by David Holley | Published June 19, 2012 at 6:00 AM
Distressed debt private equity investor Centerbridge Partners LP has wrested control of waste and recycling equipment manufacturer Wastequip LLC from former owner Odyssey Investment Partners LLC through a recapitalization that eliminated $550 million in debt, replacing it with a $150 million first-lien senior secured term loan and a $40 million revolver.
The deal brings to a conclusion a solicitation of lender votes on a consensual recapitalization, which Moody's Investors Service noted in May. The two new loans, along with cash, will refinance Wastequip's existing senior secured credit facility, which Moody's said in November consisted of a $50 million senior secured revolver and a $331 million senior secured term loan. The revolver was due in February, but Wastequip made a deal with lenders to delay exercising their rights to give Wastequip time to rework its books. The term loan would have been due in February 2013.
With the refinancing, the company's junior debt and equity is being converted into new equity or canceled, leaving Centerbridge as majority owner. Exactly when Centerbridge acquired rights to Wastequip's debt, and how much it paid, is unclear. Centerbridge did not respond to requests for comment.
The recapitalization puts Wastequip in a far better position, though it seemingly left Odyssey out in the cold. The Charlotte, N.C., company's debt-to-Ebitda ratio was more than 15 times last fall, sparking Moody's to downgrade its rating to Ca/LD (limited default) based on a missed mezzanine interest payment, while Standard & Poor's downgraded it to SD from CCC-.
The outlook for Wastequip had been poor since Odyssey issued the $381 million loan package to buy the company from DLJ Merchant Banking Partners in January 2007. The overall deal was worth $611 million, and Odyssey contributed $145 million in debt. The company, then known as Wastequip Inc., received a B2 corporate family rating, while the $381 million debt package received Ba3 ratings. Leverage was 6.3 times on revenue of $523 million, Moody's said.
DLJ paid $300 million to acquire Wastequip in 2005, investing $90 million of its own equity. It recapitalized the company in April 2006, extracting a $92.6 million dividend.
Following Odyssey's acquisition, Wastequip's corporate family rating was downgraded by the end of the 2007 to B3, as sales hadn't come in as well as hoped and the company's leverage rose to 7 times. By December 2008, the corporate family rating fell to Caa1; it was down again a year later to Caa2. By late 2009, when revenue was down to $300 million, Moody's was questioning the company's ability to finance its revolver by 2012 and its term loan by 2013.
Centerbridge clearly saw an opportunity in Wastequip's debt. Revenue had begun to rise again, sitting at $344 million for the 12 months ended March 31, 2012. The recapitalization places the company's leverage at 4.2 times.
"We expect Wastequip's recent enhancement in its operating performance to continue as its bookings and backlog trends have been steadily improving in both its steel and specialty waste handling businesses," Moody's wrote in a May 17 report.
Moody's rated the new $50 million revolver, which has first priority over the term loan, at Ba2. The term loan is rated at B3.
Wastequip president and CEO John Scott also announced he will retire now that the company has been recapitalized. Martin Bryant, who served as a senior executive of Dana Corp. between 2008 to 2011, will replace Scott in the top job.