Control of Autobar will pass tomorrow (26 June 2014) from buyout house CVC Capital Partners to a group of US investors in a debt restructuring.
A consortium of creditors led by York Capital Management and Angelo, Gordon & Co., will convert part of their debt into equity, according to people familiar with the situation and details communicated by the vending machine provider to its clients and suppliers.
The restructuring, which will help cut Autobar’s debt from €950m to about €450m, is expected to be formally presented to lenders on Thursday although CVC has so far declined to comment.
The deal is said to be ‘the latest manifestation of so called “loan to own” deals in Europe as banks stop extending the maturities of their non performing loans and instead sell them at a loss to hedge funds eager to take over the companies’.
We believe that CVC had invested almost €400m in the company.
The private equity group wrote off its investment in Autobar, which represented about 3 per cent of its €11bn fund raised in 2008. This fund was returning about 10 per cent a year as of September 31, according to Calpers, an investor.
CVC, which manages an €11bn buyout fund, took over Autobar from Charterhouse in 2010, partly financing the €1.2bn price with debt. Since then, vending companies have faced headwinds as consumers have turned to Starbucks and rival coffee providers. Companies cut the number of machines they provided for their employees as they slashed jobs during the downturn.
Selecta, Autobar’s Swiss competitor, has also struggled with the debt taken on when it was purchased by Allianz Capital Partners. Selecta is threatening to breach its bank covenant and is seeking to refinance about €800m in existing debt. KKR is among funds looking at providing a rescue package.
York, which is one of the largest investors in the Co-op Bank, and Angelo, Gordon, bought about a third of Autobar’s debt at a discount from initial lenders. Capula Investment Management, Blackstone’s GSO credit unit, and Avenue Capital Group are also among the creditors.
The funds see the investment as a cyclical bet on a recovery of the European economy: as more people return to work, the use of vending machines will rebound.
Many US investors have stepped up purchases of distressed European corporate debt at steep discounts
The funds are also betting on Autobar chief executive Alain Beyens and his cost-cutting measures to turn around the company. York and Angelo, Gordon are among the many US investors that have stepped up purchases of distressed European corporate debt at steep discounts. They are expecting a greater number of companies to default as banks, under pressure from regulators to cut assets, stop amending and extending loans.
It is reported that CVC had sought to keep distressed funds at bay by requesting to approve any sale of Autobar debt on the secondary market. This requirement, however, was challenged by the group of hedge funds.
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