LONDON (Reuters) – Countrywide will receive a 75 million pounds ($106.4 million) cash injection from a group of four distressed debt specialists, including its owner U.S. firm Apollo, the UK’s largest estate agent said.
The plans would see Countrywide’s annual interest payments cut in half, to about 20 million pounds a year, Countrywide said on Wednesday, with its 740 million pound debt burden cut by 175 million pounds.
In exchange, bondholders, advised by investment bank Lazard, will take a 40 percent stake in Countrywide, which is struggling to cope with a slump in UK housing market.
The remaining 60 percent will be taken by owner Apollo Management alongside new investors Oaktree, Alchemy Special Opportunities and hedge fund Polygon in return for a joint 75 million pounds cash injection.
Apollo acquired Countrywide for about 1.1 billion pounds ($1.56 billion) in 2007, at the height of the housing boom.
The acquisition was funded largely with debt, with Apollo contributing about a third of the purchase price.
Countrywide said the restructuring proposals came from bondholders concerned at the company’s “unsustainable” debt. It added the proposals were to provide the company with long-term security, not because of difficulties paying its debts.
“This is more about getting the correct capital structure in the next few years given the state of the wider market, particularly the mortgage market,” said Jim Clarke, Countrywide’s chief financial officer.
In the first nine months of 2008, Countrywide had revenues of 327 million pounds, according to rating agency Moody’s, which has said it may cut Countrywide’s Caa3 rating.
More than half of bondholders have already indicated their support for the proposals, Countrywide said, which will be conducted via a scheme of arrangement requiring 75 percent of bondholders voting to approve the deal.
The scheme is expected to be filed for approval in March, Clarke said.
A source familiar with the situation said the investor consortium expects to get the level of approval required.
Jon Moulton, managing partner of Alchemy, said that in making the deal, the group was not calling the bottom of the housing market.
“We are still looking into the downward slope; you can invest in something before it hits the bottom providing you get the terms right,” Moulton said.
By Tom Freke and Simon Meads