Permira holds talks with Hungarian government

The buyout giant is negotiating a capital restructuring of BorsodChem, the chemicals business it acquired for €1.6bn in 2006.

BorsodChem, a Hungarian chemicals company owned by buyout firm Permira, is in restructuring talks which could see the firm receive a €100 million loan from the Hungarian government, a source close to the situation has confirmed.

BorsodChem, which was the subject of a €1.6 billion takeover by Permira in 2006, has been hit hard by the downturn in the automotive and construction sectors: two key markets for the polyurethane foam products it produces.

BorsodChem: tough conditions

The €100 million loan from the Hungarian Development Bank would be extended to the chemicals business only if a “satisfactory agreement” is reached between BorsodChem’s financial sponsor and its lenders, which include The Royal Bank of Scotland, Erste Bank, RZB and Unicredit.

There is no suggestion that Permira would be “squeezed out” of BorsodChem’s capital structure as a result of the restructuring, a source close to the firm said.

As part of a possible restructuring of the business’ €1.1 billion of debt, Permira is expected to inject between €80 million and €90 million in fresh equity, senior lenders will be asked to roll-up interest payments until their loans mature and mezzanine lenders will be asked to swap their loans for equity, according to a report in this morning’s Financial Times.

A spokesman for Permira confirmed that discussions are ongoing with all parties, but declined to comment further.

In Permira’s latest annual report – released in April – it described BorsodChem as implementing cost reductions and disposal of none core assets, as well as reviewing its timeline for production capacity expansion. The firm employs 3,600 people.