Winding Up — Junk in the Thames

Bianca Boorer

2 August 2024•8 min read

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.

You’d think that with the sun finally showing its face that maybe the distressed activity would die down. Well, it hasn’t!

This week 9fin took a trip back to the good old Rolls Building to watch the convening hearing for OQ Chemicals on Wednesday, 31 July. That was another case of a deal requiring a Scheme to introduce a snooze provision into the debt docs because some lenders, despite being in favour of the deal, are restricted from voting.

The judge and barrister managed to squeeze some fun from the affair by geeking out over terminology.

“You snooze you lose!” Mr Justice Trower exclaimed with a jovial smile in response to Tom Smith KC, the company’s counsel, reading his skeleton argument (ironically, as some viewers in the gallery tried desperately not to snooze off). Trower also queried whether “sacred provisions” was a new jargon, which Smith was inclined to agree was new to the court room lexicon. Hear hear.

Thames Water has been downgraded to junk, which has sent banks to try and offload their debt. 9fin’s exclusive reporting reveals its WBS creditors are willing to turn on the taps on interim financing to give it time to find new equity investors.

Today, 2 August, the EMEA Credit Derivatives Determinations Committee has said credit default swap contracts referencing Atos SE will require a credit event auction, our CDS man Dan Alderson reports.

We also got to grips with summarising R-Logitech’s two year struggle to refinance €200m of debt ahead of a bondholder vote deadline today (2 August). The group hopes to extend its debt to allow it time to sell its stake in Euroports. If it does find a buyer it still has to deal with a potential pesky change of control trigger under Euroports debt, however.

Cinemas are back for a sequel, after the writers’ strike in 2023 impeded a much needed recovery since Covid-19. AMC Entertainment has garnered nearly full participation from creditors to exchange into new first lien debt, while Cineworld announced earlier this week it had launched a UK restructuring plan.

If anyone doubts 9fin’s news drive, observe distressed reporter Will Macadam putting down his pint to tell readers 60% of Intrum bondholders had signed the company’s lock-up agreement.

This week’s news

Adler — The German RE company redeemed this week its €400m Adler Group 4.25% SUNs due in July 2025 as part of a restructuring it launched on 5 June.

Altice International — The telco announced its AdTech business, Teads, is to be acquired by industry peer, Outbrain, for $1bn. Since its French counterpart’s ultimatum, Altice International’s creditors have been wary that a similar stunt may be pulled on them but details are thin. We discuss Altice’s options and the potential deleveraging here.

Atos — On Tuesday the EMEA Credit Derivatives Determinations Committee (DC) unanimously ruled that the filing of safeguard proceedings by Atos has triggered a bankruptcy credit event, The DC is yet to schedule a credit event auction to settle Atos CDS, but has determined that the credit event occurred on 18 July 2024. Holders of protection will be confident of a big payout on their contracts, with an expected recovery of less than 10 cents on bonds.

Cineworld — The Cinema operator’s UK subsidiary announced earlier this week it had launched a UK restructuring plan designed to reduce lease liabilities at some UK locations as well as exit leases at commercially unviable sites. Expect 9fin coverage on the process early next week.

Demire — As part of the restructuring plan, the German RE operator contemplates a cash tender offer for its SUNs due on 15 October 2024. So Demire is inviting eligible bondholders interested to participate in the backstop agreement (reached with the AHG of bondholders on 5 June) to get in touch with the company within 14 days.

Heimstaden — The Swedish RE company refinanced yesterday part of its portfolio in the Netherlands through a new €725m sustainability-linked secured credit facility that matures in 2031. That replaced the existing secured bank loan due in 2026 and raised €200m of fresh proceeds Heimstaden will use to repay other debt maturities.

Intrum — Bondholders of more than 60% of the debt purchaser's debt due under its SUNs and MTN programme have signed the company’s lock-up agreement, according to 9fin sources. This followed an announcement from an unaligned group of Intrum’s SEK MTN noteholders inviting other unaligned noteholders to join a call held last Friday, 26 July. The unaligned group’s motives are unclear; they are represented by Ropes & Gray and Swedish firm Gernandt & Danielsson.

iQera — S&P downgraded the debt purchaser and servicer to CCC-. This came as iQera announced, at the conciliator’s request, having launched a solicitation to suspend any principal payments over the conciliation period, which would include the €99m SSNs due September 2024

OQ Chemicals — The chemicals company received a convening order from Justice Trower for a single-class scheme meeting on 10 September, in which creditors are invited to vote on its restructuring. OQ is seeking a two-year extension of its RCF and loan maturities to allow time to sell a majority stake in the company. You can read our court coverage here.

Pfleiderer — The German wood product manufacturer received negative ratings action from Fitch and S&P. Fitch downgraded Pfleiderer’s Long-Term Issuer Default Rating from B to CCC+ on Monday, 29 July, while S&P followed suit the following day and downgraded Pfleiderer from B to CCC. Both agencies cited the probability of a distressed debt exchange — based on the group’s restructuring announcement from two weeks ago — as motivation for the downgrade.

Solocal — Following the approval of its accelerated safeguard plan in June, on 31 July the company issued new equity and warrants. Per the plan, Ycor (a company owned by the Levy family) will remain the controlling shareholder. This completes the marketing firm’s restructuring.

Stonegate Pubs — On 31 July the UK pub company launched a £2.1bn equivalent bond deal to refi most of its debt stack (read our Credit QuickTake here). Just a small portion of the notes was available for new lenders as the deal was backstopped by an AHG of 2025 SSN holders. Moody’s affirmed the corporate family rating at B3 and assigned B3 to the new instruments, but retains a negative outlook due to persistent FCF burn and uncertain earnings recovery. Read more here.

Steward Health Care — Massachusetts offered Steward $30m to fund its eight hospitals in the state until they can be sold or closed, which still has to be court approved. The funds are not expected to be paid back but have strict limits on how they can be used. Additionally, MPT’s master lease II was severed by court order so that new tenants will have a chance at paying market rates and two hospitals got a court order approval to close.

Talk Talk — On 31 July, S&P downgraded Talk Talk and its senior secured debt two notches to CCC- on expectation of a distressed debt restructuring, near-term liquidity shortfall and a breach of its RCF's net debt-to-EBITDA covenant at the next testing date in August. The UK telco has £1bn of debt due in the next seven months and bondholders recently appointed advisors.

Thames Water Utilities/Kemble — A group of creditors advised by Jefferies and Akin is willing to provide senior interim financing if it is required during the distressed water company’s equity raise process, sources told 9fin. S&P downgraded Thames Water’s Class A and Class B WBS debt from BBB- and BB, respectively, to BB and B on Wednesday, 31 July. The move to junk brings the ratings agency in line with Moody’s downgrade last week. Class As have been trading roughly at 70-75, while the Class Bs sharply deteriorated from 55 in mid-July down to 27 last Thursday, but have since been pushed higher in a short-squeeze, according to 9fin sources.