Target nation: UK

Sponsor: Oaktree Capital

Castle Holdco noteholders will meet on April 28 to vote on a proposed scheme of arrangement. Castle Holdco is the owner of estate agent Countrywide PLC.

The High Court of England and Wales, which is overseeing the scheme, has directed that separate meetings for holders of senior secured notes and senior notes are to be held at the offices of lawyers Slaughter and May. The draft scheme has been filed with the English and Cayman Islands courts.

Countrywide is being acquired by a consortium led by distressed debt investor Oaktree alongside incumbent sponsor Apollo, along with Alchemy Special Opportunities and hedge fund Polygon.

The scheme of arrangement, which has the backing of a majority of lenders, will facilitate the creation of a new holding company to own Countrywide.

The deal involves a £75m cash injection from sponsors in exchange for a debt write-down of 75% that cuts debt from £740m to just £175m. Senior bondholders are being offered a 35% equity stake to back the deal and will continue to hold the remaining debt.

Junior bondholders are being offered 5% of equity while Apollo and new investors would take the remaining stake. A £100m revolver is to be repaid in full.

Slaughter and May and Tri-Artisan Partners are acting for the company, Halliwells is acting for the board and noteholders are represented by lawyers Freshfields Bruckhaus Deringer, Linklaters and Wachtell, Lipton, Rosen & Katz and restructuring adviser Lazard.


Target nation: Germany

Sponsor: Ripplewood

German autoparts maker Honsel has extended a standstill agreement with lenders to April 30, to allow it more time to come up with a restructuring proposal to reduce debt.

The agreement initially ran from December 2008 until the end of March. Honsel, which is being advised by Goldman Sachs, is owned by sponsor Ripplewood’s listed investment vehicle RHJ International.

Honsel is a repeat stress candidate. In 2007 Goldman Sachs advised on a refinancing of its then €505m of debt and an equity injection following a covenant breach.

IMO Car Wash

Target nation: UK

Sponsor: Carlyle

IMO Car Wash debt investors are mulling a debt-for-equity swap proposal that would see the Carlyle-owned car wash chain reduce debt by £171m in exchange for a £25m equity injection.

The deal proposes to cut debt from £360m to £189m. Under the proposal, senior debt, which is made up of a £120m term loan A, a £120m term loan B and a £30m capex facility, will suffer a 30% write-off with senior lenders offered a minority equity stake in the restructured business.

The sponsor would retain a majority stake and mezzanine lenders would suffer a 100% write-down of their £90m investment but retain a slice of equity.

Senior debt is the fulcrum security in the deal and is widely held. As well as commercial banks, debt holders include CLOs and hedge funds.

CLO managers are becoming a source of frustration in deals generally – they are structurally disincentivised from writing down debt or holding equity and there is a growing fear that as a class CLOs will resist consensual restructurings, potentially forcing credits into insolvency.

UK-headquartered IMO Car Wash is among the first credits in the current downturn to need creditor attention twice. A less intensive restructuring last October did not entail a write-down of debt but Carlyle injected £25m into the business in the form of a PIK loan, in exchange for covenant headroom.

Rothschild is advising the sponsor.

IMO Car Wash was acquired in a 2006 deal. Despite being seven times leveraged and featuring a five-year bullet repayment on all tranches, the Bank of Scotland-arranged deal was heavily oversubscribed and pricing was flexed down.

Post flex, senior debt was priced at 237.5bp over Libor on the A loan and 287.5bp on the B. The capex piece paid 250bp. The £90m mezzanine debt paid 375bp cash and the PIK notes 425bp.


Target nation: France

Sponsor: Wendel Investissement

Materis, the Wendel-owned French construction company, is out with a request to lenders to its approximate €2bn 2006 buyout loan seeking to amend covenants and repayment schedule. BNP Paribas is co-ordinating.

Firstly, the request is intended to delay amortisation payments on its €300m term loan A and acquisition facility.

Secondly, the group is also looking to reset covenants and take a covenant holiday.

Finally, it is also seeking to regain access to its acquisition facility following its freezing after the exercise of the toggle feature on a mezzanine loan. The size of the acquisition facility is also set to be reduced.

In return the sponsor and management are set to provide €45m in new equity for the business. Lenders will earn a 25bp consent fee with a further 12.5bp paid for prompt replies.

In addition, lenders agreeing to the roll-over of the A and acquisition facilities through the amortisation extension will earn a 25bp fee and 50bp increase to the margins payable in PIK.


Target nation: Germany

Sponsor: DIC

Mauser’s buyback of debt via an equity cure from sponsor DIC can go ahead regardless of lenders’ rejection of the first of a number of amendments tabled by the company as part of the buyback process.

Mauser, a plastic packaging manufacturer, is seeking to use the proceeds of a €15m equity cure to buy €44m of debt that the sponsor has already acquired in the secondary market for the same amount and to in effect cancel the debt by placing it in a specially created SPV.

In order to facilitate the transaction lenders were asked to approve four amendments to the existing debt documents, which mainly deal with the treatment of the debt to be held in the SPV. Lenders rejected the amendments in a surprise move last week.

The four amendments are: to facilitate the subordination of debt held in the SPV, to cancel the voting rights of debt held in the SPV, to limit the transferability of debt held in the SPV and finally to recalibrate the calculation of net debt and EBITDA to limit the impact of calculating EBITDA monthly at a reported currency exchange rate while net debt is calculated at a spot rate.

The subordination and voting rights amendments require unanimous approval while the two latter amendments can be carried by majority vote.

A source close to the company said the first of the four amendments to be voted on was rejected in part because lenders believed the amendments that required unanimous approval could struggle to be passed and wanted to be sure that all elements of the amendment would be implemented before consenting to any one point.

There is no barrier under the existing documentation to Mauser acquiring the debt currently held by DIC, but the company is likely to wait until the outcome of the amendment process is clear before completing the transfer of assets.

The company did not offer a waiver fee, on the face of it because the amendments actually favour lenders. However, there has been ongoing tension around the Mauser buyback for some time partly because lenders would prefer to have seen a formal tender offer from the company when the paper was initially purchased, and also because what is in effect the use of a debt buyback as an EBITDA -positive equity is a relatively new development.

Blackstone is advising the borrower on the deal.

NXP Semiconductors

Target nation: Netherlands

Sponsors: Bain Capital and Apax Partners

NXP Semiconductors is set to fall short of its target to write off around US$1.65bn of debt through a bond exchange offer when the offer tender period ends.

At the close of an extended early tender deadline on March 23, the acceptance level from subordinated noteholders at the bottom of NXP’s debt structure was just under 20% for the dollar tranche and less than 13% from holders of euro notes. The offer favours more subordinated debt holders by exchanging their notes ahead of senior lenders.

NXP had planned to exchange around US$1.9bn of notes for €250m of new super-priority notes, and launched a tender process that targeted subordinated noteholders in particular.

By the extended early tender date, US$244m of a US$1.25bn 9-1/2% subordinated tranche had been tendered, together with €97m of a €525m 8-5/8% subordinated tranche, €64m of a €1bn euro FRN due 2013, US$154m of a US$1.535bn dollar FRN due 2013 and just US$21m of a US$1.026bn senior secured tranche.

Resistance to the offer from senior secured bondholders was never in doubt – the deal explicitly favoured subordinated noteholders and equity – but the low tender rate from unsecured bondholders may be evidence of a tougher attitude among creditors than the sponsors had expected.

One source away from the deal cautioned that the low take-up could simply be a reaction to a mispriced offer – the exchange implied a price of 17% of face value for subordinated debt. That is above trading levels prior to the offer being announced, but trading had been fitful and not reflective of noteholders’ own view of the credit.

Another factor, and one harder to gauge, could be the extent to which subordinated noteholders have hedged their positions with CDS contracts, and may prefer to see a default that leads to them being paid out in cash, rather than accept new senior notes for old.

JP Morgan, Lazard and Morgan Stanley are advising NXP. Law firm Cadwalader is advising a group of senior secured noteholders opposed to the deal.


Target nation: Italy

Sponsor: PAI Partners

Details are emerging of a proposed debt-for-equity swap at Italian coffee machine maker Saeco that would see debt cut from €566m to €300m in exchange for a €30m equity injection from sponsor PAI Partners.

Under the restructuring proposed, PAI Partners will retain a majority stake, senior lenders will take a 46% equity stake and mezzanine holders will get 3% of equity. Senior lenders have also been asked to provide new debt facilities of €40m.

Senior lenders, including second-lien, are being asked to write off 60% of debt and roll over the remaining outstanding facilities of around €300m. All of the mezzanine facility will be equitised.

The current debt structure is made up of a €122m term loan A, a €137m term loan B, a €137m term loan C and a €50m revolver. A €70m second-lien tranche sits above €50m of mezzanine.

Saeco was recapitalised in 2006 in a €562m deal arranged by BNP Paribas.

Banca Intesa, UBM, Interbanca, Rabobank and IKB all joined the deal as senior lenders but the deal is widely held thanks to a 60% fund carve-out of the B and C loans and 100% of a D loan.

SR Technics

Target nation: Switzerland

Sponsor: Mubadala Development

Banks have got behind a deal to restructure SFr915m of debt backing Swiss aeronautics services group SR Technics after its Mubadala-led sponsor consortium agreed to a significant liquidity injection to support and deleverage the business.

The deal agreed sees senior lenders, many of them Middle Eastern banks, kept whole and paid a fee of around 100bp to approve the restructuring. All mezzanine and second-lien lenders have opted to be paid out in cash at a significant discount to face value.

The agreement to pay cash to junior lenders is unusual among recent restructurings, where value has tended to break in senior, and is also unusual in not being compulsory: second-lien lenders are understood to have been offered an opportunity to convert their facilities to PIK and mezzanine lenders were offered a choice of cash or equity.

The original SR Technics deal was structured in 2007 by MLA ING. Pre-restructuring, the debt was split between a SFr125m term loan A, a SFr230m B loan, a SFr230m C loan, a SFr55m second-lien tranche, a SFr80m revolver, a SFr60m acquisition line and a SFr135m mezzanine loan.

The buyout was completed by a consortium of Mubadala Development, Dubai Aerospace Enterprise and Istithmar.

JP Morgan advised the borrower on the deal.

Source: IFR/EVCJ