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Lenders to German plastics manufacturer Kloeckner Pentaplast have been asked to sign up to a restructuring agreement providing €420m of debtor-in-possession (DIP) and haircut around 68% of first lien debt, according to 9fin sources.

Creditors are set to take over the company from sponsor Strategic Value Partners (SVP) under a Chapter 11 process, as 9fin previously reported. The DIP, split between euros and dollars, is due to fund the Chapter 11 proceedings, sources said.

The DIP financing includes funds to refinance the existing €112m bridge loan raised at the end of August, with the new money component being less than €300m, sources added.

As part of the agreement, €550m of first lien debt will be rolled up, with the remainder being equitised. Some equity will later be diluted via a Management Incentive Plan.

The existing bridge loan is pari passu with senior debt, but has some additional unencumbered assets pledged against it, sources said.