Reuters – SVP Battle for Kloeckner gets Debt Backing

Hedge fund SVP and junior lenders are gearing up to take over debt-laden German plastic films firm Kloeckner Pentaplast from Blackstone after Jefferies committed 650 million euros ($819 million) debt to back the buyout, banking sources said on Friday. Junior lenders set out their intentions to take over Kloeckner at a lender meeting on May 23.

(Reuters) – Hedge fund SVP and junior lenders are gearing up to take over debt-laden German plastic films firm Kloeckner Pentaplast from Blackstone after Jefferies committed 650 million euros ($819 million) debt to back the buyout, banking sources said on Friday.

 

Junior lenders set out their intentions to take over Kloeckner at a lender meeting on May 23.

 

They reiterated that in a letter sent to first lien lenders this week, after rejecting a restructuring of Kloeckner’s 1.3 billion euro debt pile put forward by owners Blackstone and senior lender Oaktree earlier this year, banking sources said.

 

The bid will be backed by around 650 million euros debt from Jefferies which could be launched for syndication at a later stage and around 190 million in equity – enough to pay senior lenders out their roughly 840 million debt at par.

 

Junior lenders will also wipe out 450 million euros of junior debt as part of the move to gain control of the company, banking sources said.

 

Blackstone and Oaktree will likely accept SVP’s offer and will need to receive the funds on Tuesday to take into account a three-day prepayment notice period before a covenant breach waiver expires on June 22, when senior lenders can enforce their debt restructuring proposal as the firm will be in default of its loan repayments.

 

Blackstone declined to comment. SVP was not available to comment.

 

Senior lenders want to restructure the company by reducing senior debt to 500 million euros from 850 million in a debt-for-equity swap and write off 450 million junior debt.

 

This would reduce the company’s leverage to around 2 times. Oaktree would take control of the company and sell a portion of it back to current owner Blackstone, bankers said.

 

Once in control of the business, senior lenders could seek a dividend recapitalisation which would push leverage to around 3.75 times. They have been in talks with Deutsche Bank, JP Morgan, Credit Suisse and Bank of America Merrill Lynch to provide the fresh injection of debt, banking sources said.

 

Blackstone bought Kloeckner from Cinven in 2007, backed by 1.25 billion euros of leveraged loans, according to Thomson Reuters LPC data. The firm has struggled with higher raw materials costs in a difficult economic climate as well as high leverage, around 10 times the company’s 130 million euros EBITDA. ($1 = 0.7939 euro) (Reporting by Claire Ruckin; Editing by Dan Lalor)