Black Toro swaps debt in €40m deal

The distressed-for-control investor has increased shareholder equity by €40 million in stainless steel distributor Irestal Group

Spanish distressed debt investor Black Toro Capital has invested in Irestal Group, in what is the first time in the 70 year history of the stainless steel company that an outside shareholder has invested in the business, Jose Manuel de la Infiesta, partner at the firm told Private Equity International's sister publication PDI.

Black Toro bought €30 million in outstanding senior bank debt at a significant discount, which will be converted into equity. It also provided the company with €10 million in equity working capital. Shareholder equity has increased by €40 million as a result. Black Toro is the sole holder of the firm’s remaining outstanding debt.

The deal cuts Irestal Group’s debt significantly and enables it to drive an expansion plan, the firm said in a statement. A new strategic plan for the business will aim to consolidate the company’s position in Europe and develop its presence in the US and Asia.

Founded in 1945, Irelstal Group operates in 12 countries. The company got into trouble after stainless steel prices fell and it had difficulty accessing fresh bank financing as Spanish banks embarked on a process of balance sheet consolidation and deleveraging, PDI understands.

The company has undergone an internal restructuring plan over the last two years, selling its subsidiaries in Ukraine, the Czech Republic and Slovakia in 2011 and refinancing its senior debt in 2013.

During this period, Irestal has consolidated its presence in traditional markets, strengthened its presence in the US and will further develop its joint venture with Chinese group Tsingshan Iron & Steel Group in Shanghai in response to strong demand from the Asian market, a statement read.

Black Toro will support management and ownership in the execution of its international expansion plan. Ramon Betolaza, founding partner of Black Toro Capital, said in a statement: “Our goal is to be a strategic partner of Irestal Group and explore new business opportunities together.”

Over the last six months, Black Toro has closed on three transactions and committed €55 million with three Spanish businesses. The firm’s investment model focuses on partnering with company ownership and other key stakeholders, through direct capital injections and deleveraging instruments. Most private equity firms in Spain do not look at these kind of deals, either because they focus on buyouts or the deals are too small, hence there is very little competition, PDI understands.

Black Toro made its first distressed-for-control investment in November last year, in Spain-based Antibioticos, one of the largest pharmaceutical ingredients manufacturing facilities in Europe. It provided the group with €35 million in debt and equity, which gave the firm control of 95 percent of the company’s equity. The firm also provided a €8 million credit line to Carbures in January last year, a listed carbon fibre technology company, which has the option to convert into equity at an undisclosed strike price.

The fund manager’s maiden fund Black Toro Capital Fund I has a target of €350 million and a hard-cap of €500 million and has attracted investment from international institutional investors.