Restructuring: How not to do it
Those charged with figuring out how best to restructure securitized assets will not have been heartened by the fate of Four Seasons Healthcare – a restructuring deemed by many to be a classic example of how not to do it. The UK care home provider was acquired by the Qatari-backed Three Delta fund in 2006 in a highly leveraged deal arranged by Credit Suisse, which involved the company being burdened with debt levels equivalent to 14 times ebitda. Of this, £600 million ($990 million) was securitized via Credit Suisse’s own CMBS conduit, Titan. The company inevitably ran into financial trouble in mid-2008. One year and four debt standstill agreements later, attempts to agree a debt for equity swap among its 30 creditors in its £1.5 billion (and 11 tranches) of debt failed in July. Under threat of the business being put up for sale, senior creditors subsequently agreed to a restructuring proposal but junior debtholders were still not on board as Euromoney went to press.