Bondholders take on ISS

ISS bondholders were last week preparing their response after lawyers of the Danish cleaning company responded to their complaints about the financing for the takeover of the company by EQT and Goldman Sachs Capital Partners.

The private equity duo launched a DKr22bn unsolicited bid for ISS in March, which saw the company’s debt slump and its rating drop seven notches to junk as a result. ISS’s 2010s were at 86.5–87.5 last week, while the 2014s were at 74.5–75.5. ISS plans to leave those bonds in place until maturity.

In a letter to the company dated May 27, bondholders outlined three concerns about the financing. They argued against acquisition vehicle PurusCo’s plans to seek financing guarantees from overseas subsidiaries. They also objected to a planned dividend payment and the size of the debt package itself.

Bondholders will also undertake a discovery process to ascertain how much ISS directors CEO Eric Ryiberg and chairman Erik Sorensen knew about the bid ahead of the offer.

Law firm Gorrissen Federspiel Kierkegaard is representing ISS and responded to the complaints in a letter to Hjejle Gersted & Mogensen, which is representing the bondholders, in a letter on May 31. “Had the terms of the notes contained a change of control provision, an offer to redeem the notes would have been made,” Gorrissen Federspiel Kierkegaard’s letter said.

ISS contends that bondholders chose to invest in the bonds knowing that the terms of the notes did not include any change of control clause or any covenant as to the distribution of dividends, financial ratios, ratings or the like.