Reuters: Apollo, TPG Among Funds Circling Gherkin Tower Owner IVG

Apollo and TPG Capital are among the private equity funds holding the debt of German property company IVG with a view to taking control as last-ditch talks with creditors near an end, sources told Reuters.

(Reuters) – Apollo and TPG Capital are among the private equity funds holding the debt of German property company IVG with a view to taking control as last-ditch talks with creditors near an end, two sources close to the situation told Reuters.

The company, which runs a fund that co-owns the Gherkin skyscraper in London, said late on Tuesday it had failed to reach agreement with creditors to restructure 4 billion euros of debt. Its shares have since plunged 42 percent.

Chief Executive Wolfgang Schaefers has already said he would seek creditor protection for three months to buy breathing room if no such deal was possible and, after the expiry of a July 30 deadline, IVG now has only days left to strike a restructuring deal before court insolvency proceedings begin. If a way to a restructuring is not found, a sell-off of all or parts of the company could begin.

Private equity funds have been buying the company’s debt to gain a negotiating position in talks over the company’s future that could see one or more take control via a debt-for-equity swap.

No single company has amassed a large enough stake to take control alone, three sources told Reuters, and the large number of creditors, which one source said was about 250, complicates the task of finding a compromise.

The identity of debt holders has not been made public, but sources close to the matter said U.S.-based TPG and Apollo Global Management were among those angling to take over some or all of the company via a debt-for-equity swap.

Apollo was not immediately available for comment and TPG and IVG both declined to comment.

About 70 to 75 percent of 2.2 billion euros of syndicated loans are held by funds after several banks sold out, according to people familiar with the matter. IVG also has a 400 million euro hybrid bond and a convertible bond for the same amount that are almost 100 percent held by funds, the sources said.

Debtholders would normally need about 75 percent to push through such a takeover but the picture at IVG is made even more complicated by the fact there are four separate packages of debt with differing amounts of collateral and negotiating power attached, plus the interest of shareholders.

IVG built up debt during an expansion spree but some costly projects then declined in value. It has said it needs to cut its liabilities by up to 1.75 billion euros and completely restructure its debt to make sure it has enough capital to refinance loans maturing this year and in 2014.

The company, which manages assets worth 21 billion euros previously warned that it had come close to breaching covenants on its syndicated loans, which would mean banks could demand early repayment.

Its share price has plummeted 92 percent this year against the backdrop of the restructuring talks.