LONDON (Reuters) – British buyout house Montagu Private Equity signed a debt restructuring deal late on Tuesday that will see it walk away from British packaging company Linpac, two sources familiar with the process said.
Lenders will take on the business as a going concern, reducing the company’s debt by 320 million pounds ($529.3 million) — 50 percent of its debt burden, the sources said.
The debt for equity deal will close around the end of the year and will include a court-approved scheme of arrangement transaction, one of the sources said.
“Things are moving but nothing is finalised until all parts of the deal are done,” the source said.
The lenders plan to inject 65 million pounds into the company, the two sources said.
Linpac, which makes plastic food packaging for retailers and food manufacturers, ran into trouble last year as a result of rising commodity costs, volatile raw material prices and the decline in sterling.
The agreement will wipe out Montagu’s investment entirely but sees Linpac’s position strengthened as a result of the support from its lenders.
The debt for equity swap has three components, with the first signed on Tuesday, a source with direct knowledge of the situation said.
Montagu and Linpac both declined to comment.
Montagu bought the company from its family owners in 2003 for 860 million pounds, backed by a loan arranged by Deutsche Bank (DBKGn.DE). The private equity firm recouped around 80 percent of its investment in 2007 through a recapitalisation in 2007, one source said.
By Simon Meads and Tom Freke
(Editing by Mike Nesbit) ($1=.6045 pounds)