Victoria gauges third party interest in potential drop-down deal
- Rachel Butt
- +Teri Buhl
- + 2 more
Victoria PLC has been sounding out interest from new investors on a potential financing deal that would involve putting some assets out of reach of existing creditors, according to 9fin sources.
The carpet and tiles company is seeking to raise roughly £185m of new money through a drop-down deal, in which it would move certain UK flooring assets with around £25m of EBITDA to an unrestricted subsidiary, sources said. Often referred to as “pulling a J. Crew” in the credit world, this liability management technique exploits capacity in the companies’ credit documents to transfer assets out the restricted boxes that provide credit support to existing lenders.
A carpet and tiles distributor, Victoria has been struggling with significantly weaker demand as consumers put off home investments in a higher cost environment. The company is also facing €500m of senior notes due August 2026, for which management said it is currently exploring refinancing options.
The notes due 2026 are indicated at 92.35 cents, up from 87.6 cents on 7 August, when the company released its FY 24 results, according to 9fin data. Over the same period, the bonds due 2028 went from 77.1 cents to 83.24 cents.
Victoria’s FY 24 revenue came in at approximately £1.3bn, down 14% year-over-year. Meanwhile, operating profit totaled £73.6m, down YoY from £118.8m. Management said it is focused on bringing down its net leverage ahead of refinancing efforts.
Liquidity-wise, the company had more than ÂŁ250 million, including roughly ÂŁ73m of cash balance as of FY 24. It has been shedding real estate assets and reducing its working capital balances.
Still, certain investors who spoke with 9fin are on watch for Victoria’s free cash flow as well as adjustments made to the company’s EBITDA calculations. They also expressed concerns over allegations of possible financial misconduct with in the company are being swept under the rug.
Victoria sought to resolve governance issues raised last year from the audit of Hanover Flooring Limited, which contributes 1.25% of its overall revenue. Upon further review of its accounting records, the company and its board concluded there was no financial misconduct and all payments due to Victoria has been received.
Current bondholders who spoke with 9fin said the company could move its UK flooring assets, such as Alliance Flooring Distribution Ltd, to facilitate a drop-down deal. They also said Victoria has been asking select bondholders to disclose their positions and where they sit in the corporate structure.
A representative at Victoria reiterated that the company is exploring refinancing options but would not expand further on details.
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