Bondholder lawyers review ISS financing doc’s

LeBoeuf Lamb Greene & MacRae, the law firm representing ISS bondholders, is reviewing documentation for the financing backing the LBO of the facilities services group after receiving it from the company last week. The bondholders are seeking assurances that the new senior debt will not contravene the negative pledge in the existing 2010 and 2014 bonds. EQT and Goldman Sachs acquired ISS in March through investment vehicle PurusCo.

The bondholder group said in July that it would sue the company over potential losses unless they received confirmation that the senior debt to fund the takeover would not subordinate the existing bonds, which do not have a change of control clause because they were issued when ISS was investment-grade.

The negative pledge prohibits ISS Global and principal subsidiaries from giving security to tradable debt, unless the same security is given to bondholders. It does, however, allow ISS Global to raise secured debt, as long as it is not tradable.

ISS said in a letter to the Luxembourg stock exchange in July that it had no plans to raise secured tradable debt. However, this was not sufficient to allay investor concerns and LeBoeuf, Lamb, Greene & MacRae asked to review details of the new financing.

Bankers away from the transaction have always maintained that bondholders’ claims have no merit. “The bondholders had discussions in July with ISS’s lawyers, who promised to let them see the documentation for the new financing if they signed a confidentiality agreement, which they did at the end of August,” said one observer close to the bondholder group.

“They received the docs on Friday [September 9] morning and their lawyers are going through them, so at the moment it is still unclear whether or not there is a breach of the negative pledge. Unless the bondholders are satisfied that the negative pledge is not being breached, they will begin litigation proceedings,” the source continued.

“As we announced on July 29 2005, we have explained to the note-holder who has been in correspondence with us, that its allegation is based on erroneous factual assumptions,” said an observer close to ISS. “In order to show this, we have supplied the note holder with various documents to show its claims are without foundation.”

LeBoeuf Lamb Greene & MacRae is understood to have since requested further documentation on the new financing.

Goldman Sachs and Citigroup are leading the financing, which indicates total debt of about DKr23bn (DKr6.2bn of secured loans to repay existing debt and dividends, a DKr5.5bn partly-committed acquisition facility, a circa DKr5bn revolving credit for general corporate purposes and a cash bridge of DKr2.38bn). The MLAs are seeking sub-underwriters on the senior debt, with general syndication expected to be launched over the next couple of weeks.

Observers away from the transaction expect the €785m bond backing the LBO to come to market soon. However, bankers working on the deal indicated that the timetable was unclear.