Materis, the privately owned French specialty chemicals company, has extended a waiver deadline after lenders failed to ease the terms of its €2bn leveraged loan, banking sources said last week.
Heavily indebted Materis, which serves the construction industry and is owned by French investment group Wendel, extended the deadline to May 15 as it seeks to avoid a debt restructuring, two bankers said.
Materis asked lenders to reset its loan covenants and ease its repayment schedule in return for fees and a small €45m equity injection from Wendel to allow the parent to keep control of the company and lenders to avoid writedowns, they added.
Wendel last week warned of a full-year loss and said it had sold assets to bolster its financial position.
The waiver to Materis’ €2bn loan, which was arranged by BNP Paribas and financed Wendel’s purchase in 2006, failed to gain the necessary consensus from lenders last week, the bankers said.
It was approved by lenders to the company’s term loan B and C but were rejected by lenders to a term loan A and acquisition loan, they added.
“A lot of the banks which are in the term loan A want to continue to receive their amortising payments, the question is can the company (Materis) afford to do so?” a banker close to the deal said.
Materis is now trying to convince lenders to agree to the changes to avoid slowly running out of money.
“If the lenders say no this will naturally lead to a situation where Materis will run out of money and default on its amortising payment,” the banker said.
Investors are reluctant to ease Materis’ repayment schedule as the company is unlikely to be able to meet even deferred payments after a slump in the chemicals sector, a second banker said.
Payments on Materis’ €260m mezzanine loan were turned off last November in an effort to conserve cash by exercising a toggle feature that turned the debt into a Payment-In-Kind loan.
Lenders to the company’s mezzanine loan include Goldman Sachs and Intermediate Capital Group, sources said. Payments on the company’s second lien loan are current, the second banker said.
The way ahead for Materis is unclear if the proposals are not accepted, both bankers said.
Indicative bids on the company’s senior loans are 34.3-35.8 percent of face value, according to Thomson Reuters LPC data, which indicates stress. Materis’ second lien and mezzanine loans are bid at 12.5 percent of face value.
France is a difficult legal jurisdiction for lenders to recover funds and investors may still opt for a pragmatic solution to avoid a full debt restructuring, they added.