Cinven dilutes stake in Jost with debt-for-equity swap

Cinven, a private equity firm based in London, is close to selling its stake in Jost, a German truck and trailer parts maker, to creditors. According to Reuters, an earnings slump prompted Jost’s management, its private equity backers, and holders of just under 400 million euros ($554 million) of loans to enter into a debt-for-equity swap. The arrangement could drop Cinven’s stake in Jost from 73 percent to 65 percent, while management, which holds the other 27 percent, would lose 7 percent.

(Reuters) – Private equity firm Cinven is close to ceding part of its stake in German truck and trailer parts maker Jost to creditors to cut debt, people close to the matter said. Jost’s management, its private equity backer, and holders of just under 400 million euros ($554 million) of loans are finalising a debt-for-equity swap after an earnings slump.

The proposed deal would see Cinven’s 73 percent stake cut to 65 percent and Jost’s management, which owns about 27 percent of the group, would see its shareholding drop to 20 percent, two sources close to the talks said.

Holders of about 87 million euros of mezzanine debt, a higher-risk type of loan ranking further down the capital structure, would convert their claims into preferred shares, giving them a 15 percent equity stake in Jost.

“The deal means the mezzanine’s stake will rank ahead of the sponsor equity,” said one of the sources. “It has taken us a long time to get to this stage but it looks like this should be finalised soon.”

With a standstill agreement with lenders due to expire in two days, fresh talks are taking place, one of the sources said.

The standstill agreement, which freezes interest payments due on debts, could be extended again, removing the threat of insolvency, which is one option that has been discussed by creditors.

While Cinven is set to lose part of its stake in Jost, which it bought from Silverfleet Capital two years ago using a 430 million euro loan, the deal would mark something of a victory for the private equity firm.

A year ago, Cinven looked set to be edged out of the company altogether after lenders backed a restructuring plan tabled by the mezzanine. But delays in debt talks, and an improvement in Jost’s earnings in the past year, gave Cinven a shot at re-entering talks to secure a deal between all parties.

While Cinven’s plan to retain a stake in Jost could still be scuppered, key elements of a restructuring deal have been agreed since a standstill extension on Sept. 15.

In particular, senior lenders, who hold about 300 million euros of loans, will get a 50 million euro payout through a cash injection to be put up by Cinven, Jost’s management, and mezzanine creditors.

“It was a big step to get the agreement with senior lenders, and hopefully this (restructuring) can be resolved this month,” said one of the sources.

Cinven declined to comment.
(Reporting by Sarah White; Editing by Dan Lalor)