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Four Seasons debt odyssey – still one more year to go
Four Seasons Healthcare, the UK care home operator, has finally completed its 1.5 billion pound debt restructuring, after a year of creditor wrangling. The group has ended up in the lap of lenders including RBS, which owns about about 40 percent of the company.
Now it has to set about refinancing 600 million pounds of asset-backed debt due next September, which makes up the bulk of its remaining 780 million pound debt pile. If the company can pull it off it will be extra good news for RBS, which managed to negotiate a deal giving it an extra slug of equity (just over two percent) in exchange for advisory services, based on performance.
Four Seasons isn’t the private healthcare group to end up in RBS’ loving hands. The bank also indirectly owns the Priory Group – which it inherited from ABN Amro. The Dutch bank’s structured financiers bought the group in 2006 and refinanced later in the asset backed debt market.
Four Seasons original owner, Three Delta, run by former Natwest banker Paul Taylor, was less lucky. The company defaulted after failing to refinance a two-year loan taken out at the time of its acquisition at the top of the market in late 2006.
A dark hour for CMBS
The last week has been a bit of a shocker for Europe’s already crumbling commercial mortgage-backed securities market (CMBS).
Investors have had to cope with steep declines in the value of their bonds and a wave of downgrades by rating agencies.
Now, to add insult to injury, there has been a jump in legal and structural issues. Bondholders are having their rights diluted over or taking on fresh liabilities they didn’t even realise they had.
Debt default watch – 213 companies so far this year
It’s a big number, and it’s no suprise that corporate debt issurers defaulting are in the U.S. Standard & Poor’s Diane Vazza has the breakdown in a report emailed out today.
Two global corporate issuers defaulted this week, bringing the 2009 year-to-date tally to 213 issuers—nearly 4x the 55 defaults at this time in 2008. Both of this week’s defaults were based in the U.S., bringing the default tallies by region to 153 issuers in the U.S., 13 in Europe, 34 in the emerging markets, and 13 in the other developed region (Australia, Canada, Japan, and New Zealand).
Unending pain in CLO land
Rating firms and analysts have been lowering high yield default forecasts in recent months, but there’s still plenty of pain in store for the banks, insurers (and taxpayers) who own collateralised loan obligations, funds that package leveraged debt.
Here are some cheery stats from Fitch Ratings, which is busy setting about downgrading more European CLOs.
Commercial real estate loans grow more distressed
Realpoint, the ratings firm that specializes in bonds backed by commercial real estate properties, is out with its July delinquency report on loans in CMBS deals and it has lots of great data tidbits on the building pressure on distressed loans.
The amount of loans delinquent for three months or more – an indication of extreme distress – now stands at $11.23 billion, up from $9.57 billion in the previous month. What’s interesting about the 90-day plus delinquencies is that they’ve been rising at a much faster clip than say foreclosures and REO (when the property is turned over to the bank). Check out chart on page 9 of the full report here.
A bit of a mezz in the Carwash
It’s not all bad news for mezzanine investors after the recent UK court verdict on the debt restructuring of IMO Carwash, the Carlyle-backed management buyout which defaulted earlier this year. Senior lenders devised a plan transfer its assets to a new company, leaving junior-ranking mezzanine investors with nothing. The mezzanine debtholders contested the plan, but a UK judge disagreed and approved it.
That is a blow for mezzanine investors everywhere, because it tips the balance in favour of senior lenders for future restructurings under so-called schemes of arrangement. But they shouldn’t feel too hard done by, and the judge’s arguments may even help them in future.
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The Wall
