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Winding Up is 9fin's weekly newsletter, incorporating summaries and commentary from our European distressed coverage for the past week. Find out more about what we do for distressed here.
“The big thing that changed was the inflation forecast. So, the inflation court forecast moved up several tenths at the end of the year… it’s probably going to take longer to get the confidence we need to begin to loosen policy,” Jerome Powell said at a press event on Wednesday (12 June).
The US economy is still running hot. With only a small month-to-month drop in the US’s CPI — 3.4% in the April numbers, down from 3.5% in March — and a strong jobs market with more than 272,000 jobs added in May (compared to a prediction of 180,000 according to a Bloomberg poll of economists).
Across the pond, Europe is in a slightly different place. The ECB elected to cut rates last week, albeit by a miniscule 25bps. While the path seems clear, the pace will likely be slower than most would like.
ECB president Christine Lagarde emphasised that “restrictive” interest rates would continue for “as long as necessary” to ensure price stability, in an 8 June blog post.
The Bank of England's monetary policy committee is due to meet the coming Thursday. Expectations are that the BoE will cut rates; UK CPI numbers are much softer — 2.3% for April 2024, according to data provided by the Office of National Statistics — than those across the pond; flatlining GDP growth in April (see chart below) also makes a case for a rate cut.
With all this in the background, stressed/distressed issuers have had to get creative when dealing with near-term maturities. French Telco giant Altice France has taken advantage of the last 10 years of covenant erosion to push assets outside of its restricted group in an attempt to corral lenders into accepting a haircut.
Irish packing firm Ardagh opted to cash-in on the golden-age of private credit and teamed up with Apollo on a priming deal to refinance the company’s $700m 2025 SSNs. An unrestricted subsidary, Ardagh Investments Holdings Sarl (AIHS), will issue a €790m senior secured term loan due 2029 — fully subscribed by Apollo and secured against the company’s majority holding in Ardagh Metal Packaging.
Swedish property group Samhällsbyggnadsbolaget i Norden AB (SBB) paired up with US-based Castlelake to move assets into an off-balance sheet joint venture, following earlier deals struck with Morgan Stanley and Brookfield. Most recently it has proposed to hybrid and unsecured bondholders an exchange offer into new a residential unit which it plans to IPO sometime this year.
In the context of central banks actually starting to cut rates, refinancings may become slightly more palatable. It begs the question: will the current trend of aggressive liability management exercises continue or become a relic of the high rate environment?
Anyway, onto this week’s news…
This week’s news
Atos SE —On Tuesday (11 June) the French software company announced that it had selected the restructuring proposal put forward by Onepoint, Butler Industries and Econocom (Onepoint consortium) and a group of some of its creditors. The proposal entails €2.9bn of debt converted into equity, €1.5bn of new money debt (including €300m of bank guarantees) and €250m of new money equity. The group will work with the Onepoint consortium to reach a definitive restructuring agreement to be implemented by an accelerated procedure by next month. The announcement means CDS investors are closer to triggering a credit event on CDS contracts.
Consolis — More than 90% of the French concrete manufacturer’s lenders signed a lock-up agreement to support its restructuring proposal, enough to complete the deal consensually, according to 9fin sources. Read more here.
Hurtigruten — The Norwegian cruise liner held an uneventful Q1 24 call on Wednesday 12 June 2024 (see Transcript & Playback here) where management quickly ran through the performance but didn’t take questions at the end. Q1 24 numbers showed modest improvement YoY. However, headwinds in its largest German market and in its HX (Hurtigruten Expeditions) segment persist, so performance is unlikely to dramatically take off for the remainder of the year. But 2025 is looking up with good inflow of pre-bookings, which is a positive sign.
Medical Properties Trust —Judge Christopher Lopez of the US Bankruptcy Court of the Southern District of Texas approved on an interim basis a DIP financing proposed by a FILO lenders to Steward Health. The DIP includes a $150m roll-up portion, along with up to $225m in new money, with $75m being provided upon interim approval. Read more here.
OQ Chemicals — The German chemicals producer reported a 10% drop in EBITDA in Q1 to €45m compared to last year as lenders rejected its former owner Advent’s proposal to take over the company in exchange for a €250m equity injection. One of the sources said Advent’s proposal was rejected because “it lacked day-one par recovery”. Bloomberg reported that Strategic Value Partners (SVP) is looking to take over now that Advent’s deal has been rejected.
Pfleiderer — Strategic Value Partners injected €80m of equity into the wood product manufacturer last Friday, 7 June, according to 9fin sources. SVP wants bondholders to extend their obligations for two years in-exchange for a margin uplift. Read more here.
R-Logitech — The ports operator is facing €379m of maturities on 24 June which it cannot repay, according to a company notice. It is at risk of filing for insolvency if its bondholders do not agree to extend the maturity by two years and it does not come to a refinancing agreement for its mezzanine loan. The group requires 75% consent in order to pass the extension. Voting opens on 22 June (12am CEST) and closes on 24 June (11 pm CEST).
Samhallsbyggnadsbolaget — The troubled Nordic real estate group announced a SEK 2.5bn ($240m) debt exchange to shift hybrid and unsecured bonds from SBB’s parent company to a new residential spin-off entity, Sveafastigheter AB. The company will be using a Dutch auction to facilitate the exchange, with accepted offers receiving 80% of the exchanged price in new bonds and the remaining 20% paid as a cash consideration. Read more here.
Zayo - The fiber network company is considering raising $750m-$900m in new loans and bonds at its Zayo Europe subsidiary, which will retain $100m-$200m of the potential proceeds while the rest is sent to the group’s US subsidiary to repay its revolver due March 2025. Read more here.
Willkie Farr & Gallagherannounced that it had hired a team of 11 lawyers from Latham’s Hamburg office on Tuesday, 11 June. The move added three new partners to firm: Jörn Kowalewski, Ulrich Klockenbrink and Hendrik Hauke. And one new counsel, Jan-Philipp Praß; alongside seven new associates. Read 9fin’s update on this team move here.
Kowalewski and the team advised Leoni on the implementation of its €1.6bn StaRUG restructuring plan last year, which was Germany’s first large-cap scheme since StaRUG was introduced in 2021.
In London, Hogan Lovells hired Sam Norris as a partner in the firm’s restructuring and special situations pratice, according to a 3 June announcement.
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