Vallourec SA has moved a step closer to finalizing a debt restructuring in which current lenders Apollo and SVPGlobal will become the largest shareholders in the French tube producer.
The company announced today that an agreement in principle has been reached on the terms of the restructuring, reducing the company's debt by about half, or €1.8 billion.
The deleveraging will be achieved via a partial repayment of the group's debt with proceeds from a €300 million rights issue that has been backstopped by creditors of the firm's revolving credit facility and the unsecured bonds. The plan also envisages a conversion of €1.33 billion of the revolving credit and bond debt into equity, in addition to a €169 million write-off of debt by commercial banks in return for warrants.
Following the restructuring, Apollo will hold between 23.2% and 29.3% of the share capital, and SVPGlobal between 9.7% and 12.3%, becoming the two largest shareholders. The two funds currently own a portion of Vallourec's debt.
The group's total credit facilities amount to €1.9 billion and the company also has high-yield bonds outstanding including €550 million of unsecured 6.625% notes due 2022, €400 million of unsecured 6.375% notes due 2023, and €555 million of bonds that mature in 2024 or after. An €800 million unsecured revolving credit facility is due in 2024.
The restructuring agreement has been signed by the company and a group of lenders representing together 65.1% of the total amount of financial debt, including commercial banks that own the revolving credit facilities and funds that own the notes, as well as the RCF. Moreover, incumbent shareholders Bpifrance Participations and Nippon Steel Corp. confirmed their support for this agreement, Vallourec said.
The agreement is subject to several conditions, including shareholder approval at the next extraordinary general meeting expected in April as well as the required level of creditor support in the safeguard proceedings, which are expected to be held over the course of March 2021.
Vallourec first announced in September 2020 that it is seeking permission to undergo a "mandate ad hoc" procedure, a process under French pre-insolvency code, after being hit by the COVID-19 pandemic and a drop in oil prices earlier in 2020. The process is typically used for debt restructurings.
Rothschild, Morgan Stanley and Weil Gotshal & Manges are advisers to Vallourec, while Willkie Farr & Gallagher is advising owner Bpifrance. Messier Maris and White & Case are advising a group of bondholders in the restructuring.
Vallourec provides tubular products, primarily for energy markets and other industrial applications. S&P Global Ratings downgraded the group to CC in November 2020.