La Seda’s Scheme of Arrangement process kicked-off today; single lender class meeting on 21 May
An open court hearing for La Seda de Barcelona’s Scheme of Arrangement took place this morning (30 April) at the English High Court. Presiding Judge Justice Newey gave his endorsement to implement a debt restructuring via a UK Scheme of Arrangement, subject to approval from 75% of lenders, after that the company’s counsel, instructed by Freshfields – legal representatives to the Spanish petrochemicals derivatives group – briefly outlined the plan.
The pre-pack was accepted by the judge not on the basis of a centre of main interest (COMI) shift, but based on proof that the Barcelona-based group has a “sufficient connection” with UK jurisdiction. The company has operations and employees in the UK, and its senior banking facilities are governed under English law.
In response to a request from Newey, the company counsel said La Seda’s lending syndicate consists of around 54 banks, both Spanish and international, plus a number of funds. The international banks, including agent bank Deutsche Bank, represent a significant portion of the creditor group, he added.
The counsel also gave a brief outline of the rescue proposal, which envisages a debt for equity swap as well as a partial debt conversion to PIK interest.
The debt restructuring is conditional upon EUR 150m of new equity being injected into the business. As of now, the capital increase has not been fully subscribed to, and if the EUR 50m shortfall is not filled, the Scheme of Arrangement would become ineffective, the counsel warned.
The next step is a lender meeting at Freshfields’ London offices on 21 May. The judge agreed that a single creditor class will vote on the plan, reasoning that slight differences in margins within the individual debt tranches will not affect voting. Whilst recognizing that there is a relatively short gap before today’s hearing and the meeting, the company’s legal counsel said lenders are well aware of the Scheme following lengthy restructuring negotiations and from receiving regular company updates. Any further delays would be detrimental for the company, he added. Restructuring documents will be circulated to lenders from today.
La Seda’s Scheme is expected to be sanctioned by the end of May. The restructuring is likely to become effective in late June/ early July once the Spanish regulator has approved the company’s equity prospectus.
La Seda began negotiations with its lending group early last year. In the summer of 2009, turnaround firms Gila & Co and Bryan, Tappy & Tilley stepped in to help the company and lead restructuring talks. Carlos Gila from Gila & Co is currently La Seda’s vice chairman.
According to the restructuring agreement terms, La Seda’s new facilities comprise an eight-year EUR 235m term loan A priced at Libor+ 235bps and an eight-year EUR 207m PIK loan priced at Libor+ 150bps. The PIK loan may not be repaid (in full or part) before the term loan A is fully repaid and is subject to leverage covenants tested only at the end of each year, as previously reported. Total net debt- to-EBITDA excluding the PIK loan is set at 5x for end 2010, 4.5x for end 2011, 4x for end 2012, and at 3.75x for end 2013 and thereafter.
Holders of the syndicated loan would receive 41% of the reorganised equity; BA Vidro, which will backstop a substantial part of the capital increase, 41%-42%; and the existing shareholders 17%. Proceeds from the capital increase will be used to fund operations and pay some arrears.
In addition to the syndicated loans, La Seda has around EUR 180m-EUR 200m of bilateral facilities, which are not part of the Scheme of Arrangement. La Seda negotiated separate agreements with individual lenders as the facilities were taken by different subsidiaries and plants. Some of the lines were renewed, and others were either rescheduled or payments were deferred, as earlier reported.
by Chiara Elisei
Intel. Grade: Strong evidence
Intelligence ID: 973125