Luggage company Samsonite has become the latest private equity portfolio company to require a cash injection from its sponsor.
CVC Capital Partners, which bought the business for $1.7 billion at the height of the credit bubble in June 2008, has agreed to pay $175 million to retain a controlling 60 percent stake in the business, a source close to the situation confirmed.
The recent debt-for-equity swap arrangement will see Samsonite’s debt burden reduced from around $800 million to $240 million.
|Samsonite: in CVC's hands|
CVC acquired Samsonite in a take-private transaction, which represented an exit for the business’ largest shareholders – Ares Management, Bain Capital, and Teachers’ Private Capital, the private investment arm of Ontario Teachers’ Pension Plan. The exit reportedly netted the consortium, which took over the business as it struggled to cope with a downturn in air travel following the September 11th terror attacks, more than five times their money invested.
CVC’s deal to retain control of the US company comes as an increasing number of private equity firms are engaging in similar discussions with lenders, as highly-leveraged portfolio companies bump up against their debt covenants.
One such process being negotiated at the moment involves Monier, a French roofing materials business backed by European buyout group PAI Partners. The buyout firm has already had two debt-for-equity swap proposals rejected by its lenders. Now a competing group, led by a consortium of distressed-investment groups Apollo Management, TowerBrook Capital and York Capital, is expected to submit a formal proposal by the end of the week, which would see it inject around €200 million, halve the debt and take control of the business.
In January Nordic Capital effected a successful restructuring of portfolio company Thule, a manufacturer of roof racks, injecting further cash into the business and reducing its debt by around 45 percent.
Other processes have been less successful for buyout sponsors. London-based Cinven recently saw its equity stake in struggling Spanish hospital group USP Hospitales reduced from 65 percent to less than 10 percent as lenders Barclays and Royal Bank of Scotland took 65 percent in a debt-for-equity swap.