Monier Deal May Mean Big Losses for PAI Partners

LONDON (Reuters) – Private equity firm PAI Partners stands to lose its 256 million euro ($361.2 million) investment in French firm Monier Group as activist lenders gather support for a rival 1 billion euro bid designed to improve the outcome of its debt restructuring.

The battle for roofing company Monier, which employs over 10,000 people, is a test case for European debt restructurings as lenders set plans to take control of other private equity-owned firms and recapitalize the firms themselves.

“A lot of people are looking at Monier as one of the first significant tests of loan to own strategies in Europe,” said Karl Clowry, a restructuring expert at law firm Paul Hastings.

Lenders have forced other private equity firms — such as Candover and Permira — to walk away from their holdings this year but until now few have been keen to take control of the companies themselves.

Monier’s lenders and management now have about two weeks before a debt deadline of June 30 to decide whether to back the lender-led offer or PAI’s proposals.

PAI told lenders on Wednesday it was not likely to improve its own debt restructuring proposal for Monier, a source with knowledge of the situation said.

In a letter sent to Monier investors on Thursday, PAI said the “probable outcome” of the restructuring is that the lender-led bid will succeed.


The restructuring provides employment for a phalanx of financial advisers and lawyers, which every stakeholder in the firm supported by restructuring and legal specialists.

Goldman Sachs is advising Monier, Lazard is working with the lender-led bid and Houlihan Lokey is adviser to the steering committee of lenders.

Lawyers are interested in Monier’s restructuring because the restructuring is likely to take place under UK law, even though Monier has operations in France and is headquartered in Germany.

Moving a firm’s center of main interest, or “COMI-shifting”, is a restructuring tool allowing lenders to use English court processes to squeeze out minority creditors. They might not be able to do this elsewhere in Europe.

The lenders’ debt-for-equity offer sees a higher level of debt left on Monier’s balance sheet than PAI’s offer — 700 million euros, against 500 million — but ties lenders to a low interest rate on the debt until the company’s fortunes improve.

This compromise would limit lenders’ write-offs, an investor source said.

Both proposals also include 300 million euros of payment in kind debt, where borrowers can delay paying interest.

The level of debt on Monier’s balance sheet is a worry for its management, the first source said, because the building industry’s woes have led to a collapse in the company’s income.

The latest forecast earnings before interest, taxes, depreciation and amortization (EBITDA) for 2009 is just 110 million euros, the source said, which is barely sufficient to cover the company’s interest payments.

Clowry said: “Will the current EBITDA of 110 million turn into 300 million or 400 million in a few years time? That’s what the investors will be focusing on.


Many other private-equity owned companies are struggling with excessive debts loaded onto them via leveraged buyouts during the credit boom. Distressed debt investors are eager to start taking control of these firms at a knock-down price.

“The Monier deal is symbolic of what lenders can do,” said one distressed debt investor, who declined to be named.

Monier lenders have been led by specialist debt investors Apollo Management , TowerBrook and York Capital, which bought into the company’s debt at discount prices.

“These three investors have provided the skills needed to run the business which the other lenders — banks and CLOs — did not have,” said the second source.

The distressed debt investors hope they are buying into Monier at the bottom of the cycle ahead of a sharp recovery in its fortunes, according to Paul Hastings’ Clowry.

By Tom Freke and Tessa Walsh

(Editing by Andrew Macdonald)

($1=.7087 Euro)