Strategic Value Partners recoups Klöckner investment

Distressed specialist Strategic Value Partners (SVP) is poised to recoup its investment in Klöckner Pentaplast by refinancing existing debt with new-issue PIK notes.

German plastics company Klöckner Pentaplast, acquired 10 months ago by Strategic Value Partners (SVP) after its previous owner, The Blackstone Group, lost control of the business, is refinancing its existing debt by issuing €225 million of senior PIK (payment-in-kind) notes.

The PIK notes offer investors 11 percent compounded interest rate to be repaid at maturity.
Proceeds from the sale will be used to partially refinance preferred equity certificates used as part of the funding for the June 2012 acquisition, the firm said in a statement.
SVP acquired ownership of Klöckner following a lingering battle with ex-owner Blackstone.

Klöckner had been struggling with mounting debt and plunging sales. In an attempt to profit from the distressed opportunity, Strategic Value Partners (SVP) stepped in and purchased €350 million in second-lien and mezzanine debt. The distressed specialist then won a vote to lead a restructuring of the company’s balance sheet. Soon after, the equity became worthless, and ex-owner, Blackstone lost the €1.3 billion it had invested, reportedly Blackstone’s first loss of control in Europe. However, under the new terms, SVP had to inject €190 million of new equity and €800 million of senior debt.

Since SVP stepped in 10 months ago, the firm has made some progress, and the debt offering suggests management feel sentiment towards the company has improved.

Victor Khosla, founder and chief investment officer of SVP, attributes Klöckner’s strong performance to the company’s “strong management team”. He believes the refinancing will allow the firm “to return significant capital to investors in less than one year and ensures that the company is well positioned to deliver on its strong prospects both in its current markets and as it expands into newer emerging markets in Asia and South America,” he said in a statement.