Target nation: Germany

Sponsor: DIC

DIC-owned Almatis has secured a standstill agreement from lenders, granting forbearance until August to allow space to agree a consensual restructuring of its US$1bn debt pile.

Almatis hired Close Brothers to advise on the deal. Rothschild is advising a group of senior lenders and KPMG has been brought in to do due diligence on the company.

Almatis was one of the few syndications to close in the second half of 2007, making it among the first post-boom European LBO structures, notable for the large equity contribution from DIC. UBS arranged the US$1bn of senior and mezzanine debt backing the deal.

Germany-based Almatis is a leading producer of specialist alumina materials used in industry.


Target nation: Germany

Sponsor: RHJ International

German autoparts supplier Honsel has agreed a comprehensive restructuring built around a debt for equity swap and radical writedown of debt from €510m to €140m.

Goldman Sachs is acting as sole financial adviser to the company. Latham & Watkins advised a steering committee of senior lenders on the deal.

Under the plan now agreed, sponsor RHJ International will invest €50m into the business in exchange for retaining a 51% equity stake. A super senior debt facility of €40m is not affected by the restructuring but the remaining €510m of secured debt will be reduced to just €140m, made up of new senior and mezzanine tranches.

Existing senior lenders will take a 49% stake in the business in exchange for writing down their more than €300m of senior debt to the new €140m total. Existing mezzanine and PIK lenders receive nothing under the restructuring.

A key element of the deal is that it was agreed consensually, outside the German courts system and under the existing loan documentation.

The consensual execution of the debt for equity swap was possible because of the priority agreement in place at Honsel, which allowed the deal to go ahead with majority rather than unanimous consent from lenders in each tranche of debt.

Out-of-the-money subordinated debtholders had limited hold-out potential given the obvious distress at the credit, and in the sector in general, according to a source involved in the deal. A significant portion of junior debt was held by investors with cross-holdings in the senior facilities who supported the restructuring, and voted with the majority across tranches.

All consents have now been obtained and all parties have now entered into a lock-up agreement to press ahead with the closing of the restructuring, which is set to complete within the month. Honsel’s performance declined dramatically in Q4 of 2008 and a standstill agreement with lenders has held since December last year.

The 2007 deal put in place €480m in facilities, made up of €355m of senior secured facilities paying 375bp over Euribor, €75m of mezzanine facilities paying 425bp cash and 600bp PIK, as well as €70m of PIK facilities. It was followed by an add-on acquisition financing with a further €40m of senior secured and €15m of mezzanine.

The 2007 deals were placed mainly with a group of hedge funds brought into the stressed situation as a relative value proposition.

Coupons on the new senior and mezzanine tranches have been increased, though not dramatically, given the continued strain in the sector and lack of visibility on Honsel’s trading outlook.

IMO Car Wash

Target nation: UK

Sponsor: The Carlyle Group

Senior creditors had instructed financial adviser Rothschild to conduct an auction process in an effort to sell IMO Car Wash, the UK-headquartered car wash chain, which owes £360m to a group of banks and other loan investors. The auction was launched after lenders rejected a restructuring proposal from Carlyle to slash debt by more than 50% to £171m in exchange for a £25m equity injection. The lenders, including distressed fund Angelo Gordon, then proposed a deal structured around extending new senior and junior debt to the company, while implying a 31% haircut on the outstanding debt.

At the same time they launched an M&A process to seek alternative buyers and valuations. However, bids from private equity houses fell below lenders’ own assessment of the value of the deal, according to someone involved in the process, while trade buyers were absent because IMO has few if any European peers.

As a result, lenders pushed ahead with their own proposal and, while the M&A process failed to find a buyer at an attractive price, the auction is understood to have shown unambiguously that value in the deal breaks in the senior debt.

Debt is currently split between senior debt made up of a £120m term loan A, a £120m term loan B and a £30m capex facility, €90m in mezzanine and a €25m PIK loan from the sponsor.


Target nation: Germany

Sponsor: DIC

Mauser has executed its controversial €15m equity cure. The DIC-owned plastics packaging manufacturer used the proceeds to buy €44m of debt, which the sponsor had already acquired in the secondary market.

The debt has been placed in a specially created SPV, and effectively cancelled. The cure went ahead despite lenders’ initial rejection of amendments tabled by the company to facilitate the process.

The process was made more difficult because of tension around the initial Mauser buyback – where lenders would have preferred to see a formal tender offer when the paper was initially purchased, and also because of the calculation of the impact of the debt buyback as EBITDA-positive equity.

Blackstone advised the borrower on the deal.


Target nation: Germany

Sponsor: PAI Partners

Lenders to German roof supplies maker Monier look certain to take control of the business in the coming weeks after seeing off a major effort from sponsor PAI to retain control of the company. A successful outcome for distressed debt investors will come in large part because of their better appreciation of the mood among CLO managers, who until now had been seen by many sponsors as sheep to be led in restructurings rather than candidates happy to take the keys.

In early June, senior lenders to Monier rejected a sweetened PAI offer to inject €135m of new cash into the business and swap one-third of debt for up to 50% of equity. The PAI offer was the largest new money bid from a sponsor to buy back a portfolio company, but was nonetheless rejected by lenders, who are increasingly happy to take short-term pain for long-term equity upside.

Some 75% of senior lenders now support an alternative restructuring plan, initiated by distressed debt investors Apollo, TowerBrook and York, who collectively hold in the region of 20% of debt, but are backed by a wide array of lenders notably including CLO managers thought to include experienced debt managers such as Alcentra, Babson and M&G.

Second-lien lenders are out of the money under both proposals, the latest example of the reality that second-lien ranks as junior debt in the event of real distress.

The lender-initiated proposal at Monier would cut debt by 50% to €700m of senior debt and €300m of PIK, with that debt paying an interest slashed to just 25bp, or €30m annually.

As well as debt reduction, the proposal features €150m of new money in the form of super senior secured loans, split between a €45m three-year A loan paying 7% over Euribor cash and 5% PIK, and a €105m five-year B loan paying 7% cash and 6% PIK, increasing to 7% cash and 9% PIK after 18 months. A further €50m of super senior secured financing is available on an uncommitted basis.

The equity swapped under the proposal will be offered to senior lenders on a pro rata basis to their current holdings.

While the PAI proposal featured a more aggressive deleveraging of Monier, which should aid the long-term viability of the business, institutional investors are believed to have favoured the alternative because it not only offered them more equity but also left a greater volume of debt in place – not that good for management but better for keeping CLO managers’ portfolios stocked.

NXP Semiconductors

Target nation: Netherlands

Sponsors: Bain Capital, Apax Partners

Bondholders who participated in NXP Semiconductors’ March exchange offer and swapped subordinated notes for super senior paper have been left reeling by the company’s latest move – a cash buyback for remaining subordinated notes at a price of between 30.5% and 35% of face value. That compares with the implied price of 17% of face value of the previous exchange.

The March exchange offer did hit substantial resistance, with most bondholders rejecting the move, but the acceptance level from subordinated noteholders at the bottom of NXP’s debt structure was close to 20% for a dollar tranche and 13% from holders of euro notes. To make matters worse, the super senior paper that those bondholders accepted is now trading at 70% of par.

NXP now says it will spend US$300m buying back outstanding debt, including up to US$1bn face value of 9-1/2 senior notes due 2015; €458m face value of 8-5/8 senior notes due 2015; US$1.4bn of FRNs due 2013; €936m of FRNs due 2013; and US$1bn of 7-7/8 senior secured notes due 2014.

As with the exchange offer, the buyback offer is targeting the most junior notes first, and will only apply to more senior paper if the bid is not hit by junior noteholders. Given the attractiveness of the cash offer for the junior notes, which compares with a level of about 19 before the offer was announced, it seems likely the bid will be hit.

The moral of the story, according to a bond trader: “Don’t give away a free option.”

NXP had cash on the balance sheet in March, subordinated euro bondholders who participated in the non-cash exchange could have comfortably clipped the 8-5/8 coupon for a year with limited downside risk, and, it is now clear, plenty of potential upside.

Deutsche Bank and JPMorgan are acting as dealer-managers on the offer.

Schoeller Arca Systems

Target nation: Netherlands

Sponsor: One Equity Partners

Bondholders in Dutch plastic packaging company Schoeller Arca Systems are to challenge a valuation on the business which could scupper restructuring plans, a source involved in the deal said.

Senior lenders and sponsor One Equity Partners is backing a restructuring proposal under which the sponsor will inject €50m into the business and senior lenders will be kept whole and rolled into new facilities, but holders of a €180m hung bridge will suffer significant write-downs.

Debt backing Schoeller Arca Systems was put in place after the credit crunch, in a deal arranged by Citigroup and JPMorgan.

Senior facilities total €142m, including a €25m revolver, a term loan A and term loan B. Schoeller Arca is a provider of plastic packaging. When the deal was syndicated in late 2007 it had an annual turnover of about €500m.

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 Sherman & Sterling.


Target nation: Ireland

Sponsors: Doughty Hanson, Balderton Capital

Irish sports broadcaster Setanta has failed to meet its £10m payment deadline to the English Premier League, and has lost the rights to broadcast football matches next season, due to start in August.

The news followed further reports that it had failed to pay £3m it owes to the Scottish Premier League. It is not yet in technical default, according to research firm Enders Analysis, and has the rest of June to negotiate new terms with SPL authorities.

It is believed to be in negotiations not just with the SPL but many – perhaps all – of the rights partners for sporting events that it shows. The English Premier League is expected to sell the 46 games package Setanta lost to BSkyB and ESPN.

Setanta’s top shareholders, Doughty Hanson, Balderton Capital and Goldman Sachs, are reported to have offered £50m to cover its costs, leaving it £50m short of covering its losses, which Enders estimated at £100m. Its backers have already injected £450m into the channel, Enders said.

The SPL did not return calls on the matter.

USP Hospitales

Target nation: Spain

Sponsor: Cinven

Private equity sponsor Cinven has opted to let lenders take the keys of Spanish healthcare investment USP Hospitales, rather than inject new cash into the business. Lenders will write down half of about €500m in outstanding debt in exchange for two-thirds of the business.

Cinven bought USP in a secondary buyout from Mercapital in 2007 for a total consideration of €675m. The sponsor contributed about €175m in equity backed by debt provided by arrangers Barclays and RBS.

The debt package arranged was never successfully syndicated, making talks between the two lenders and equity holders relatively straightforward.

Advisers said UK banks that were creditors in a distressed Spanish situation were generally showing greater willingness to take the keys from equity owners, even where that meant suffering big write-downs, in contrast to Spanish banks, which were more nervous about having to write down debt aggressively.

Under the debt-for-equity swap agreed Cinven will retain a less than 10% stake in the business, with the remaining roughly 25% of equity going to management.

Cinven has been a significant investor in private healthcare clinics. In 2007 it also bought Bupa Hospitals in the UK for €2.13bn, and owns Partnerships in Care, another UK healthcare group, that specialises in mental health and related services.