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McCarthy & Stone told senior lenders Friday (14 November) it is seeking to fully equitise the company’s GBP 200m term loans and GBP 40m second-lien debt, two sources familiar with the situation told Debtwire. As a result, GBP 110m of mezzanine debt and the equity will be wiped out, they said.
The super senior GBP 650m Revolving Credit Facility (RCF) however, would remain in place noted the second source familiar.
The UK-based retirement home builder made the proposal to senior lenders at a meeting
held today to facilitate restructuring negotiations. As previously reported by Debtwire, a senior lender steering committee recently asked the company to find a third party investor with the understanding that loan holders would take some degree of equitisation.
“[Friday’s] proposal isn’t that appealing as only a certain group of lenders is being equitised, whereas the revolver remains untouched,” said one of the sources familiar.
Though the proposal may not be very attractive, it does mark a starting point around which negotiations can begin, said the second source familiar.
“Not much direction was given on the issue of a third party investor, though the company did allude to the fact that there were still opportunities for third party investors to come forward,” said the first source familiar.
Given that some creditors are invested in more than one part of the capital structure, they could write off some of their tranches in order to protect the others, said the first source familiar.
PwC, the advisor for the senior lenders, is still working on intra-senior issues, primarily where the split on the security is, continued the second source familiar.
The GBP 650m property revolver is secured on the company’s land bank. At time of issue in 2006, the value of the land bank was estimated to be around GBP 930m, said a third source familiar with the matter.
The company did allude to several figures in terms of a sustainable level of debt, noted the sources.
“It depends on which business plan you back,” the second source added. The company has given a couple of vague business plans around the ideas of whether you want to run the business for cash or invest in a moderate build-out programme, he explained.
In terms of performance, the company said that it is ahead of its revised budget for the first two months of this fiscal year ended in August, both sources said. As reported, McCarthy & Stone has forecasted GBP 47.3m of EBITDA for FY09, after posting around GBP 110m for FY08. McCarthy and Stone had originally budgeted GBP 159.2m for FY08.
McCarthy & Stone said that the next update for lenders would be around 24 November, both sources said.
McCarthy & Stone declined to comment.
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