Blackstone Near Sale Of Troubled Kloeckner

The Blackstone Group is set to announce the sale of its debt-laden German plastic films group Kloeckner Pentaplast to hedge fund SVP and junior lenders, three people familiar with the matter told sister news service Reuters. These people said that senior lenders would get back €840 million of loans at face value, but that Blackstone would lose the remaining equity stake worth about €100 million ($127 million).

SVP and junior lenders were to be handed the keys to the company following a lengthy restructuring process after securing debt financing of 650 million euros from Jefferies as well as committing €190 million of equity to pay senior lenders back their debt. Junior lenders will also wipe out €450 million of junior debt as part of the move to gain control of the company.

The deal needed to complete before a covenant breach waiver expired in June when Blackstone and senior lender Oaktree Capital could enforce their debt restructuring proposal as the firm would be in default of its loan repayments.

Senior lenders wanted to restructure the company by reducing senior debt to €500 million from €850 million in a debt-for-equity swap and write off €450 million junior debt. This would reduce the company’s leverage to around 2x EBITDA. Oaktree would take control of the company and sell a portion of it back to current owner Blackstone, bankers said.

Blackstone bought Kloeckner from Cinven Ltd in 2007, backed by €1.25 billion of leveraged loans, according to Thomson Reuters LPC data. The firm has struggled with higher raw materials costs in a difficult economic climate as well as high leverage, around 10x the company’s €130 million EBITDA.

(Alexander Huebner is a correspondent for Reuters in Frankfurt; Claire Ruckin, in London.)