Carlyle-Led Bondholders Group Offers to Take Over Majority Stake of Officine Maccaferri’s Equity Through Debt-For-Equity Swap, Provide New Money; Company Using Grace Period After Missing Dec. 1 Coupon Payment

Relevant Document:
€200M 5.75% Senior Notes due 2021

Officine Maccaferri’s bondholders committee, led by investment fund Carlyle, is proposing to take over a majority stake of the Italian business’ equity through a debt-for-equity swap and to provide new money, sources close to the deal told Reorg.

The bondholders’ group, which is advised by DC Advisory and Delfino & Associati Willkie Farr & Gallagher as its financial and legal advisors, respectively, controls over 50% of the company’s 2021 €190 million bonds, sources said. Along with Carlyle, GLG and Schroders are part of the bondholders’ committee, sources said.

Maccaferri’s bonds have tanked over the past few days and are quoted at 44/45 after the company missed its coupon payment on Dec. 1. Sources close told Reorg that the company is using its grace period, which expires on Dec. 31, 2019.

Under the terms of the company’s €200 million 5.75% 2021 notes, Maccaferri has a 30-day grace period in the payment of interest or additional amounts when due, before there is an event of default. If the payment is not made before the expiry of the grace period, there will be a continuing event of default at which point the trustee or 25% in aggregate principal amount of the noteholders can declare all of the notes immediately due and payable. For this to happen the issuer must first have been notified and have failed to cure the payment default within the applicable period. The non-payment event of default can be waived by 90% in aggregate principal amount of the outstanding notes.

The company is currently evaluating its next steps but has engaged with the bondholders’ group and considers their offer interesting, sources close said.

It is unclear how the bondholders are planning to implement the deal and whether they aim to use any in-court procedures such as a concordato.

Last week, Moody’s downgraded the corporate family rating of Officine Maccaferri to Caa3 from Caa1 due to a further deterioration in the company’s liquidity driven by delays in the debt restructuring process pursued by its parent company and exacerbated by a weak operating performance in the first nine months of 2019. Moody’s negative outlook reflects a heightening risk of near-term default on upcoming debt payments or service obligations, as a result of continuing deterioration in the group’s liquidity profile.

Officine Maccaferri’s holding company group SECI has received an extension from the Bologna court to the deadline for presenting its concordato plan until Jan. 3. The court will convene on Feb. 4 to admit or reject the plan, sources said.

SECI is still in negotiations with funds interested in providing new money. Among them are HPS Investment Partners and Oxy Capital, while Italian private equity group QuattroR may have withdrawn from the situation, sources said.

SECI, which is advised by Rothschild and BonelliErede, is looking for a new money provider interested in investing both at holding and operating company levels, sources said.

On Dec. 2, the heavy machinery manufacturer Samp, another subsidiary of the group, filed for concordato in bianco after a group of its lenders decided to close some of the company’s credit lines, sources said. Samp had revenue of about €163 million in 2018, a company spokesperson said.

The filing of Samp comes after that of seven companies of SECI Holding (Enerray, Exergy, Seci Energia, SECI Holding, Sadam, Sapaba and Felsinea Factor), which filed for concordato in bianco on May 31. The holding company has €750 million of debt, a spokesperson told Reorg.

Reorg reported in October that SECI was struggling to draw interest from funds who were uncomfortable with the security package offered to a potential new money provider. SECI was seeking about €60 million of new money, as reported. The security package included some of the group’s real estate as well as a share pledge over the operating company Officine Maccaferri, sources said.

While Maccaferri can boast specific know-how in the gabion-retaining structures sector, the company is over-levered and has €190 million of notes due in January 2021, sources pointed out. Therefore, any operation at the holding company level which involves Maccaferri should be conditional on a refinancing or restructuring of its 5.75% notes, sources added.

Officine Maccaferri's capital structure is below:
 
-- Luca Rossi