Thu 09/24/2020 06:00 AM
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UPDATE 1: 6:00 a.m. ET 9/24/2020: Lenders to Bain Capital-controlled Trans Maldivian Airways’ originally $305 million buyout loan, which have enforced their rights under the loan documentation after failing to reach an agreement with Bain Capital on the airlines’ debt restructuring, now intend to take possession of the airline and seek recovery of their investments through a sale of the business, said two sources with knowledge. Continue reading for the Asia Core Credit team's update on the Trans Maldivian Airways debt restructuring, and request a trial to access our coverage of thousands of other debt restructurings.

The lenders had earlier rejected the latest offer from Bain Capital to restructure the company’s debt, after it had earlier missed a $6.8 million amortisation payment and entered a standstill agreement with the lenders, the two sources said.

Enforcement under the loan documentation requires support of two-thirds by value of loan holders, said the two sources.

The lenders under the loan include Bank of America Merrill Lynch, Carlyle, Davidson Kempner Capital Management, Deutsche Bank, Goldman Sachs, King Street Capital Management, and Sculptor Capital Management, as reported.

Bain Capital acquired Trans Maldivian through a leveraged buyout in 2018 from Blackstone Group, as reported. The private equity firm had acquired the asset for around $550 million, two sources said. The LBO was backed by term debt structured into a $145 million Term Loan A, a $145 million Term Loan B, and a $15 million revolving credit facility, as reported. Additionally, an around $50 million HoldCo mezzanine loan was provided at the time of the buyout.

Around $280 million of the term debt remains outstanding, as reported.


Broad details in the latest round of discussions between Bain and the lenders - which the lenders rejected - were that the private equity firm offered no haircut on the existing facility, and a pari passu injection of debt - said to be around $30 million, with a $5 million equity injection. Bain was looking to roll over the existing facility - with about $280 million outstanding - into a new loan which would mature in 2025. The existing facility matures in December 2022.

The $30 million five-year Bain Capital pari passu new money facility was proposed to pay a margin of LIBOR+ 570bps.

The margin for the rolled over loan to mature in 2025 would drop to L+ 275bps for the term loan A (TLA) tranche and revolving credit (RCF), and to L+ 300bps for the term loan B tranche. Repayment would be PIK for the first two years and cash for the final three years.

When it was originally structured for Bain’s leveraged buyout of Trans Maldivian Airways, the financing was structured as a $145 million TLA with a 3.5-year average life paying a margin of L+ 550bps, a $145 million five-year bullet TLB paying a margin of L+ 600bps and a $15 million revolver, as reported.

The top level blended all-in of L+ 630.4bps, as reported.

The private equity firm was also offering 10% to 20% of the equity of the reorganised company to lenders, as reported.

Bain’s earlier restructuring proposals, including a reduction in principal on the loan, a maturity extension and an injection of finance via super senior debt, had been rejected by lenders, as reported.

Valuation, Bidders

Under Blackstone’s ownership, and in a pre-Covid-19 environment, Trans Maldivian enjoyed a virtual monopoly on travel between the Maldives capital, Male, and the islands popular with international tourists. The cash generative nature of the business meant Blackstone, which acquired the business in 2013, very quickly recouped its equity through two dividend recaps, as reported.

When Blackstone put the asset up for sale in 2017, PAG Asia Capital was among underbidders, but even during the buyout process, the remote nature of the asset - which means there is limited bank lender support for a buyout loan - meant HSBC offered a staple financing to prospective buyers, said a source with direct knowledge.

However, sources noted that a key question is who will buy the asset now, and how will they calculate its value: Trans Maldivian’s earnings have been cratered by Covid-19, and its fleet grounded, and even when international flights resume, tourism to such a remote destination may not pick up quickly, as reported.

At the time of the Bain buyout, EBITDA was estimated at $68 million, as reported.

The lenders previously rejected Bain’s suggestion that the cash burn rate was $3.4 million a month as too conservative, as reported.

Additional considerations are raised by the lack of track record of enforcement in the Maldives, said the two sources.


Original Story 1:13 a.m. UTC on Sep. 24, 2020

BREAKING: Trans Maldivian Airways Lenders Enforce Rights, Seek to Take Possession of Company

Lenders to Bain Capital-controlled Trans Maldivian Airways originally $305 million leveraged buyout loan have yesterday evening enforced their rights under the loans documentation, after failing to reach an agreement with Bain Capital on restructuring the airlines debt, said four sources with knowledge.

Lenders include Deutsche Bank, Bank of America Merrill Lynch, Carlyle, Davidson Kempner Capital Management, Goldman Sachs, King Street Capital Management, and Sculptor Capital Management.

Commercial bank lenders, many of which have close working relationships with Bain, began exiting the facility after Trans Maldivian missed a $6.8 million amortisation payment on its leveraged debt, and with a vote looming on enforcement action, as Reorg reported in August.

Bank lenders which sold their exposure, at pricing that has risen from the high 70s to the most recent 86/87 level, include Sumitomo Mitsui Banking Corp, ING Bank, HSBC, and Far Eastern International Bank, as also reported.
Bain Capital did not immediately respond to request for comment.

--Stephen Aldred
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