EQT, owner of Dutch dental chain operator Curaeos, is proposing to swap approximately €70 million of the company’s first lien debt, which currently amounts to €343 million including the RCF, into a minimum of a 25% equity stake without voting rights, sources tell Reorg.
As part of the proposed deal, EQT would inject about €50 million of new money to retain control of the company. The 25% equity stake handed to creditors would be in the form of warrants and lenders would not have any voting rights. If certain business milestones are met, the equity stake could slightly increase, sources added.
Additionally, about €75 million of the remaining first lien debt will be turned into a PIK toggle note, which will rank junior to the remaining first lien debt. The company is then expected to have about €200 million of first lien debt. The second lien debt of currently €64 million is expected to be wiped out, although discussions are ongoing with EQT.
The lender committee represents about 50% of lenders by value but the group would need to achieve a minimum of 75% to implement the transaction through an English scheme of arrangement. Sources say the company is unlikely to pursue a Dutch scheme. A lender meeting was held on July 31, as
reported.
Curaeos issued a going concern
notice in its full-year report as a result of the Covid-19 crisis and has been struggling to integrate its dental clinic and laboratory acquisitions. The company’s €75 million RCF was fully drawn at the end of June, and EBITDA for the first six months of 2020 was slightly negative. The RCF has a springing leverage covenant of 10.5x when drawn over 50%.
Curaeos and its sponsor EQT are advised by Houlihan Lokey and Clifford Chance while lenders are working with Latham & Watkins and PJT. The group’s restructuring proposal aims to reduce the group’s interest burden so the business is in a better position to defend market share as clinics return to normal operations after Covid-19 induced closures. Curaeos’ cost base has been under strain due to a number of acquisitions in recent years.
At the moment, the group’s debt consists of a €268 million first lien TLB paying Euribor+400 basis points maturing on May 25, 2025. The company also has a €75 million revolving credit facility due May 23, 2024, with a 3.25% margin; and a €64 million second lien term loan maturing May 23, 2026, with a cash margin of E+7.5% and a PIK margin of 8.25%.
Reorg Debt Explained have analyzed Curaeos’ May 2018 SFA. To see the full report or to talk to one of our legal analysts, click HERE. You can get access to this product if you have a copy of the SFA.
EQT declined to comment.
--Connor Lovell, Aurelia Seidlhofer, Mario Oliviero