Saur to Write Off 900 Million Euros of Buyout Debt From 2007

Saur SAS, a French water provider, is writing off 900 million euros ($1.2 billion) of debt in a restructuring proposal backed by banks and shareholders.

The agreement would halve the debt of Saur’s parent company, according to a statement from the Guyancourt, France-based business. Lenders including BNP Paribas SA, Groupe BPCE and Royal Bank of Scotland Group Plc will become “major shareholders” following completion of the deal.

The company has been in talks with creditors and shareholders to refinance 1.9 billion euros of loans raised in 2007, most of which are due to be repaid next year, according to data compiled by Bloomberg. Revenues of French water providers have dropped as Europe’s economic crisis shrinks volumes.

“Saur has long-term contracts with 10,000 localities and it requires a sustainable financial structure,” said Caroline Catoire, Saur’s chief financial officer, in a telephone interview. “This new refinancing gives us a chance to pursue long-term development.”

Saur’s debt-for-equity deal, which needs to be approved by a French court, will reduce its annual interest costs by two-thirds, to about 30 million euros, it said. The company, which provides services to 18 million people worldwide, will also raise 200 million euros of new credit lines.

Cash Flow

Free cash flow at the operating company level was always positive, Catoire said. “What weakened the group was its holding company’s indebtedness. Saur had to pay large dividends to service its debt.”

The water provider’s restructured debt, borrowed by Holding d’Infrastructures et des Metiers de l’Environnement, is due for repayment in 2019, according to two people familiar with the deal, who asked not to be identified because it is private. The loans may be reduced further, to 750 million euros, if conditions in the water market deteriorate.

Shareholder Seche Environnement sold its 33% stake in the holding company to Saur’s lenders after its attempts to restructure the business were rejected, it said last week. Saur’s other shareholders are Fonds Strategique d’Investissement, France’s strategic investment fund, Axa SA (CS) and Cube Infrastructure Fund, according to the company’s website.

Suez Environnement, Europe’s second-biggest water company, said waste-treatment revenue dropped 5.3 percent in the first quarter of the year and profit remained almost unchanged because of “particularly difficult” economic conditions. The utility, together with larger competitor Veolia Environnement SA (VIE), has seen demand for industrial waste collection slide after manufacturers reduced factory output.

To contact the reporter on this story: Julie Miecamp in London at jmiecamp@bloomberg.net

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net

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