The long and torturous restructuring of SAUR, France’s third-largest water company, was completed earlier this month in a deal that saw its debt cut in half and its original shareholders write off almost all of their equity.
A club of some 60 banks agreed to reduce SAUR’s €1.8 billion debt pile to €900 million, with its three largest lenders – BNP Paribas, Natixis and RBS – becoming the utility’s main shareholders with 45 percent of the company. The deal will also see annual interest payments halved from €90 million to €30 million and €200 million in new lending made available to SAUR.
The company’s original shareholders have either agreed to write-off virtually all of their equity – as was the case with AXA Private Equity (AXA PE), Cube Infrastructure, and the Fonds Strategique d’Investissement (FSI) – or sell them to the new shareholders at a symbolic price – which is what former principal shareholder Seche Environnement did on the eve of the restructuring.
The restructuring still needs to be approved by the Versailles Commerce Court later this month.
SAUR’s troubles have their root in its €2 billion-plus 2007 acquisition by a consortium of Seche Environnement, the FSI, France’s sovereign wealth fund, and AXA PE from PAI Partners. Cube was to join the shareholding structure a year later.
As part of the 2007 deal, Seche Environnement, formerly SAUR’s largest shareholder with 33 percent of the company, was given the opportunity to buy an extra 18 percent in SAUR from the FSI through a call option.
It was Seche’s desire to exercise that call option against the other shareholders’ will – combined with the company’s unsustainable debt pile, which ended with it breaching its debt covenants last year – that precipitated the crisis which ended in the recent restructuring.
Matthias Burghardt, AXA PE’s head of infrastructure, was philosophical about SAUR in a May keynote with Infrastructure Investor:
“One of the mistakes [made] in the market was to use too much leverage. A few years ago, we almost had to fight [off banks] to refuse leverage for our transactions. The asset [SAUR] is actually quite good, but when you have too much leverage, even a good asset turns bad. That’s one of the lessons the industry has learned. [But] that investment also corresponded with a pretty violent turning in the cycle,” he added.