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Winding Up is 9fin's weekly newsletter, incorporating summaries and commentary from our European distressed coverage for the past week. Sign up for this newsletter here.

Despite being knee-deep in festive celebrations, the 9fin distressed team has kept breaking stories round the clock this week. 9fin reported yesterday (5 December) that Covalis Capital and Suez put in a £5bn non-binding offer for Thames Water.

9fin is also hot on the trail in covering fellow struggling water utility Southern Water with advisors being appointed by its RCF lenders and wrapped bonds insurer Assured Guaranty.

When we weren’t focusing on troubled waters, we enjoyed some champagne. The festivities began earlier in the week with Kirkland & Ellis’ Stressed Credit Symposium on Tuesday (3 December), which had around 300 attendees.

The firm conceded that while there will not be a distressed wave as such, distressed activity will be sustained for the foreseeable future.

Given we’ve had the highest interest rates in 15 years, practitioners expected the disruption to create distressed opportunities. Instead, we’ve seen issuers elongate their runway, which could eventually leave them in a worse situation. One of the panellists did however say due to the high volume of opportunities available, they’ve become more selective by raising the bar on their expected return.

The speakers at the event expect more liability management exercises to crop up in Europe as private equity portfolio companies seek to explore the full range of alternatives open to them.

Co-ops have cropped up as a defensive measure in response to these LMEs but we’re yet to see them being used in an offensive way, one panellist commented.

Another panellist pointed out that we’re starting to see provisions pop up in financing documentation now that ban investors from joining co-ops in the future. 9fin has been on top of this, reporting last week on Stepstone’s €1.9bn carve-out financing, which featured the ban in pre-marketing docs but faced resistance from lenders.

The practitioners also cautioned to not ignore the macroeconomic climate given the political volatility in Europe. And indeed, just two days later, French prime minister Michael Barnier bid adieu to his short-lived job after a no-confidence vote stopped him from implementing his austerity budget.

On the legal developments panel they highlighted how Thames Water was about to have the biggest ever UK restructuring plan, with the convening hearing scheduled on 17 December.

The Class Bs might put up a fight in court given they’ve been pushing for an alternative financing proposal or an amendment to the company’s plan.

One of the panellists pointed out however that just because there is another plan it doesn’t necessarily mean that the court will find the company’s plan unacceptable.

Here is the rest of what we covered this week:

Ardagh — The Irish packaging company’s bondholders represented by Gibson Dunn and Perella Weinberg Partners have been asked to go restricted in advance of a new recapitalisation proposal and business plan being presented by the company, according to 9fin sources.

BayWa — The German agriculture conglomerate intends to carry out a capital increase and sell some key assets to strengthen its liquidity and achieve a long term agreement with its creditors. These measures are based on the findings from the second draft of an IDW S6 report — an opinion on how a restructuring should look — prepared by Roland Berger. The capital increase will be carried out next year, the company said in a statement published on 30 November.

BME — The Irish building materials firm reported net leverage of 10.3x in Q3 24, according to 9fin sources — more than double the 4.2x it reported in Q3 23. Exposure to the weak German construction market is weighing on the business.

Intrum — The CDS auction for Intrum’s bonds was pushed into the New Year. EMEA Credit Determinations Committee has admitted only the CDS instruments related to the euro notes in that auction (but not the SEK bonds or RCF). The Ad Hoc Group that drove Intrum’s prepack Chapter 11 is mainly exposed to the euro notes. It holds 73% in principal vs the 75% needed to file for a UK Restructuring Plan that might be faster, cleaner and somewhat cheaper.

iQera — The French debt collector announced yesterday (5 December) that it reached a restructuring agreement on 4 December, which involves fellow debt collector Arrow Global, through a subsidiary, taking over the company.

KTM — The Sport motorcycle manufacturer has filed for a self-administered insolvency procedure in Austria, as it struggles to find the financing it needs to recover. KTM will not be able to secure “the necessary interim financing in time”, which amounts to “a high three-digit million figure”, the company stated. It aims to achieve a reorganisation plan with its creditors within 90 days.

Lowell — Lenders behind the UK-based NPL purchaser’s revolving credit facility have mandated Lazard and Clifford Chance to advise on discussions over the company’s refinancing. A restructuring deal could cause problems for the servicing of the firm’s Wolf Receivables ABS deals, writes 9fin’s Owen Sanderson.

Thames Water — Covalis and Suez have lined up a £5bn offer for the troubled UK water company while Castle Water submitted a rival £4bn bid, 9fin sources said. Thames Water and a group of its junior creditors remain in discussions about ways the group can support the company’s recently launched UK restructuring plan.

Samhallsbyggnadsbolaget (SBB): The Swedish real estate firm received communications from Fir Tree Partners and three additional funds signalling an intention to accelerate their holdings of the company’s 2028 and 2029 notes issued under the 2020 and 2021 EMTN programme. The funds have joined Fin Tree in alleging that SBB has been in breach of the EMTN consolidated covenant ratio since 31 March 2023. The company has rejected the claim, which is the subject of litigation with a trial set to start in January.

Standard Profil — A downturn in the automotive market, combined with strained liquidity, has created challenging conditions for the German auto parts supplier as its secured bonds are set to go current in April 2025. This led to a disappointing earnings call Tuesday (3 December), lasting only 20 minutes, with management refraining from taking questions from investors.

Southern Water — Banks behind the UK utility’s £350m revolving credit facility have appointed Perella Weinberg Partners and Clifford Chance after holding a beauty parade last week, according to 9fin sources. Assured Guaranty, the insurance provider for Southern’s wrapped bonds in its whole business securitisation facility, has also appointed Akin Gump for discussions with the water company.

6 December — US vs European high yield in charts (9fin)

5 December — Covalis and Suez submit £5bn offer for Thames Water (9fin)

5 December — Lowell restructuring could sever servicing on sold-off portfolios (9fin)

5 December — Arrow to take control of iQera (9fin)

5 December — Intrum CDS auction sets up perfect storm for squeeze (9fin)

5 December — Southern Water bond insurer appoints advisor (9fin)

4 December — Thames Water’s junior creditors mull support for bridge financing proposal (9fin)

4 December — KTM files for insolvency in Austria (9fin)

4 December — BME builds leverage over 10x in Q3 24 (9fin)

4 December — What is the preferred route for Standard Profil? Q3 earnings review (9fin)

3 December — BayWa plans capital increase and asset sales to support restructuring (9fin)

3 December — Graanul counting on colder winter to break the ice with investors — Q3 24 earnings review (9fin)

3 December — Top of the Flops — European Distressed Watchlist November 2024 (9fin)

2 December — Lowell RCF lenders tap Lazard and Clifford Chance as advisors (9fin)

2 December — Southern Water’s RCF banks hire advisors (9fin)

2 December — Ardagh to present restructuring proposal to lenders (9fin)

Top bond movers (link to full screener on the 9fin platform)

Top loan movers (link to full screener on the 9fin platform)

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Winding Up — Christmas comes early for Thames Water with £5bn equity offer

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