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Need To Sell?

Clondalkin is an Amsterdam-based manufacturer of packaging products for the pharmaceutical and health care markets that may be ripe for an exit—although the company is highly leveraged.

Warburg Pincus bought it in more than eight years ago, in March 2004, in a deal valued at about $784 million, according to Capital IQ.Since then, Clondalkin has gone on a buying spree, executing at least nine acquisitions, according to Capital IQ, its most recent being the April 2011 purchase of Catalent Pharma Solutions Inc.’s printed components business.

Last month, Moody’s Investors Service affirmed the company’s speculative-grade corporate family and probability of default rating of B3, and downgraded its outlook on all its ratings on the company to negative from stable. The agency did this because of the company’s “significant debt maturities which ware due in December 2013 and March 2014.” Moody’s did not reveal exactly how much debt the company has, but did mention that its outlook could improve if the company is able to reduce its debt-to-EBITDA ratio to “clearly below 7x.”

Further, a weak economy in Europe coupled with supply chain challenges in North America hampered profitability, the Moody’s report said, adding that the company’s management was “pursuing alternatives to expand the refinancing possibilities.” Debtwire reported in March that Warburg Pincus might need  to inject more capital to prevent the company’s debt from reaching unsustainable levels. It’s unclear if Warburg Pincus ever took action; executives there declined to comment.  

That said, Moody’s pointed to the company’s “solid business profile,” including a strong market position and an ability to generate “meaningful” positive free cash flows on a sustainable basis.

Clondalkin isn’t the only buyout gathering dust for Warburg Pincus. Of the 17 deals the firm lists as LBOs or special situations on its Web site, eight, or just under half, were made in 2007 or earlier, and four date from 2005 or earlier.