Four Seasons Delays Sale as Debt Deal Nears

LONDON (Reuters) – Junior lenders to British care home operator Four Seasons Health Care came under pressure to sign up to a debt restructuring deal after the company’s senior creditors agreed to the proposals.

The lenders, holding so-called payment in kind (PIK) notes, are now the biggest obstacle to a successful debt restructuring, Four Seasons said on Monday.

The lenders, owed more than 200 million pounds ($322 million), have been holding out for better terms in the restructuring, two sources with knowledge of the situation said.

However, PIK lenders’ power to gain better terms is now in doubt after senior lenders agreed to the restructuring deal.

“Senior lenders are determined to get a deal that does not involve selling the business and have some ideas about the routes to achieve this,” one lender source said.

Without support amongst senior lenders the PIK holders are at risk of having the terms of the deal imposed on them, the source said.

PIK lenders could defend their position by threatening a sale of the company, a power they have due to an unusual feature in the loan documentation.

However, such a step is seen as unlikely because a sale now would not generate enough cash to repay the lowest-rank lenders.

The company owes a total of about 1.4 billion pounds but a recent valuation estimated the company’s assets at little more than 900 million pounds.

The restructuring plan on the table suggests slashing the company’s debt in half and giving lenders big equity stakes, the two sources said.

Last week, the restructuring deal looked to be off the table after failing to receive unanimous support from senior lenders by a July 6 deadline. This triggered a process to put the heavily indebted firm up for sale.

However, the lender that objected to the deal — named as Credit Suisse (CSGN.VX) by the two sources — last week changed its position and now backs the restructuring deal.

Credit Suisse declined to comment.

That sale plan is now on hold as management and lenders make another push to finalise the debt talks, which have dragged on for more than a year.

By Tom Freke
(Editing by Dan Lalor) ($1 = 0.6211 pound)