Klockner Pentaplast Group’s senior creditors led by Oaktree Capital Management LP plan to cut its debt to about 250 million euros ($315 million) from 1.25 billion euros if they take control of the plastic packaging producer through a restructuring, according to three people with knowledge of the situation.
The senior lenders aim to take ownership of the company through a debt-for-equity swap after Klockner breached loan terms at the end of last year, unless the creditors are repaid at par by June 22, said the people, who declined to be identified because the talks are private. Klockner Pentaplast, founded in 1965 in Montabaur, Germany, was bought by New York-based Blackstone Group LP in 2007, according to its website.
Under the restructuring proposal, Klockner’s debt will be cut initially to about 250 million euros, or two times its earnings before interest, tax, depreciation and amortization, said the people. A plan to increase Klockner’s borrowings to about 470 million euros for a dividend payout after a debt restructuring was shelved because of market conditions, said the people.
The senior lenders have been working with Bank of America Corp., Credit Suisse Group AG, Deutsche Bank AG and JPMorgan Chase & Co. for the dividend loans, said the people.
Blackstone plans to retain a stake in the company by buying back some of the equity Oaktree will hold, said the people.
A London-based Blackstone spokesperson, who declined to be identified citing company policy, declined to comment. Los Angeles-based Oaktree declined to comment.
The Oaktree-led proposal is not supported by Klockner Pentaplast’s junior lenders.
Strategic Value Partners LLC, a Greenwich, Connecticut-based hedge fund, is leading a group of junior lenders seeking to take over Klockner Pentaplast by repaying the company’s senior debt at par, said two other people with knowledge of the situation. They plan to issue a prepayment notice next week after getting debt and equity financing, the people said.
Jefferies Group Inc. agreed to underwrite 650 million euros of new debt, including a 50 million-euro revolving credit, to back the junior lenders’ plan, said the people. Jefferies plans to sell the debt to a wider group of lenders at a later date, said the people. Strategic Value Partners and two other lenders have also lined up 190 million euros of equity for the bid, the people said.
Under the junior lenders’ proposal, Klockner’s debt will represent about 4.3 times its Ebitda after the debt restructuring, said the people.
Andrew Dowler, a spokesman in London for Strategic Value Partners, declined to comment.