Target nation: UK
Sponsor: Candover
Candover-backed Alcontrol, a laboratory testing services business, is close to completing a financial restructuring that will see the sponsor lose control of the business to senior lenders.
Senior debt and second-lien lenders, including distressed investor GSO Capital Partners – part of the Blackstone Group – have come to a consensual agreement over a proposal to take control of the business and provide refinancing in a deal that will not involve the incumbent sponsor.
DrKW and HBOS arranged the debt backing Candover’s circa £350m secondary buyout of Alcontrol from Bridgepoint in 2004.
The €240m all-senior debt package was split between a €75m seven-year term loan A paying 225bp over Euribor, a €37.5m eight-year term loan B at 275bp, a €37.5m nine-year term loan C at 325bp over Euribor, a €35m nine-and-a-half-year term loan D at 525bp, a €15m revolver and a €40m acquisition facility.
Leverage multiples are 4.7x for the senior priority debt and 5.8x including the term loan D. Alcontrol runs 26 laboratories in 10 countries. Bridgepoint acquired Alcontrol from the Kelda Group for £112m in 2000.
Target nation: Germany
Sponsor: DIC
Senior lenders of Almatis have been asked to back a proposal from the company that would see its US$1bn debt burden halved in exchange for creditors taking the company’s equity. A creditor co-ordinating committee has backed the proposal.
Management is hoping to get a deal done before a standstill agreement from mezzanine lenders expires on October 4.
The plan is to execute the deal through a pre-arranged Chapter 11 filing in the US. Almatis is based in Germany but has operations in the US, which has a low threshold for eligibility to use its insolvency regime.
Under the proposal, the current debt burden will be cut down to a new US$325m senior debt tranche sitting over a US$150m subordinated debt piece, which will only pay a peppercorn coupon. Senior lenders will be asked to provide a new US$25m revolver, but beyond that the restructuring sees no new equity injected into the business.
Incumbent sponsor DIC is understood to be offering a cash alternative to the junior piece in a bid to stay in the deal. Its restructuring proposal, made in partnership with Oaktree, was rejected by creditors.
An equity split has yet to be agreed with junior lenders but it is believed senior lenders would only offer out-of-the-money warrants to mezzanine holders.
Senior lenders are understood to be positively disposed to the current proposal.
A 66.66% majority would be enough to get a pre-packed deal executed under the US system.
Management, which proposed the restructuring now on the table, would share a US$4m bonus if the deal is agreed and will also benefit from what is understood to be a generous incentive plan geared towards value recovery for the banks.
Close Brothers is advising Almatis, while Rothschild is advising a senior lender steering committee. KPMG was brought in for due diligence.
Target nation: Hungary
Sponsor: Permira
BorsodChem said it was making good progress towards finalising the details of the debt restructuring plan currently being thrashed out by the existing shareholders, lenders and the Hungarian state.
In mid-September, a steering committee of senior lenders endorsed the proposal, which has been negotiated between senior and mezzanine lender representatives, the Hungarian Development Bank, and the company’s owners and management.
The Hungarian state bank has offered a capital injection of about €100m in return for a restructuring of the company’s debt in a way acceptable to the Hungarian government.
However, the potential for trade buyers to affect the restructuring has reared its head after China’s Wanhua Industrial Group opened discussions with the company’s owner, Permira, with a view to buying into the business.
Wanhua is understood to have built a stake in BorsodChem’s mezzanine debt before making its approach to Permira.
Permira acquired BorsodChem in 2006 for €1.63bn from Austrian investment company Vienna Capital Partners and Megdet Rahimulov, one of Hungary’s richest men. The deal was backed by a €1.15bn financing package arranged by UniCredit, Lehman Brothers and RBS, paying coupons scarcely higher than those seen in similarly-sized West European deals – reflecting no premium for country risk.
The structure comprised a €275m eight-year B tranche paying 250bp, a €275m nine-year C tranche paying 300bp, a €100m seven-year revolver at 225bp, a €300m capex facility at 250bp, and €200m of mezzanine paying 975bp over Euribor.
Houlihan Lokey has been advising BorsodChem and Close Brothers is advising senior lenders.
Target nation: Sweden
Sponsor: BC Partners
Management and directors look like the big winners and mezzanine lenders the biggest losers in the restructuring of Dometic after a restructuring deal was agreed that gives Dometic’s 100-strong management team 25% of the business post-restructuring, with board members taking another 5%. Senior lenders are taking the bulk of the remaining 70% in exchange for a 22% write-down of debt, though second-lien and mezzanine investors will get small single-digit percentage stakes in exchange for the total write-down of their debt.
Dometic makes refrigerators for yachts and caravans. BC Partners paid €1.1bn for the business in 2005.
Even with the write-down of junior debt, net debt will be cut relatively modestly – from SKr13bn (US$1.85bn) to SKr8bn – though annual interest expenses will be slashed by 70% from SKr750m to SKr250m through a combination of debt reduction and PIKing of some of the remaining facilities.
Lenders are providing SKr400m in new credit facilities to support “aggressive market investments”. Incumbent sponsor BC Partners is reported to be walking away from the deal without suffering a loss thanks to the proceeds of asset disposals made over the course of its four years running the business. But the outcome is a blow to mezzanine lenders.
Mezzanine holder ICG had teamed up with BC Partners to offer a joint proposal to take control of the business but that was rejected in favour of the senior lenders’ deal.
Unlike a number of situations in the Nordic region, the mezzanine lenders had felt there was value in the business and pursued it. Dometic has proved extremely cyclical and a restructuring now, at the bottom of the cycle, crystallises the effect of that for mezzanine lenders, while the new capital structure leaves much of the senior debt in place.
Target nation: UK
Sponsor: Cerberus
Focus DIY has gained over 90% approval for its CVA, saving the chain from pre-packed administration. A CVA is essentially a “reduce it or lose it” deal, whereby Focus has agreed to pay its creditors a proportion of what it owes them. The deal needed 75% approval to succeed.
The Focus CVA will see leases for empty stores bought off with two lump sums equivalent to six months’ rent. The DIY chain has 180 stores still trading and 38 closed outlets costing £12m a year in rent. While the payout is less than the lease values, it is more than creditors would get if the firm went under.
The retailer has also agreed to pay empty property rates on the “dark” stores, which would provide substantial savings while the landlord finds an alternative tenant. The remaining stores will move to paying rent on a monthly basis until 2011, helping the retailer’s cash flow. This will save Focus £8.6m and in return the landlords will be entitled to a share of a £3.7m compensation fund.
Of the closed stores, 16 have been sub-let and Focus is not seeking to renegotiate rents on the existing stores. The firm’s lenders, HBOS and GMAC, will grant a two-year extension to the company’s £50m revolving credit facility, which is due to expire at the end of this year.
Cerberus acquired Focus for just £1 in June 2007 from private equity firms Apax and Dukes Street Capital. The US fund paid off £174m of debts and 40p in the pound to bondholders and drafted in retail veterans Bill Grimsey and Bill Hoskins to help turn the company around.
Target nation: Italy
Sponsor: 3i
Lawnmower maker Global Garden Products (GGP) has confirmed breaching covenants and the company, sponsor 3i and lenders are in talks as the business struggles under a hefty and complex debt burden. Sponsor 3i is understood to be supportive of the business, which it believes to be resilient, but is keen to tackle its leverage. GGP was refinanced in 2007 with €545m of senior debt, which was followed in 2008 with a €120m holdco PIK facility that substantially reduced the equity contribution of 3i in the deal. The PIK piece was being placed with a small club of institutional investors and mezzanine funds. The holdco PIK was raised after 3i bought Global Garden and did not require the approval of existing senior and second-lien bank lenders and that tranche of debt is understood to be the target of the current restructuring focus.
Target nation: UK
Sponsor: Apax Partners
The top of the market media buyouts which created the Incisive group have finally been undone – with UK-based Incisive Media and US arm American Lawyer Magazine going their separate ways under different balance-sheet restructurings.
Sponsor Apax will retain a majority 51% stake in ALM with RBS taking 49% in exchange for reducing debt, while Incisive will be taken over by a syndicate of lenders. Separate financing packages mean the Incisive bank syndicate has no claim over ALM, bought in 2007 as a bolt-on acquisition.
The syndicate of banks taking control of Incisive rejected an offer that would have seen sponsor Apax inject £20m in exchange for a 50% write-down of senior debt.
Apax will inject £15m into ALM to retain its majority stake there. Apax bought Incisive in 2006 in a deal backed by a £222.3m loan syndicated by RBS. More debt was added at the Incisive level with the bolt-on acquisitions of MSM International, VNU’s UK operations and Central Banking Publications.
An Incisive lending committee of RBS, AIB, Bank of Ireland and Alcentra was formed in March this year after lenders agreed to waive covenants.
RBS underwrote the subsequent debt package financing Incisive’s US$630m buyout of American Lawyer, which was never syndicated.
Apax’s original plan was to merge and refinance its media portfolio, including Emap’s business-to-business division bought in a £1.2bn acquisition alongside Guardian Media Group. But that deal fell victim to the lack of bank appetite in 2008 and the mix of facilities was left in place.
Target nation: Germany
Sponsors: KKR and Goldman Sachs
German forklift trucks maker Kion has confirmed receiving a winning majority of lender support for its loan covenant amendment and revised business plan.
The amendment required a two-thirds majority to be carried, and according to the company it achieved this comfortably. That was despite a letter-writing campaign from a minority of lenders looking to block the deal. The dissenters failed to put together a blocking minority, not least because they failed to put forward an alternative plan to tackle debt issues at the business.
The amendments are now being documented with the agent UniCredit/HVB.
Kion offered a 75bp fee to lenders who consented to the request. The amendment increased coupons across all its facilities bar the second-lien debt of between 125bp and 150bp, depending on leverage. That takes the coupon on the most expensive tranche of debt up to a maximum 400bp.
New liquidity is being injected in the form of a loan from sponsors KKR and Goldman Sachs, which will have the same terms as existing senior debt but will mature later. Rothschild advised the company on the plan.
Target nation: Germany
Sponsor: AXA Private Equity
German specialist timber producer Pfleiderer has confirmed it is in talks with lenders after breaching covenants and suffering a pre-tax loss in the first half, although the company said it was confident of securing a refinancing deal when it announced half-year results at the end of August.
German state agency KfW is among the banks in talks with the debtor, which saw its net debt increase in the first half to €797.5m, lifting its gearing to 114.5%, compared with debt of €635.5m in 2008.
Pfleiderer has already suspended interest payments on a €260m, 7.125%, hybrid bond. Announcing the half-year results, Pfleiderer said it had secured a waiver from banks of covenants on €513m of debt. Blaming the state of the economy, the company said it had recorded a pre-tax loss of €10.4m and had seen revenue fall 24.5% in the first half to €692.4m.
Target nation: Netherlands
Sponsor: One Equity Partners
A Dutch court is set to rule this month whether or not to accept a valuation being relied on to drive a proposed restructuring of Schoeller Arca Systems’ debt.
After an initial hearing on August 20, parties to the deal were called back for a follow-on hearing last week. Holders of a €180m hung bridge to high-yield bonds for Schoeller Arca Systems have challenged a valuation that is backed by senior lenders and sponsor One Equity Partners as the basis for a restructuring proposal.
Under that proposal the sponsor would repurchase the business, injecting €50m in new equity, rolled into new facilities at par. But holders of the bridge would suffer significant write-downs under the scheme and so mounted a challenge. The deal must be executed through a court-approved M&A process, but that process was halted by the valuation challenge.
Debt backing Schoeller Arca Systems was put in place after the credit crunch in a deal arranged by Citigroup and JP Morgan. Senior debt totals €142m, including a €25m revolver, a term loan A and a term loan B.
Law firm Latham & Watkins and financial adviser Houlihan Lokey are advising Schoeller Arca Systems. Financial adviser Blackstone and legal adviser Clifford Chance have been retained by senior lenders, while law firm Allen & Overy is advising the bridge lenders. Citigroup, the security trustee, is being advised by law firms Van Doorne and Shearman & Sterling.
Target nation: UK
Sponsor: Allianz Capital Partners
A sponsor-funded reverse auction to buy back Selecta loans closed as planned in mid-September.
Sponsor Allianz is being advised by JP Morgan on the deal which will see the financial sponsor buy back and forgive debt through a reverse auction.
The auction targeted senior, second-lien and mezzanine loans. The paper is understood to have been fairly illiquid prior to the offer and while there is no formal price guidance, the debt is being targeted in a fairly tight range of 30% to 35% of face value for mezzanine, 40 to 45 for second line and 55 to 60 for senior.
The buyer’s own preference is to buy up the cheaper, more junior pieces. Mezzanine had been bid at 20 prior to the auction, with second lien at 25 and senior seen in the mid-50s.
Technically the process differs from previous third-party buybacks only on the final fate of the purchased loans.
The intention now is to sign an agreement between the debtor and the new debt-holder Allianz to forgive the debt. Allianz will remain a lender of record but give up all rights to be repaid principal or paid interest and all voting interest associated with the debt.
The simplicity of the forgiveness deal means it does not require the consent of lenders or any subsequent actions or amendments at the debtor level, unlike a broadly similar deal for Mauser, which closed over the summer. Mauser’s deal saw debt bought by the sponsor and then injected into the portfolio company as an equity cure by sponsor DIC.
Allianz acquired Selecta for £772.5m in 2007 in a deal backed by a £690m debt package arranged by Barclays, JP Morgan and Merrill Lynch.
Senior debt was split between a £25m seven-year revolver, a £55m acquisition facility and a £447.5m term loan. An £87.5m second-lien loan priced at the top end of talk at 400bp, while the £75m mezzanine priced at 850bp PIK or at a mix of 375bp cash and 425bp PIK.
Target nation: Belgium
Sponsors: Apax Partners and Cinven
The wind appears to have gone out of the sails of the controversy surrounding €250m of cash that has been sitting on directories business Truvo’s balance sheet since it sold its Dutch yellow pages business Goudon Gids.
Proceeds of the sale will be used to buy back senior loans at par, in line with the inter-creditor agreement, after senior lenders refused to consent to a deal that would have allowed proceeds to target a discounted buyback of junior notes.
Truvo, formerly World Directories, has debts of €1.6bn, and the proceeds of the Goudon Gids sale had been seen by sponsors Apax and Cinven as the ideal funding for a discounted buyback of junior debt. That would have had a more dramatic deleveraging effect, without impairing senior debt.
Goudon Gids was sold in March and, under the terms of its debt, the company had 360 days from the sale date to decide on the use of the proceeds.
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