Restructuring

Ferretti

Target nation: Italy

Sponsor: Candover

Luxury speedboat manufacturer Ferretti is understood to be in default of its debt commitments, after missing a scheduled mezzanine interest repayment. Sponsor Candover and the Italian luxury boat maker’s management are reported to have proposed a restructuring that would see them inject €100m in new money into the deal. In exchange senior lenders would take a 30% equity stake but suffer a 33.33% write-down on loans, while junior lenders would see their debt written off but receive a 15% equity stake. Ferretti has appointed Rothschild as financial adviser, Chiomenti, Linklaters and CBA as legal advisors and KPMG as industrial adviser.The March 2007 secondary buyout of Ferretti by Candover was backed by a €1.28bn debt package. Mediobanca and RBS are bookrunners.

Senior debt comprises a €175m seven-year term loan A at 200bp over Euribor; a €270m eight-year term loan B at 250bp; a €270m nine-year term loan C at 300bp; a €65m earn-out facility, which will remain undrawn until certain conditions are met and splits pro rata across the senior tranches; a €50m seven-year capex line at 200bp; and a €130m seven-year revolver at 200bp.

A significant amount of junior debt is made up of a €120m 9-1/2 year piece, priced at 475bp and a €200m mezzanine tranche paying 4% cash and 5% PIK.

Some 65% of the B and C tranches were carved out for funds. Permira was the vendor in the 2007 deal, but retained a junior equity stake in the business.

The group designs and manufactures luxury motor yachts and speedboats in the seven metre to 60 metre range, under the brand names Ferretti Yachts, Pershing, Itama, Bertram, Riva, Apreamare, Mochi Craft, Custom Line and CRN.

Trading is understood to have held up through the first phases of the credit crunch before plunging in autumn last year, as wealthy buyers opted not to splash cash on luxury goods.

Four Seasons

Target nation: UK

Sponsor: Three Delta

Four Seasons Health Care Group has entered into another standstill agreement with senior lenders, until July 22 this year, in a continued effort to allow time to pursue a consensual restructuring of the group’s debt.

Four Seasons said it had tabled a restructuring proposal, though agreement would be made contentious by the mix of creditors holding parts of the 11 separate tranches of debt that backed a £1.4bn LBO in 2006. The buyout was led by financial sponsor Three Delta, in turn backed by Qatar Investment Authority. QIA has since walked away from the business, after seeing its £100m equity investment wiped out.

Despite the apparent simplicity of easing out equity investors, the mix of lenders and the complexity of the capital structure make securing a consensual agreement particularly slow going, as various levels of debt investors jockey for position.

Four Seasons is the UK’s third-largest care home operator. It has an outstanding debt package of about £1.5bn, which has been strangling the company over the course of 2008. Preliminary results for the year ended December 31 2008 show that EBITDA for the year will have increased to more than £100m.

In September, a £900m refinancing deal put forward by RBS was rejected by the other creditors.

The new standstill agreement has been signed on the same terms as the existing deal, which has been in effect from November until January 22, and followed an earlier agreement in September.

Groupe Autodistribution

Target nation: France

Sponsor: Investcorp

Lenders to Investcorp-owned Groupe Autodistribution may be in talks with alternative sponsors, after months of talks between lenders and sponsor have failed to produce a restructuring plan.

Banks and sponsor agreed a standstill agreement early last autumn and the situation has continued to drag on since then.

In 2006 Investcorp acquired the French auto parts distribution business from Goldman Sachs in a secondary LBO backed by a €530m debt package through bookrunner Citicorp. The 2006 buyout was supplemented in 2007 by a €116m financing for an add-on acquisition of OREFI, underwritten by CIC Credit Industriel et Commercial. Goldman had originally acquired the company in a debt-for-equity swap in late 2000.

Incisive Media

Target nation: UK

Sponsor: Apax Partners

Apax Partners’ 2007 buyout Incisive Media has already breached loan covenants: profits at the business to business publisher were below the minimum required by lenders when covenants were tested at the end of 2008. The buyout of Incisive was backed by a £222.3m loan arranged by RBS. The deal flew through syndication, with coupons flexed down on the back of string demand in May 2007.

After the flex the debt was split between a £72.4m eight-year term loan B paying 237.5bp over Libor, down from 250bp; a £72.4m nine-year term loan C paying 287.5bp over Libor, down from 300bp; an £8.5m seven-year revolver paying 200bp, a £25m seven-year amortising acquisition facility paying 225bp and a £44m 10-year mezzanine line paying 862.5bp, down from 875bp.

Apax struggled to maintain that momentum as it tried to grow Incisive through add-on deals to buy Emap (in partnership with Guardian Media) and American Lawyer.

RBS underwrote a separate debt package financing Incisive’s US$630m buyout of US publisher American Lawyer. Apax and GMG mandated HSBC, GE, Lloyds TSB and RBS to arrange an £850m debt facility to support the buyout of Emap. These remain stand-alone financings.

Saeco

Target nation: Italy

Sponsor: PAI Partners

PAI Partners has proposed a deal that would see senior lenders to Italian coffee machine maker Saeco take a 60% write-down on their debt, in exchange for equity and a cash injection from the sponsor, while junior lenders would see their entire investment converted into a 3% equity stake.

PAI Partners has already taken equity out of the business, through a €562m dividend recapitalisation in 2006.

Senior debt comprises a €150m 6-1/2 year term loan A, a €146m 7-1/2 year term loan B, a €146m 8-1/2 year term loan C, a €70m nine-year D loan at 350bp and a €50m, 6-1/2 year revolver.

Sanitec

Target nation: Sweden

Sponsor: EQT

Talks are ongoing over the future of Sanitec. Sanitec is a sponsor-backed Swedish bathroom fittings maker which breached its banking covenants at the end of the year. Restructuring discussions are ongoing but have been inconclusive so far, though EQT has proposed to inject new capital into the business in a deal that would probably see second-lien lenders wiped out and senior debt reduced.

Terreal

Target nation: France

Sponsor: LBO France

High-level talks continue between Terreal sponsor LBO France and creditors, but as yet there is no agreement, document or specific proposal under discussion.

A source close to the situation said details of a €70m capital injection, which has been proposed by LBO France, remain vague. It is not clear where in the capital structure the proposed capital would sit, where LBO France would source the funds or what changes to terms and conditions the sponsor would require in exchange for the injection.

Creditors have hired KPMG for a second round of diligence work, a process which is due to be completed in the second half of February. That should create greater clarity around Terreal’s budget issues, and determining the level of new capital needed to maintain its viability.

Thule

Target nation: Sweden

Sponsor: Nordic Capital

Nordic Capital-owned sports equipment maker Thule has agreed a restructuring deal that has seen it inject €46m, with senior lenders converting part of their debt to preference shares and Goldman Sach’s mezzanine position wiped out.

Vita

Target nation: UK

Sponsor: TPG

Sponsor TPG has tabled a restructuring proposal that would see it retain 65% of chemicals business Vita (formerly British Vita) in exchange for a €60m equity injection. The offer is aggressive compared with traditional restructuring terms, but is in line with recent examples that have seen sponsors demand huge concessions in exchange for supporting corporates.

Sponsor aggression is taking place against a background of general illiquidity and dire corporate performance, which means lenders are being forced to contemplate looming insolvency as the alternative to agreeing deals. Sponsors are also reacting to tough talking from their own LPs, who have been dismayed by the performance of private equity portfolios.

In exchange for the new liquidity, Vita’s senior lenders are being asked to write down €533m of a €633m debt pile and instead take a 32.5% equity stake. They have also been asked to provide a €35m revolving credit facility. Mezzanine creditors would receive 2.5% of equity in the business in exchange for their support and for providing part of the equity injection.

The deal fits into a pattern of aggressive restructuring proposals that have seen sponsors only provide new liquidity to portfolio companies in situations where lenders are prepared to “share the pain” by dramatically deleveraging the business and agreeing to accept that new liquidity comes into deals either as fairly senior debt or well-valued equity.

VNU Business Media

Target nation: Netherlands

Sponsor: 3i

Sponsor 3i is understood to be in talks with its banks on fears that the Dutch media business could breach covenants on the €199m debt package backing a €320m LBO in 2007.

The 2007 deal was arranged by bookrunners BNP Paribas and SG. Bank of Ireland joined as an mandated lead arranger ahead of launch. Debt comprises a €166.5m eight-year term loan B at 275bp over Euribor, a €10m seven-year revolver at 225bp and a €22.5m nine-year term loan C at 475bp over Euribor.

Source: IFR/EVCJ