Fitness First

Target nation: UK

Sponsor: BC Partners

Lenders are set to review the financing behind Fitness First in January following year-end results on October 31. BC Partners, the European private equity group, acquired Fitness First in 2005 for an enterprise value of £835m in a secondary buyout from Cinven.

The £597.5m debt backing the deal is split between a £75m five-year term loan A priced at 225bp, a £335m seven-year term loan B at 287.5bp, a £20m seven-year revolver paying 225bp drawn, a £62.5m Capex facility and a £105m mezzanine piece.

Fitness First is the largest fitness company in the world by number of clubs, comprising 424 clubs and more than 1m members across 15 countries in Europe, Asia and Australia. Cinven bought out the company in 2003 in a £204m MBO with Bank of Scotland and RBS arranging the supporting £331.6m of debt.

Gala Coral

Target nation: UK

Sponsor: Candover, Cinven and Permira

Gala Coral, the UK gaming group, has asked senior debt holders for three waivers including a request to delay the publication of its annual accounts according to a report in the Daily Telegraph.

In exchange the business – owned by Candover, Cinven and Permira – has offered a fee of around £2.3m.

The Financial Times also reported that senior lenders have asked for a £150m cash injection from mezzanine debt holders led by Park Square and Intermediate Capital Group.

An approach from private equity firm Blackstone, aimed at executing a takeover of Gala Coral, may have stalled even before it tabled its proposal. Blackstone’s prospective deal is understood to have relied on winning senior lender support to a deal that would keep senior debt whole and hand mezzanine lenders a minority stake.

Any effort to “divide and conquer” senior and junior creditors was always likely to be hampered by mezzanine lenders’ cross-holding of 40% of senior debt.

Another obvious danger was that any new investor looking to buy into the structure in the throws of a restructuring could be cast as a stalking horse by existing investors, like the mezzanine holders Park Square and ICG who have already put together a deal.

A senior lender co-ordinating committee has hired KPMG to advise on the situation. Lazard is advising Gala Coral, while Rothschild is advising mezzanine lenders Park Square and ICG.

Mezzanine lenders are convinced value breaks in their debt and form an effective blocking group in senior, even if a deal was proposed. Under the mezzanine proposal they will take half of the gaming group’s equity in exchange for a refinancing of £2.7bn of outstanding debt.

The proposal keeps mezzanine whole, but defers the cash paid on that debt for the term of the facility. Senior lenders will receive a fee and have their coupons lifted to 2009 levels. Incumbent sponsors Candover, Cinven and Permira will retain half of the business.

The deal originated with Park Square and ICG, which hold just under half of Gala’s £460m of mezzanine debt and have been in the deal since it was first arranged. Apollo Management is another substantial mezzanine holder.

Global Garden Products

Target nation: Italy

Sponsor: 3i

Senior lenders are understood to have proposed their own plan to restructure Italian lawnmower maker Global Garden Products, after rejecting a proposal from sponsor 3i and mezzanine lenders built around a €40m equity injection. GGP breached covenants in 2009.

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 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.

Now senior lenders plan to take equity themselves and provide a €35m credit line to the debtor, converting €220m of debt into an 80% equity stake with management and holders of €120m of mezzanine lenders taking the rest. 3i had sought to write-down €360m of senior debt and all junior debt.

Lazard is advising the company.


Target nation: Spain

Sponsor: Advent International

Sponsor Advent sold Spanish plant-hire business Hune for €1 after lenders agreed to waive their change of control clause at the end of an 18-month process involving lenders, management and the outgoing sponsor. Hune is being sold to management with all of its debt in place, after lenders and sponsor failed to agree a deal to keep the sponsor in the business.

Hune, formerly Euroloc de Maquinaria, was bought by Advent at the end of 2007 when the leveraged finance market was already limping to a close. The deal was backed by a €240m facility, mandated to Banesto and Bank of Scotland.

Debt comprised a six-and-a-half-year A tranche of €55m, a seven-year B tranche of €65m, a seven-year capex line of €80m and a six-and-a-half-year revolver of €40m.


Target nation: Hungary

Sponsor: Mid Europa Partners

In the next step in the ongoing restructuring and repurchase of Invitel by Mid Europa Partners, the Central and Eastern European private equity firm has began a tender offer to purchase the outstanding ordinary shares and all the ADS of the Hungarian telecoms company.

Mid Europa has offered to pay in cash par value of €0.01 per ordinary share and US$4.5 per American Depositary Share, each representing one Invitel share, that it does not currently own. The latter represents a premium of circa 27% over the Invitel ADS closing price of US$3.55 on the NYSE Amex Stock Exchange on December 4.

Mid Europa currently owns approximately 74.4% of all outstanding Invitel shares (including Invitel shares represented by Invitel ADSs).If Mid Europa controls more than 90% of the share capital of Invitel following the completion of the tender offer, any ordinary shares and ADSs not acquired in the tender offer will be acquired in a compulsory acquisition procedure under Danish law, at the same per-share cash price as in the tender offer.

Mid Europa sold the business two years ago to TDC’s subsidiary HTCC for €470m, but is retaking control after acquiring TDC’s 64% stake in the business in November and purchasing Invitel’s outstanding debt by way of a distressed bond exchange through a series of transactions worth €700m. These included an exchange offer to buy 87% of the €125m of outstanding floating-rate senior PIK notes due 2013 at 50% of face value and the €72m cash buy-back of a further €85m of outstanding debt – a mix of 10.75% senior notes due 2012 and senior FRNs due 2013 issued by Invitel’s subsidiary Magyar Telecom.

Mid Europa says that the repurchase of the business so soon after its sale is an opportunistic acquisition for the private equity firm. Shearman & Sterling is acting as Mid Europa’s legal adviser.

Kabel Deutschland

Target nation: Germany

Sponsor: Providence Equity

Kabel Deutschland has approached lenders with a request for amendments to €1.3bn of senior debt facilities. Goldman Sachs is co-ordinating and bookrunning. BNP Paribas, Deutsche Bank, JP Morgan and RBS are bookrunners.

The company wants more leeway in raising debt for acquisitions, and to move the tenor on the €1.3bn facility out to March 2014. It reports that holders of approximately 47% of the senor facilities by value have already agreed to the proposals. The early-bird deadline is January 22 and the final consent date is January 29.

In April 2006, KDG raised a senior €1.35bn loan to upgrade to its network. The facility comprised a €1.15bn six-year term loan and a €200m six-year revolver. The out-of-the-box pricing for both tranches was 200bp over Euribor and the deal was led by RBS with Deutsche Bank and Goldman Sachs.

In November 2007, the company closed a €650m senior secured loan repack facility that was inserted pari passu with existing senior debt. That facility had a March 2013 maturity and a margin of 325bp over Euribor.

N&W Global Vending

Target nation: Italy

Sponsor: Barclays Private Equity

N&W Global Vending, the pan-European manufacturer of food and beverage vending machines, will go through some “light restructuring”, with covenants reset in exchange for an equity injection by its private equity owners.

In November 2008, Barclays Private Equity, Italy, together with Investcorp, acquired N&W Global from Argan Capital and Merrill Lynch Global Private Equity, who themselves acquired the business through a buyout in 2005.

The terms of the deal were not disclosed but it was thought to be in the region of US$1bn, with lenders including Bank of Ireland, Barclays, BNP Paribas, Calyon and ING. Intermediate Capital Group was also reported to have committed mezzanine.

At the time, Merrill Lynch Private Equity and Argan called it the largest leveraged buyout that year in Italy. Barclays Private Equity and Investcorp own the company on an equal basis, in conjunction with management who hold a minority stake in the company.

The business is headquartered in Valbrembo, Italy, with offices in Argentina, Brazil and China. The company manufactures products in three core areas: hot and cold beverages, snacks and foods, and can and bottle vending machines.

N&W Global was established nine years ago through the merger of European manufacturers Necta and Wittenborg. The company is advising itself on the restructuring.


Target nation: Spain

Sponsor: Apax

Debt-laden Spanish bakery Panrico is to meet with creditors at the end of January, once its current covenant waiver expires on January 20. The Apax-owned business agreed the waiver with lenders after breaching covenants last September.

Cesar Bardaji Vivancos, formerly an independent board member at Panrico, took up his new position as CEO this week, and is working with Apax to formulate a new business plan for the company. This will form the basis of restructuring talks with lenders and follows the senior lenders’ rejection of a restructuring proposal put forward by Panrico last year, which they labelled a “sticking-plaster” deal.

According to a source close to the senior lenders, the proposal put forward by Apax involved “layering” more debt on the capital structure rather than a proper deleveraging of the €856m debt pile. Apax has formally accepted a steering committee organised by the senior lenders, which is putting together a restructuring proposal, as is a steering committee of PIK lenders led by Avenue Capital.

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: France

Sponsor: Wendel

Wendel has announced further details of deals to extend maturities and increase flexibility on credit lines for Saint-Gobain. So far this year Wendel has extended maturities on all its bank debt with margin calls by more than two years, and has repaid or reduced bond and bank debt by €946m – as a result it has no debt maturities pending until after February 2011.

Analysts reacted positively to that news. Deutsche Bank said that the position of 2011 noteholders in particular had improved, but also that of the 2014 noteholders, given that some bank debt now matures after these bonds, rather than before.

Among these measures is an extension of two tranches of Saint-Gobain debt. This includes €930.6m in bank debt maturing in April 2012 which has been broken into four tranches of €232.65m each, maturing in April 2012, April 2013, April 2014 and April 2015.

The other tranche is €1bn in bank debt maturing in July 2013, which has been reduced to €800m and will be repaid in three tranches of €266.6m each in July 2013, March 2014 and December 2014.

Wendel has also amended a credit line for Saint-Gobain of €500m maturing in 2011. After repaying €107m of this line in the third quarter of 2009 and renegotiating the terms of the contract, Wendel now has a €300m undrawn line for Saint-Gobain with its maturity extended by two and a half years, made up of three €100m tranches maturing in November 2013, May 2014 and November 2014.

Wendel bond debt maturing in 2011 has been reduced to €466m following a buyback of €5m in bonds, which brings the total of buybacks to date to a €21m, in addition to an exchange offer in September extending the maturity of €112.8m of bonds from 2011 to 2014.

Saint-Gobain Desjonqueres

Target nation: France

Sponsor: Cognetas and Sagard

Oaktree will take an 80% equity stake in French specialist glassware maker Saint-Gobain Desjonqueres (SGD) in exchange for a €140m equity injection, following a deal agreed with its creditors. Lenders will take a 20% equity stake and see debt cut by 63% under a debt-for-equity swap.

Incumbent sponsors Cognetas and Sagard will exit the business. The deal is a second French set-back for Cognetas in recent months, after it and co-sponsor CVC lost control of printer CPI in October. The agreed deal has been approved and is expected to close within weeks.

The buyout of DSG from Saint-Gobain in 2007 was backed by a €590.8m leveraged loan, through MLAs RBS and UBS. BNP Paribas is also among the senior lenders. The debt comprised a €200m eight-year term loan B; a €200.4m nine-year term loan C; a €50m seven-year acquisition line; a €60m seven-year revolver; a €40m second-lien tranche; and €40m of mezzanine.

The loan backed the buyout of DSG by Cognetas and Sagard. DSG was the speciality bottle-making division of Saint-Gobain. The overall deal was valued at about €690m. Lazard and Weil & Gothsal are advising the company on the restructuring.


Target nation: France

Sponsor: Wendel

Listed French private equity firm Wendel has won the support of more than 95% of lenders for a debt restructuring of Dutch chemicals concern Stahl. The deal is backed by 95% of senior and second-lien lenders and 100% of its mezzanine lenders.

Wendel will inject €60m of equity into Stahl, leaving it with a 92% stake, with mezzanine lenders, second-lien lenders, and management holding the rest. The deal cuts Stahl’s debt by almost 40%, from €360m to less than €200m. It is scheduled to close in the first quarter of 2010.


Target nation: France

Sponsor: LBO France

Lenders have unanimously agreed a deal to restructure French roof tile maker Terreal in a deal that leaves all debt in place, leaving the credit in the region of 20x leveraged in absolute terms, but with cash retained in the business through conversion of cash pay debt to PIK facilities.

The deal was agreed after lenders shied away from taking a more aggressive stance in the face of the alignment of management with the sponsor, and the difficulty of trying to force a non-consensual deal over the heads of other stakeholders in France.

Incumbent sponsor LBO France agreed the deal with a syndicate of 22 senior lenders and the 12 mezzanine lenders. 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 is being kept whole but will be split into €500m of cash-pay and €402m of PIK. The €402m PIK piece remains a debt instrument but is convertible into equity and will be pushed down the capital structure. The new facilities are five-year with a one-year extension.

Lenders gain voting rights under the new structure as well as seats on the company board and enhanced control over the exit mechanism, which allows 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 will only see a return on its equity once senior debt is paid down – at or ahead of exit. If the sponsor recoups more than its principal a profit-sharing scheme gives lenders a share in the equity return.

The proposal requires unanimous support from lenders. The company agreed a standstill with banks in 2008, and has rolled over a drawn revolver since then, thanks mainly to the lack of liquidity concerns.

Wind Hellas

Target nation: Greece

Sponsor: Weather Investments

A UK court has given the go-ahead to implement a restructuring deal for Wind Hellas which will leave incumbent Weather Investments in control of the company. This follows the failure of a second bid in November from subordinated bondholders in their attempt to acquire the Greek telecommunications company. Bondholders are now preparing to explore various avenues of litigation.

Mike Hodges, CIO of Aladdin Capital, said: “With the Weather deal now going ahead the company and management team that got Wind Hellas into this situation in the first place will be repurchasing what was a €3bn company for €50m and basically using our money by gaining the value of our written off debt.”

Aladdin holds Wind Hellas junior notes. Junior creditors had put forward a revised bid worth €450m, which comprised €200m of equity, a €50m increase on the original offer, and the acquisition of Wind Hellas’s €250m fully drawn credit facility. But two days later, the junior creditors announced that they had not been able to get enough support for their bid to stop a court hearing regarding the pre-packaged restructuring deal going ahead the following day.

To stop the hearing going ahead junior creditors had to prove they could get enough creditor support for the deal before a lock-up period agreed between creditors and Weather ended on November 30.

Hodges said that UK law worked against the junior creditors in these situations. “Not only can we demonstrate that we are in the money but our offer was also superior to that put forward by Weather – the value of our cash bid is worth €1.4bn – but it is not executable simply because we can’t get consent by a certain time. Our losses are irrelevant to the process.”

A preliminary hearing was held in mid-November in which Hellas II, a finance and intermediary company that holds the assets of Wind Hellas, applied to be put into administration. The application came just over a week after Weather won the battle to keep control of Wind Hellas despite the first superior offer from junior bondholders.

Bondholders did not contest the administration application at the time because they assumed that their second bid would be successful.

Wind Hellas owes some €3.2bn of debt. The Weather proposal will wipe out nearly all of €1.2bn of junior debt, including €270m of PIK notes and €1.2bn of subordinated bonds, but will keep senior debt entirely in place.

Source: IFR/EVCJ