You win some, you lose some. That seems to be thinking among private equity firms right now. The latest buyout house to succumb to this mood of resignation is PAI Partners. The Paris firm has more or less given up on a debt-for-equity rescue for its Oberursel, Germany, roofing materials company Monier GmbH and decided to leave it to the tender mercies of a group of American distressed-debt funds led by Apollo Management LP, TowerBrook Capital Partners LP and York Capital Management LLC.
PAI wrote to its investors on Tuesday, explaining that it would probably not now agree to make any further investment in the company and would cease to have any involvement with it. It said it had written down the €256 million ($358 million) equity investment, made when it bought the company from its PAI IV fund in February 2007, and while it had tried to offer a deal to the lenders, it was now likely the banks would accept the counteroffer from Apollo.
PAI's final offer was to contribute €100 million of new equity for 40% of Monier's share capital as part of a €200 million new capital raising. In exchange Monier's debt would have been reduced from its current level of more than €1.8 billion to €500 million cash-pay debt and up to €300 million in pay-in-kind. The Apollo group has picked up 20% of the company's debt and can offer the wider lender group continued debt servicing and higher repayments. Their restructuring proposal includes a €150 million super senior revolver, €700 million of senior debt and a €300 million PIK tranche.
The downside is a continued burden on Monier, which the company believes will jeopardize own capital investment and growth program. But, as a source close to the situation put it, philosophically: "The management want [a structure with] more equity, but they don't have much bargaining power." - Jonathan Braude
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