Cube, creditors vie to take over troubled water firm

SAUR is struggling to repay its €2bn of debt, amidst rumours of an equity wipeout and massive debt losses.

The shareholders of SAUR, France’s third-largest water company, and its 60-plus creditor banks are locked in takeover negotiations as the company finds itself unable to repay its €2 billion of debt, market sources said.

The troubled water firm counts the Fonds Strategique d’Investissement (FSI), a fund affiliated to state-backed bank Caisse des Dépots et Consignations, as its biggest shareholder, together with fund managers AXA Private Equity (AXA PE), Cube Infrastructure and environment group Seche Environnement. 

None of the shareholders could be reached for comment in time for publication. 

According to market sources, there are now two offers on the table to take over the company, which employs some 13,000 people: one from the firm’s bank syndicate and another from Cube Infrastructure. 

A report in French newspaper Les Echos suggests the bank group wants to keep SAUR saddled with €1.4 billion of debt and convert the remaining €600 of debt into equity, taking over the company but avoiding a recapitalisation. 

The newspaper, however, quotes third-party sources indicating that SAUR is probably not able to service more than €500 million to €600 million of debt and would require a recapitalisation of between €100 million and €200 million.

One local source told Infrastructure Investor the water utility is unlikely to be worth more than between €600 million and €1 billion. The source also argued that the shareholders will probably see all their debt wiped out and that the firm’s creditors are likely to suffer heavy losses. 

In addition to Cube and the bank syndicate, several other parties – including Antin Infrastructure Partners, services firm Derichebourg, Macquarie and businessman Jacques Veyrat – have expressed interest in taking over SAUR, but none are said not to have submitted an offer. A decision on the offers being tabled is expected by mid-April. 

SAUR has had a troubled history. Acquired in 2007 by AXA PE, FSI and Seche Environnement from private equity firm PAI Partners, the original plan was for Seche to buy an extra 18 percent stake in SAUR from FSI through a call option. Cube only joined the shareholding structure in 2008. 

But the financial crisis derailed Seche’s ability to pay for the call option at the price originally stipulated. In addition, fierce bickering between the shareholders ensued, considering that any bid for majority control of SAUR would have triggered a clause in its debt covenants that could have paved the way for the bank club to demand an immediate renegotiation of SAUR’s debt, which is priced at comparatively cheap 2007 prices. 

Most of the company’s debt is acquisition debt, maturing in 2014.