Winding Up — Will the rise in co-ops last?

9fin team

13 September 2024•5 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.

9fin caught up with some familiar faces at Kirkland & Ellis’ Global Distressed Investing seminar and cocktail reception yesterday evening (12 September).

The law firm expects liability management exercises to continue to rise through various US-style tactics adapted to European debt documentation such as drop-downs, uptiering or a combination of the two. We’ve seen them in Ardagh, Altice, Hunkemoller and Lycra.

In response to these LMEs the consensus is that there will also continue to be a rise in co-op agreements among creditors. The law firm however expects this development will come to a head at some point. This week 9fin wrote about challenges to co-ops being on the horizon and we examine the possibility of the argument that they be considered anti-competitive in the US. Our examination of the same argument in Europe is coming soon.

The law firm expects a steady level of distress across construction, automobiles, retail, real estate and manufacturing.

Kirkland & Ellis also expect a doubling down on out of court procedures and noted we’ve seen a general absence of major UK Restructuring Plans recently, with the exception of Cineworld.

The firm’s partners from Munich, Hong Kong and New York then took us through the restructuring landscapes in Germany, Asia and US.

German situations tend to be driven by directors’ duties (given the obligation to file for insolvency) and we’ve seen the use of the StaRUG to cramdown minority shareholders in Leoni.

In China, winding up petitions are an effective tool to push shareholders to act within a certain time frame. The courts in Hong Kong can be creditor friendly but they are still unpredictable in terms of sanctioning schemes even if they are approved by the majority of creditors (although major cases have gone through, there have been several warning shots). Private credit has stepped up in distressed investing in countries such as India.

In the US, the boundaries of LMEs are being pushed as parties are willing to test the limits of documents. Before it was only distressed companies that opted for LMEs but this is expanding to different parts of the market. Private credit for instance could be a new arena for LMEs. The lawyers gave the example of Pluralsight which did a dropdown in April through an out of court exchange.

Now on to what we covered this week…

This week’s news

Adler — The German real estate company is set to close its second restructuring in September 2024 after exceeding the requisite 90% consent threshold from each series of bonds. 9fin’s QuickTake is here.

Intrum — Two creditor groups, representing 18% of the Swedish debt purchaser’s bonds, opposed to the company’s restructuring proposals joined forces under the same financial advisor, Lazard, and published a notice inviting undecided creditors to join their group. Approximately 71% of Intrum’s noteholders have signed a lock-up agreement in support of the deal, enough to file for a pre-pack Chapter 11. This leaves 11% still undecided.

Kloeckner Pentaplast — The German plastic packager’s secured creditors have been piling into a co-op agreement ahead of a deadline to join on Wednesday (11 September), sources told 9fin. Support under the dollar tranche has grown to 80% and under the euro tranche it has climbed to 50%, a source close said.

Medical Properties Trust — On Wednesday (11 September) Steward Health Care announced that it had reached an interim global settlement with Medical Properties Trust (MPT). The settlement includes $25m of bi-weekly funding payments from MPT and final numbers on how much cash MPT will be allocated from the Space Coast hospital sales.

Scenic — The cruise company is sailing towards a rebound after a few years facing rough seas, with lenders bullish on the company getting an upgrade ahead of its debt maturities. Scenic — which is privately rated CCC, sources said — has a €350m term loan B due in February 2027, but is in “advanced discussions” to extend its RCF out by 18 months from February 2025, sources added.

Thames Water — a new piece of proposed water industry legislation was slated in the House of Lords — the Water (Special Measures) Bill. We set out the key things you need to know with regards to the regulatory and legislative framework.

Lateral Moves

Blantyre investment director Kai Zeng is going back to being a restructuring lawyer at Paul Weiss a source close confirmed to 9fin. Before Blantyre, Zeng was a restructuring lawyer at Kirkland & Ellis.