Deals

Lending quartet wrest control of Biffa

After turning down an offer reportedly worth £520m in the summer, Montagu and GIP are set to cede control of Biffa to a quartet of senior lenders.

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Montagu Private Equity and Global Infrastructure Partners are set to become the latest firms to hand over the keys to a portfolio company to its lenders, after UK waste-management group Biffa outlined a restructuring proposal.

Avenue Capital Group, which along with fellow lenders Goldman Sachs and GoldenTree Asset Management earlier this year won control of UK hotel chain Travelodge from Dubai International Capital, is one of four senior lenders who this week assumed control of Biffa as part of a restructuring.

The restructuring will see a majority shareholding in Biffa pass to senior creditors Avenue, Angelo Gordon & Co, Babson Capital Europe and Sankaty Advisors (the debt investment arm of Bain Capital) after the quartet agreed to write off 55 percent of the company’s debt – about £580 million (€714 million; $929 million) – and inject £75 million of equity.

“The £75 million of new investment will be used to fund a new infrastructure programme designed to reinforce the company’s position,” Biffa said in a statement outlining the proposal.

The company’s debt burden will thereby be reduced from £1.1 billion to £520 million. Mezzanine lenders, which include Intermediate Capital Group, may also lose their investments. ICG could not be reached for comment by press time.

“The proposal has support from a substantial majority of Biffa’s senior lenders and the company plans to conclude the process in early 2013,” Biffa said. The lending quartet will continue to back the incumbent management, it added.

Montagu and GIP acquired the business in 2008 in a £1.7 billion take-private. The restructuring will see their combined £700 million stake written off, making it a bigger loss for the sponsors than similar write-offs by DIC for Travelodge, and BC Partners for UK gym chain Fitness First.

In August, Montagu and GIP reportedly rejected a £520 million offer for the business from a consortium including Clearbrook Capital and UK recycling group Chinook Urban Mining, having initiated a Goldman Sachs-led strategic review of the business in January.