Monier Group Services GmbH, the German tilemaker seized by lenders including Apollo (APO) Global Management LLC in 2009, won three years to restructure its business after a U.K. court allowed it to extend about $935 million of debt.
London’s High Court granted an application to increase the maturity on the equivalent of about 700 million euros ($935 million) of loans to 2018, after the Oberursel-based company failed to garner enough support from lenders, according to a company filing. Getting the Nov. 7 court ruling was the “only realistic alternative to a formal insolvency,” Monier said.
It’s the third time a European borrower has used the British legal system in the past year to get an amendment and extension to its debt without the backing of all its lenders. The U.K. process is proving attractive to borrowers based outside of the country that want to make changes to their debt in the face of opposition from some creditors.
“This allows us to focus on driving operational improvements to avoid another financial restructuring,” said Pepyn Dinandt, Monier’s chief executive officer. The court deal is “ultimately to the benefit of our lenders,” he said.
Monier went to the court after an extension request got backing from lenders holding about 80 percent of its loans, short of a 90 percent target, according to the filing. Under the U.K. legal process, known as a scheme of arrangement, only 75 percent support is needed.
Companies from outside the U.K. can use the High Court to make changes to their debt if the borrowing is governed by English law and there’s evidence the plan would be recognized in the borrower’s home country, the documents say. Monier’s debt extension request included businesses in France, Germany, Italy, the Netherlands, the U.S. and the U.K.
“The multi-jurisdictional reach of the Monier schemes are the largest to date,” said Elaine Nolan, restructuring partner at Kirkland & Ellis LLP, who advised Monier.
The company made a net loss of 180 million euros in 2012, the documents show, as Europe’s construction markets were hurt by the region’s longest-ever recession. Sales in 2012 totaled 1.3 billion euros, down from 1.4 billion the previous year and about 1.6 billion in 2008, according to statements on Monier’s website.
The tilemaker spent 73 million euros trying to restructure its business last year, pushing the ratio of debt to earnings before interest, taxes, depreciation and amortization to more than 30 times, according to a May 16 report by Moody’s Investors Service.
The cost-cutting program is “the only viable option to address depressed market conditions across most European markets, which are not expected to improve materially over the next two to three years at least,” the ratings firm said.
Monier was a unit of Lafarge SA until it was sold to PAI Partners in 2007. The private-equity company then lost control of the business in 2009 to lenders led by New York-based Apollo, TowerBrook Capital Partners LP and York Capital Management LP. Under that restructuring, the company reduced its 2.1 billion euros of debt by about 50 percent.
Fran McGill, a spokesman for Apollo employed by Rubenstein Associates Inc., declined to comment on Monier’s debt extension. Simon Maine, a spokesman for TowerBrook employed by Brunswick Group, also declined to comment. Officials at York Capital didn’t respond to a telephone call and an e-mailed request for comment.
“Maybe the first restructuring didn’t take quite enough debt off the company’s balance sheet,” said Karl Clowry, a London-based attorney at Paul Hastings LLP, who advised Schefenacker AG when it moved its headquarters to London to restructure its debt. “At the time there was still hope to increase the group’s value but the recent economic environment has not been favorable so now it’s easier to extend debt maturities.”
Holcim Ltd. and Lafarge SA, Europe’s two biggest cement makers, said last week they are pushing ahead with cost-cutting measures to boost profitability amid lackluster demand and higher energy costs.
Moody’s downgraded Monier’s grade to Caa1 from B3 last year and stopped awarding ratings to the company in May. Standard & Poor’s graded the company B- until it also stopped providing ratings in May.
“I do expect we will see more schemes for amend and extends,” said Anthony Ward, a London-based restructuring attorney at Shearman & Sterling LLP, which advised Danish roofing company Icopal A/S on its debt extension. “It’s a way of dealing with a fundamental problem in documentations: certain matters require all lender consent.”
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