New York-headquartered KKR Asset Management is providing €220 million payment-in-kind (PIK) financing to Selecta, Europe’s largest pan-European vending machine operator.
The unsecured junior loan due 2020 is part of an €820 million rescue package for the struggling vending machine group, as it seeks to avoid a breach on its loan obligations and finance future growth.
Selecta has faced stiff competition from branded coffee chains like Starbucks Coffee Company and Pret a Manger. A statement from its private equity owner, Allianz Capital Partners (ACP), said that the new financing, which includes the issuance of €550 million in high yield bond issuance, would provide the company flexibility for investments in its 140,000 vending machines and the further implementation of its on-going growth strategy.
The senior secured bond due 2019 was priced at a yield of 6.5 percent and includes two tranches. It has been assigned preliminary ratings of B+ and B3 by S&P and Moody’s respectively. Selecta has also taken out a €50 million super senior revolving credit facility (RCF). Proceeds from the new issuance will be used to retire around €800 million in existing senior and mezzanine debt.
KKR’s PIK investment means Selecta can delay the payment of interest until maturity. The loan is also said to have warrants attached, which means KKR will receive 35 to 40 percent of the company’s shares when sold by ACP, according to the Financial Times. The investment has been made from KKR’s Special Situations fund.
Mark Brown, a London-based director in KKR’s Special Situations team, commented: “We look forward to partnering with Selecta and ACP. We believe the company now has the liquidity and a long-term, patient capital structure to pursue several attractive strategic initiatives.”
Remo Brunschwiler, Selecta’s chief executive, said: “Since the beginning of 2013, we have managed to implement successful measures leading to improvements to the business and set the course for further growth. The refinancing helps us to drive the identified growth initiatives such as the further roll-out of Starbucks Corner Cafes and the introduction of newly developed vending machines into the market.”
Selecta has operations in 21 countries including France, Switzerland, Sweden, UK and Germany. Its business includes private and public vending in various settings including office, healthcare and education.
Joerg Spanier, managing director at ACP, said: “The notable interest for our financing demonstrates the confidence the financial markets have in Selecta’s sustainable business model. We are confident that based on the strategic initiatives and efficiency measures implemented over the past 18 months Selecta is well positioned to further strengthen its leading market position going forward.”