Baxi renegotiates debt to avoid default

Baxi, a European heating company owned by buyout firms BC Partners and Electra, has approached lenders in an appeal to renegotiate its debt obligations to avoid defaulting. The negotiations come as the latest sign the credit markets are proving less favourable to buyout firms.

Buyout firms BC Partners and Electra’s Baxi, a European heating company, has approached lenders to ease its debt obligations after warning in a company trading statement it risked defaulting.

Baxi is currently valued at £700 million (€1 billion, $1.4 billion) and it has £515 million of debt, according to a company spokesperson. “Baxi doesn’t expect to have problems renegotiating the terms with lenders,” she said. 

Last week the rating agency Standard & Poor’s said it was reviewing the B+ rating allocated to Baxi’s debt because of concerns about difficult market conditions. The group has suffered difficulties in the French and German markets, although it is the sector and not the group’s market share that has declined, according to the company’s trading statement.

The last month has seen increasing difficulties for buyout firms in the debt markets, as problems in the US appeared to be moving overseas. News agency Bloomberg reported last week the asset management arms of Lehman Brothers and Fidelity were avoiding the debt markets for leveraged loans. The UK interest rate hike to 6 percent is also causing difficulties for borrowers.

Buyout firms Candover and Electra bought Baxi in 2000 for an undisclosed sum and merged it with portfolio company Newmond.  Candover exited the company with almost a two times return on its investment in January 2004, when BC Partners acquired its undisclosed stake as part of a £662.5 billion refinancing. At the time Electra increased its 28 percent holding through a £15 million reinvestment.