Target nation: France/US
Sponsors: Capital Management & Investments and TDR
Capital Management & Investments (CMI) has confirmed that Algeco Scotsman is in talks with lenders and is expected to breach financial covenants by the end of the year. CMI is a listed investor in Algeco Scotsman, alongside private equity house TDR.
Algeco Scotsman was formed from the 2007 buyout of US storage space provider Williams Scotsman by TDR-owned French peer Algeco. The deal was financed by €3bn of debt, which funded both the acquisition and a refinancing of the buyer. The debt, arranged by Deutsche Bank and RBS, was caught in the leveraged loan overhang when it could not be syndicated into the institutional investor sector, though the facility was substantially sold down by the arrangers in 2008.
Mezzanine lenders in the deal are understood to have organised in recent weeks and been advised by investment banking boutique North Sea Partners.
CMI said that discussions with the principal lenders were continuing. One equity investor believes a proposal will be presented to shareholders by mid-December.
According to the investor, the proposal is likely to include a restructuring of existing debt coupled with a new money injection from either new or existing shareholders.
Target nation: UK
DIC has injected £53m in new equity into Doncasters, its UK engineering portfolio company after agreeing a covenant waiver with lenders. The deal has full approval from senior, mezzanine and PIK lenders. UBS advised the company on the transactions.
In 2007, DIC put in place a £940m debt package for Doncasters, made up of a £300m B tranche, a £300m C tranche, a £75m revolver and an £85m acquisition line. The multi-layered deals includes a £72.5m second-lien loan, a £57.5m mezzanine piece and £50m PIK loan. The 2007 deal refinanced existing LBO debt as well as the add-on acquisition of FastenTech.
DIC recently teamed up with mezzanine lenders in an effort to retain control of German chemicals business Almatis. There, DIC and its partners are courting senior lenders that may be antagonistic to write-downs envisaged under a management-sponsored restructuring plan and could coalesce to block the proposal. A recent pick-up in Almatis’s underlying business probably strengthens that analysis.
Target nation: UK
Sponsor: Apax Partners
Private equity firm Apax is prepared to inject fresh equity into its portfolio company HIT Entertainment, which is in early stage talks with US lenders regarding a restructuring of its debt.
Apax had warned that the UK-based producer of TV programmes aimed at children would breach banking covenants in March 2010. Lenders could face a debt-for-equity swap as part of a restructuring.
HIT’s portfolio of shows includes Bob the Builder, Pingu, Fireman Sam and Thomas the Tank Engine.
Apax acquired HIT in April 2005 in a deal valuing the company at £489.4m. Debt backing the acquisition included a US$77m six-year revolver and a US$376m seven-year term loan. The deal paid 250bp over Libor, with Deutsche Bank and Merrill Lynch wrapping up the financing, which was sold to US investors.
The original loan was later supplemented by a US$172m second-lien tranche. Financial results for July 2008 show the company had US$470m of debt. The HIT restructuring talks come after Apax incurred a loss of about £110m on another media investment, Incisive Media.
Target nation: Hungary
Sponsor: Mid Europa
Private equity firm Mid Europa Partners has closed a series of transactions through which it repurchased and restructured Hungarian telco Invitel from Dutch telecoms giant TDC in a deal worth €700m.
Mid Europa sold the business two years ago to TDC’s subsidiary HTCC for €470m, but is retaking control after taking TDC’s 64% stake in the business and purchasing Invitel’s outstanding debt by way of a distressed bond exchange.
Mid Europa has acquired a 32.3% equity stake in Invitel and delivered into escrow the purchase price of TDC’s remaining 32.3%, pending approval by Serbian competition authorities.
The private equity house has also completed an exchange offer to buy 87% of the €125m of outstanding floating rate senior PIK notes due 2013. The PIK notes were bought via a tender offer, at 50% of face value, plus an early tender fee. Having acquired a majority stake in the tranche, Mid Europa secured lender consent to amendments governing the PIK notes.
Magyar Telecom, a subsidiary of Invitel, paid €72m cash to buy back a further €85m of outstanding debt – a mix of 10.75% senior notes due 2012 and senior FRNs due 2013 issued by Magyar Telecom.
That was again executed by a tender offer, funded by a shareholder loan from Mid Europa. Mid Europa purchased all of TDC’s rights and obligations under a €34.1m subordinated PIK loan, which was further amended and increased to €91.4m, and used to finance the purchase of the 2012 and 2013 notes.
Craig Butcher, senior partner at Mid Europa, which specialises in buyouts in Central & Eastern Europe, said: “The deal was finalised during the middle of an enormous debt market rally, which took us through July, August and September.
“We probably wouldn’t have targeted the cash pay debt but the senior lenders wanted us to and the board insisted on deleveraging so that there was a corporate benefit. However, the 87% uptake for the 2013 notes was a great outcome, better than we expected.”
As well as buybacks of junior debt, lenders to a €165m senior debt facility agreed to remain in the deal and a number of additional banks have also provided further financing under the senior facility to secure funding for Invitel.
Credit Suisse, BNP Paribas and Calyon acted as joint deal managers in connection with the PIK notes offer. Credit Suisse and Lazard acted as joint financial advisers to Mid Europa in connection with the transactions. Shearman & Sterling acted as legal adviser to Mid Europa. BNP Paribas and Calyon acted as senior and subordinated debt global co-ordinators.
Butcher says that the repurchase of the business so soon after its sale was an opportunistic acquisition for the private equity firm.
“When we previously owned Invitel we wanted to acquire HTCC but ended up selling to them instead. The sector has consolidated over the last few years and Deutsche Telekom is now Invitel’s only fixed-line competitor in Hungary.
“We understand the market context and the next step will be to potentially dispose of different business segments within Invitel, which HTCC was already preparing to do before the sale.”
Rating agency Standard & Poor’s said that it had assessed the exchange offers as distressed and tantamount to default and as such it had lowered the long-term corporate credit rating to SD (selective default).
Target nation: Spain
Sponsor: Apax Partners
Senior lenders to Spanish bakery Panrico are delaying progress in restructuring talks, according to a source close to its private equity owner Apax. However, senior lenders argue that they are not delaying the process but are simply reviewing alternatives after rejecting a proposal put forward by the company, which they consider is merely a “sticking plaster” deal.
According to a source close to the senior lenders, the proposal put forward by the company involved “layering” more debt on the capital structure rather than a proper deleveraging of the €856m debt pile.
A steering committee of PIK lenders led by Avenue Capital is also in the process of putting together its own proposal. The company is being advised by Credit Suisse. Rothschild and law firm Latham & Watkins have been mandated to advise the committee of PIK lenders, while Houlihan Lokey is advising senior lenders.
Apax acquired Panrico 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 refi added €585m of new debt, which was followed in November by the €225m PIK loan.
Target nation: UK
The restructuring of airport catering business Select Service Partner (SSP), backed by Swedish private equity firm EQT, is likely to be fully consensual and completed by the end of the year.
SSP entered a lock-up period with banks earlier this month after agreeing, in principle, to a proposal to restructure its €1.1bn of debt facilities.
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.
Existing mezzanine lenders will get a 15% equity stake in the company post-restructuring along with co-investment rights. 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.
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: Netherlands
The term sheet backing a proposed restructuring of Stahl has been approved by a senior lenders co-ordination committee. All lenders to the Dutch chemicals group owned by French private equity firm Wendel are now in the process of voting.
Wendel acquired Stahl in June 2006 from Investcorp with a €460m financing through MLAs JP Morgan and Lehman Brothers. The restructuring proposal has been rumoured to involve a sizeable equity cheque from the sponsor.
The original loan comprised senior, second-lien and mezzanine tranches. At the time, leverage was roughly 4x senior net debt to EBITDA, 4.8x through the second lien and 5.9x total.
In a company statement, Wendel said that sales for Stahl were down 24.6% in the first nine months of 2009, at €178m versus €236.2m for the same period last year. However sales in Q3 showed a gradual recovery, coming in at €67.2m, up 6.6% from the previous quarter.
In September Wendel announced a net loss of €960m for the first half of the year, mainly due to its share in battered construction company Saint-Gobain. On the back of its loss the listed firm said it would tackle debt at a number of portfolio companies, including Stahl, Saint-Gobain and Deutsch Connectors
Target nation: France
Sponsor: LBO France
Blackstone is advising senior lenders to Wheelabrator Allevard, which is owned by LBO France. The business, a French industrial tool maker, was acquired in 2005 in a deal backed by a €374m loan in a secondary buyout from Wendel Investissement. It has been in default since May.
Matters appear to be shaping up for a consensual agreement, and there is understood to be no pressing liquidity problem to force any radical or speedy resolution of the situation.
A co-ordinating committee of senior lenders includes Harbourmaster, Commerzbank, RBS and HSBC. GE is also a lender.