KKR’s ATU to Be Taken Over by Lenders in Debt Restructuring

ATU Auto-Teile-Unger, the German car repair and tire chain owned by KKR & Co., will be taken over by lenders following a debt restructuring.

Shareholders and a majority of senior bondholders agreed to write off more than 600 million euros ($816 million) of debt to cut cash interest costs by more than 90 percent, Weiden, Germany-based ATU said in a statement today. The company was downgraded to ‘selective default’ by Standard & Poor’s after the deal was announced.

Centerbridge Partners LP will become the majority shareholder after providing about 100 million euros of new financing along with investors Goldman Sachs Investment Partners and Babson Capital. Hayfin Capital Management LLP will provide an additional 75 million euros in a senior credit facility due in 2018.

“Our top priority over the past months has been to deleverage and protect liquidity,” Hans-Norbert Topp, chief executive officer of ATU, said in the statement. “With this agreement in place, we can now focus on further improving our offering and services.”

ATU has been struggling with declining sales and high interest costs, accumulating debts of 765 million euros including shareholder loans since its leveraged buyout by New York-based by KKR in 2004. The company’s ratio of borrowings to earnings has swollen to more than 11 times from 7.7 times in 2010, Moody’s Investors Service said in August.

Photographer:Ralph Orlowski/Bloomberg

Car mechanics work on a car at a garage in Frankfurt. ATU has been struggling with declining sales and high interest costs on debt incurred from its acquisition by KKR in 2004. Close

Car mechanics work on a car at a garage in Frankfurt. ATU has been struggling with... Read More

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Photographer:Ralph Orlowski/Bloomberg

Car mechanics work on a car at a garage in Frankfurt. ATU has been struggling with declining sales and high interest costs on debt incurred from its acquisition by KKR in 2004.

Low Growth

“ATU had too high levels of debt for what is a low-growth and low-margin business,” said Clark Nicholls, the head of high-yield research at Spread Research in London. “The company has already restructured more than once in less than 10 years and this new capital structure should become more sustainable.”

S&P said it downgraded ATU today because the company hasn’t paid a coupon due on its 450 million euros of bonds that mature in May 2014 and that it doesn’t expect a payment within a 30-day grace period. The company said Dec. 3 that about 80 percent of bondholders agreed to waive the coupon.

“We view this as a selective default under our timeliness of payments criteria,” the ratings firm said in a statement.

The company’s earnings before interest, tax, depreciation and amortization totaled 61.9 million euros in the year to June 2013, compared with 103.4 million euros in the previous period, the company said on Aug. 8. At that time, the management said it was “working intensively” on options ranging from refinancing to finding strategic partners to restructure the company’s balance sheet.

Senior bondholders will convert their debt into equity as part of the restructuring, which is expected to complete in January, according to the statement. Investors in the new financing will receive about 92 percent of the company’s common equity.

KKR funded its buyout of ATU from Doughty Hanson & Co. with about 1.2 billion euros of loans, according to data compiled by Bloomberg.

To contact the reporter on this story: Patricia Kuo in London at pkuo2@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net

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