Target nation: Germany

Sponsor: DIC

Hedge funds Goldman Sachs ESSG, Oaktree and Varde Partners could become mired in Almatis debt while less aggressive lenders agree a deal around them, or even allow the status quo to go unchanged, as momentum ebbs away from plans for a radical restructuring of the business.

Since August Almatis, a German chemicals business, has seen trading pick up sufficiently to allay fears of a pending liquidity crisis. That is seen as a potentially crucial factor in turning senior lenders off any proposal that would see senior debt written down.

Distressed debt investors bought into the deal at levels of up to 70, and while secondary prices have strengthened, the agreement of a consensual deal could make it virtually impossible to find buyers to provide an exit. This would tie up capital in a deal with fixed income rather than equity levels of return.

In September the company’s management proposed a deal to cut its US$1bn debt burden in half, in exchange for creditors taking Almatis equity. Distressed investors would like an even more aggressive deal, and had hoped to be able to drive lenders into writing down debt and giving up equity if a new money requirement became urgent enough.

Incumbent sponsor DIC has meanwhile teamed up with mezzanine lenders to propose its own, softer restructuring, believing that junior creditors and equity owners would get nothing under a deal driven from any part of the senior camp.

Bavaria Yachtbau

Target nation: Germany

Sponsor: Bain Capital

The restructuring of the top of the market Bavaria Yachtbau LBO is nearing a close. Loan-to-own investors Anchorage Advisors and Oaktree signed a binding agreement to swap their 95% of Bavaria debt for ownership of the business in a deal that will cut debt by 90%. Bavaria Yachtbau was advised by Lazard and law firm Latham & Watkins.

A deal has long been expected and became inevitable once distressed investors took a majority stake in the business. A failed syndication of the original buyout debt had left the arrangers €900m of debt to sell directly into the distressed market. Bavaria was among the very first European credits to fall out of favour in summer 2007.

Bain acquired the German boat builder for €1.3bn, five times the company’s annual revenues, in June 2007, backed by debt arranged by Dresdner and Goldman Sachs. A disastrous syndication effort has made it easier for distressed investors to build up their dominant position in the deal, freeing them to take a radical axe to the over-leveraged transaction.

The new owners will inject €55m in new cash into the business once the debt for equity swap is agreed. Bain is backing the deal.


Target nation: Hungary

Sponsor: Permira

BorsodChem owners Permira and Vienna Capital Partners have finally agreed to hand an equity stake to mezzanine holders as part of a deal that brings mezzanine debt holder Yantai Wanhua into an agreed restructuring.

The Chinese trade investor will have to put new money into the deal to secure its position alongside existing sponsors. It built up a majority stake in the Hungarian chemicals maker’s junior debt in recent months.

A successful parlay of that into an equity stake is doubly rare – it is very unusual for a non-financial sponsor to undertake a risky loan-to-own strategy and almost equally rare in the current climate for any junior lender to fight its way into a meaningful bargaining position in a restructuring.

Yantai Wanhua will take a minority equity stake in an amended version of a restructuring already backed by senior lenders and the Hungarian state. The move looks like the final step in the long-running effort to restructure the business. Houlihan Lokey has been advising BorsodChem and Close Brothers is advising senior lenders.


Target nation: Netherlands

Sponsor: Sankaty Advisors, HAL Investments and Project Holland Funds

Oslo-listed marine contractor Dockwise has raised a guaranteed US$235m through an equity raising and provided 3i with a NKr464m (US$82m) return on its 26.2% stake acquired in late 2006. The company is also planning a secondary listing on Euronext Amsterdam.

New investors Sankaty Advisors (a subsidiary of Bain Capital), HAL Investments and Project Holland Fonds acquired 3i’s position. They anchored the fund raising by subscribing in a directed placement for up to US$183.7m in new stock at NKr7.70, topped up by US$51.5m from existing investors including Franklin Mutual, Invesco, Odin and Skagen.

Existing investors will be offered the chance to avoid dilution through a repair issue of 86.3m shares on the same terms. Once demand exceeds US$14.8m, taking proceeds to US$250m, investors in the directed placement will be scaled back.

Post-deal, Dockwise will have significantly reduced debt levels, with a forecast of net debt to EBITDA of 2.8 for 2009 versus a covenant of 3.85, and 2.4 for 2010 versus a covenant of 3.4.

Friday October 16 was the record date for the issue, which went ex-rights last Friday. An EGM will take place on November 4, and the subscription period runs from November 9 to November 23, with allocation on November 27.

Share consolidation occurs on December 2 with shares in the secondary listing, intended to help the liquidity and analyst coverage of the company, to begin trading on December 4. ABN AMRO is sole global co-ordinator and bookrunner for the directed placement and repair issue, and listing agent for the Euronext listing.

Gala Coral

Target nation: UK

Sponsors: Candover, Cinven and Permira

Apollo Management and a group comprising Park Square and ICG (Intermediate Capital Partners) appear to be in separate camps within a mezzanine tranche over a restructuring proposal for Gala Coral.

According to a mezzanine player involved, distressed debt firm Apollo, which has built up a mezzanine stake in Gala over the past year, is opposing some aspects of the outline proposal put forward by Park and ICG, which together hold half of a £460m strip of Gala’s mezzanine.

However, with the mezzanine players battling to get a proposal agreed before covenants are breached and momentum swings further in favour of senior syndicates, it is expected that all parties will work towards reaching agreement relatively quickly.

Gala Coral was expected to breach its covenants at the end of September. That did not happen, but the business is saddled with a massive £2.7bn of debt. A covenant breach and, ultimately, a restructuring, appear to be inevitable.

Hilding Anders

Target nation: Sweden

Sponsor: Candover

A consensual restructuring of Swedish mattress and bedding manufacturer Hilding Anders has moved into the final stages of documentation and is expected to close in the early weeks of November.

A restructuring proposal has received 100% consent from senior lenders. The deal involves a €50m equity injection by incumbent sponsor Candover and mezzanine investor MezzVest, in an 80:20 split respectively. Senior debt will remain unimpaired but covenants will be reset, leaving 20% headroom.

An adviser involved in the deal said: “It was perceived as a fair deal by all stakeholders and good for the company. The relative ease of the restructuring process was due to the strength of the underlying business, which has been performing well.”

Hilding Anders was acquired by Candover in a tertiary buyout from private equity firm Investcorp. In April 2007 mandated lead arrangers HSBC and Bank of Scotland completed a reverse flex to the €934m debt package supporting Candover’s buyout of the bedding company.

The flex saw a 25bp pricing drop to the B and second-lien tranches. Following the change the debt was split between a €545m eight-year B loan paying 225bp – down from 250bp over Euribor; a €125m acquisition loan at 200bp, a €77m revolver, an €87.5m second-lien loan paying 400bp – down from 425bp; and a €100m pre-placed mezzanine loan. There were no A or C tranches.

In syndication a handful of joint lead arrangers were invited to join on a SKr400m ticket, while bank lenders were invited with takes of SKr300m for 75bp or SKr200m for 60bp. Leverage is 7.6x total debt.

Investcorp had earlier acquired the firm back in 2003 from a group of investors which included Nordic Capital and Ratos. That buyout was backed by a €386m loan arranged through CSFB and Citigroup, recapitalised and amended in 2004.


Target nation: UK

Sponsor: Montagu Private Equity

Senior lenders to UK packaging group Linpac have agreed a debt for equity swap that will see them take over the Montagu-backed company, acquired for £830m in 2003. A steering committee includes key lenders Deutsche Bank, Babson Capital and Lloyds. Senior lenders will suffer a 50% haircut on outstanding debt and will finance a new money injection of £65m in return for control of the business.

Montagu will retain a nominal equity interest in Linpac post-restructuring. The deal is now in the implementation stage and will close within the next month. In March this year, lenders approved a deferral of first-quarter covenant testing, subsequently waived until May. Houlihan Lokey is advising the company.

Linpac was acquired by Montagu Private Equity in 2003 for £830m, initially with a £713m debt package arranged by Deutsche Bank. Bank lenders included HSBC, ABN AMRO/RBS and Lloyds. In 2007 Montagu completed a £568m recapitalisation, through mandated lead arranger Deutsche Bank. The all-senior facility was split between a £120m seven-year term loan A paying 212.5bp over Libor, a £204m eight-year term loan B paying 250bp, a £204m nine-year term loan C at 300bp and a £40m revolver at 212.5bp.

As well as refinancing debt, the facility paid a sponsor dividend to Montagu. In February 2008 Montagu sold Linpac Containers for £170m to DS Smith and repaid a mezzanine loan.

Birmingham-based Linpac supplies paper and plastic packaging and plastic automotive components. It employs 9,000 people globally.


Target nation: Spain

Sponsor: Apax Partners

Avenue Capital is understood to be the main mover behind a committee of Panrico PIK lenders who are angling to take control of the Spanish doughnut maker.

The deal is the latest example of junior lenders looking to seize the initiative in order to drive a favourable restructuring. Avenue is prepared to put new money into the deal under a proposal that would equitise the PIK and squeeze out existing equity owners, including Apax Partners. The committee of PIK lenders has hired London-based lawyer Latham & Watkins to advise on the situation.

Senior lenders are believed to be moving towards creating a steering committee and there has already been a beauty parade to find a financial adviser, with Houlihan Lokey and Rothschild leading a chase for the mandate.

Apax Partners holds a 75% stake in Panrico, which it bought in 2005 in a deal that valued the business at €900m, including €650m of debt. Two refinancings followed – the first just six months after the acquisition.

In June 2006 the first refinancing added €585m of new debt, which was followed in November by a €225m 9-1/2-year FRN PIK loan.

Half of the proceeds of the PIK were used to repay outstanding mezzanine of about €118m, the rest funding a dividend to shareholders. In 2008 an “amend and extend” of the original capex facility funded a bolt-on acquisition of Artiach biscuits from Kraft. Panrico is understood to have improved its performance over the course of the year, from a pretty grim situation early in 2009, but the sponsor is believed to view its capital structure as unsustainable.

Park Resorts

Target nation: UK

Sponsor: GI Partners

UK caravan park operator Park Resorts has reached agreement to restructure its £325m debt facilities after winning over lenders by bringing back the ex-manager of the business David Vaughan. Vaughan left after incumbent sponsor GI Partners took control in 2007.

The deal now agreed is a light restructuring with existing debt remaining in place and financial sponsor GI Partners retaining majority control.

Banks will receive a 5% equity stake in the firm in return for a new £25m revolving debt facility which, the company says, “will free up cash to allow the business to undertake an extensive capital expenditure programme to invest in the company’s parks over the next five years”.

According to a financial adviser involved, the reason lenders have agreed to such a light restructuring was the return of David Vaughan as chief executive officer last year. This was followed by a strong summer season in 2009, which saw caravan sales for the first six months up by more than 40%.

As long as Vaughan is at the helm and the business continues to do well the banks are happy to leave things relatively unaltered.

Park Resorts was acquired by financial sponsors GI Partners for £440m in a secondary buyout from ABN AMRO Capital in March 2007.

Vaughan left the company after it was acquired by GI but returned last year following a period of underperformance at the business. As a result, it is thought that Vaughan and the management team will do well out of the agreed restructuring, potentially taking a significant equity stake in the company.

Park Resorts said it expected full-year EBITDA to be up more than 80% over last year and cash flow from operations to be even better. The company was advised by Hawkpoint Partners. The £328m loan backing GI’s acquisition was arranged by Bank of Scotland with £35m of the loan at the opco level and £293m at the propco level.

Select Service Partner

Target nation: UK

Sponsor: EQT

The airport catering business Select Service Partner (SSP), backed by Swedish private equity firm EQT, has entered a lock-up period with banks after agreeing, in principle, a proposal to restructure its €1.1bn of debt facilities.

Under the terms of the proposal, EQT will inject €100m into the business in the form of a loan. Existing senior debt will be kept whole but restructured into a €750m cash pay tranche A loan, while a €385m tranche B1 loan will sit pari passu to the new €100m B2 tranche provided by EQT’s cash injection.

Existing mezzanine lenders will get a 15% equity stake in the company post-restructuring, along with co-investment rights.

The lock-up agreement follows two months of roadshowing the proposal in one-on-one meetings with different creditors. Execution of the proposal will be by way of a court-approved process through a scheme of arrangement, and completion is expected early next year. Houlihan Lokey is advising SSP.

EQT acquired SSP from Compass Group in April 2006 for €2.1bn at the height of the buyout boom. The private equity firm is backed by the Wallenbergs, one of Sweden’s wealthiest families.

Dresdner Bank, Mizuho Corporate Bank and Morgan Stanley were MLAs on the original debt, which was flexed down in syndication.

Post-flex, the loan comprised a £90m seven-year term loan A at 200bp over Libor, a £255m eight-year term loan B at 237.5bp, a £255m nine-year term loan C at 287.5bp, a £150m seven-year revolver at 212.5bp, an £80m 9-1/2-year second-lien tranche paying 450bp and a £100m 10-year mezzanine facility paying 9.25%. Leverage was 6.7x total net debt to EBITDA.

SSP operates catering and retail units in more than 600 sites, primarily airports and railway stations, across 26 countries and comprises well-known in-house brands such as Caffe Ritazza, Upper Crust, Whistlestop and Harry Ramsden.


Target nation: France

Sponsor: LBO France

Lenders have rejected the suggestion that a plan to restructure €912.5m of Terreal debt amounts to little more than a covenant reset, citing the increased control and potential upside gained by lenders if they agree to a restructuring proposal currently on the table.

Lenders in the all-senior deal have until October 14 to decide whether to back the proposal, which was made by incumbent sponsor LBO France and is backed by management.

Under the proposal, LBO France would make a €70m capital injection to retain its majority equity stake, with management gaining from a revised incentive package.

All debt would be kept whole but would be split into €500m of cash-pay and €402m of PIK. The €402m PIK piece would remain a debt instrument but would become a convertible bond and be pushed down the capital structure. The new facilities are five-year with a one-year extension.

One lender said it would have been happy to take a more aggressive stance but that the alignment of management with the sponsor, and the difficulty of forcing a non-consensual deal over the heads of other stakeholders in France, made the deal on the table a more realistic alternative.

Lenders would gain voting rights under the new structure as well as seats on the company board. They would also secure enhanced control over the exit mechanism, which would allow them to step in and manage an exit at the end of the life of the facilities if LBO France cannot agree a deal.

LBO France would retain its control of the company under the deal, though it would only see an equity return once senior debt could be paid down. If the sponsor does recoup its principal, there is a profit-sharing scheme giving lenders an equity return in the event of lenders being repaid and the sponsor breaking even. The proposal requires unanimous support from lenders.

The deal has a relatively small syndicate of fewer than 25 lenders, including just one non-original lender, which reduces the likelihood of holdouts. A broad group of lenders is believed to support the proposal, raising the possibility of a pre-pack safeguard being used as a plan B if the current consensual deal fails.

The company agreed a stand-still with banks in 2008, and has rolled over a drawn revolver since then, thanks mainly to the lack of any imminent liquidity concerns.

Wind Hellas

Target nation: Greece

Sponsor: Weather Investments

Apax Partners has taken itself out of the running to buy Wind Hellas, or to put new equity into the business, which needs a €50m equity injection to support forthcoming liquidity needs.

However, Apax has a 5% stake in Wind Hellas owner Weather Investments and the private equity firm’s lack of appetite to buy Hellas does not mean it will not support Weather by putting new equity into a restructuring to retain control of Hellas. Such a move would not require new equity from Weather shareholders.

Wind Hellas has seen EBITDA fall by 25% over the past quarter, compared with the same period in 2008, the company said on Tuesday. It needs a €50m equity injection to improve its liquidity position from the current €26m of total available liquidity, and that liquidity is likely to come only if subordinated lenders to its €3.2bn debt load are forced to write off or restructure some of their claims.

Lenders to Wind Hellas’s senior revolving credit have agreed to a waiver request from the company that clears the way to restructure junior debt, if an injection can be found. The waiver did not include a relaxation of the change of control provision, something that appears to favour a solution coming from the incumbent owner.

There was bad if not completely unexpected news for subordinated bondholders last week too, the company has deferred payment of interest to sub-noteholders while a sale process is underway.

Payments to RCF, secured FRN and senior unsecured noteholders will continue to be paid interest, however; a move that, like the COMI shift of the sub-note issuer to the UK, supports the argument that sub-notes, along with a PIK piece, will be the focus of any debt cut in a restructuring.

As well as its RCF Wind has a €1.22bn tranche of senior secured high yield bonds due 2013, a €355m layer of senior unsecured notes, €1.17bn of euro and dollar-denominated sub-notes and a €265m PIK piece.