Winding Up — The un(Serta)in future

Will Macadam

10 January 2025•5 min read

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.

Happy new year, to those who haven’t grown sick of this greeting; hope this first Winding Up of 2025 finds you well, to those who have.

The United States Court of Appeals for the Fifth Circuit’s decision to partially unpick Serta Simmons’ 2020 uptiering transaction has proved to be a healthy source of content as we detox from a holiday break of gamey meats and (too much?) time spent with families.

In brief, the US Court of Appeals held that Serta Simmons 2020 uptier was not a permissible “open market purchase” as defined within its 2016 credit agreement and reversed the bankruptcy court’s ruling on the validity of Serta’s uptier as an open market transaction.

A preliminary take from 9fin’s Jane Komsky and Cat Corey was that we’d see “fewer uptiers and more dropdowns” throughout 2025.

Akin Gump noted in a recently published memo that, “a significant portion of broadly syndicated term loan credit agreements” include pro rata sharing and open market provisions that are “similar or identical” to those in Serta’s credit agreement.

One of the possible implications of the judgment, as mentioned in Akin’s memo, is that it could rebalance the dynamics between existing and third party lenders; as it becomes harder to agree an LME with existing lenders, financing provided by third parties becomes more attractive.

Issuers may seek to mitigate the impact of the Fifth Circuit’s decision by inserting some form of “privately negotiated transaction” alongside open market purchases into their financial documentation. To get a sense of what the future may hold you can read 9fin’s educational here.

On the macro front, the new year has not provided the UK government with any respite. Yields on 10-year gilts (around 4.82% as of writing) are near a 16-year high, as concerns over the UK’s growth prospects (see chart below) and high debt levels fester. Uncertainty seems to remain an early theme of 2025.

Source: GDP monthly estimate from the Office for National Statistics

Meanwhile, in Europe’s distressed market, Swedish debt purchaser Intrum has filed for a Swedish Company Reorganisation following the confirmation of its pre-pack Chapter 11 plan as it looks to complete its contentious restructuring deal.

And in case you missed it, check 9fin’s predictions for the new year from our European Distressed Outlook 2025.

Now, onto…

This week’s news

Constellation Automotive — The TDR-owned British used vehicle market platform has secured a £1.3bn private credit refinancing deal with KKR in advance of bond maturities in 2027 and 2028. Constellation was recently removed from 9fin’s watchlist following the stabilisation of its capital structure.

Grover — Lenders and shareholders of the German tech rental company voted down a restructuring proposal tabled by the company’s founder on Tuesday, 7 January, according to 9fin sources. Parties involved are instead interested in exploring an alternative plan involving new funding from the company’s shareholders. Read more here.

Idorsia — The Swiss biopharmaceutical company is seeking an A&E for its CHF 200m senior unsecured convertible bond due on 17 January 2025 and an amendment of terms for its CHF 600m senior unsecured convertible bond maturing in August 2028. Meanwhile, the negotiations for the sale of the global rights to its Aprocitentan drug have stalled and the company is considering different options to extend its operational cash runway.

iQera — The French debt purchaser announced that more than 91% of its creditors had acceded to its financial restructuring before the 31 December 2024 deadline.

Pro-Gest — The Italian paper maker has decided to access the out-of-court procedure known as negotiated composition for business crisis management, according to a statement. The process “will offer the company a technical margin of several months to negotiate a rescheduling of its debt,” a source close to the company told 9fin.

Thames Water — A group of the distressed UK water company’s Class B WBS noteholders formally launched their parallel restructuring plan on Tuesday, in opposition to Thames Water’s current restructuring proposals. The parallel restructuring was neither “approved or authorised by [Thames Water]”, the company said in a statement shortly after the plan was launched. The English High Court is due to hear the Class B plan on 20 January.

Tropicana — The juice brand group netted $175m in new first-lien debt from sponsor PAI and minority shareholder PepsiCo, according to a 9 January S&P note. The loans come as Tropicana faces operational pressures and increased costs due to an agreement with Alico, one of its largest citrus producers, that increased prices.

Zayo — Certain lenders of the fiber network company signed a cooperation agreement after the company tried to extend the maturity on some or all of its first lien debt, according to 9fin sources. Zayo was exploring its refinancing options via the ABS market but failed to come to cost effective deal, sources said. A co-op piece of Zayo’s 2027 TLB appeared on a Sculptor Capital Management BWIC on Thursday, 9 January.