Equity swap to slash British Vita's debt burden

ERJ staff report (CMB)

Manchester, UK -- Chemicals group British Vita, which operates 10 North West factories making foam and industrial polymers, has agreed a debt for equity deal with its lenders, according to reports.

Citing an anonymous source, news agency Reuters said the deal would mean a fresh injection of about £85m in cash from private equity owner TPG and debt providers. British Vita's debt mountain will be reduced from £590m to £90m.

At a meeting on Friday, more than 75 per cent of creditors are said to have backed the deal, which now needs court approval at a hearing tomorrow.

Lenders will have a 37.5 per cent equity stake while TPG will put in £40m of new money, giving it 33.4 per cent.

British Vita has declined to comment on the reports.

TPG, then known as Texas Pacific, bought British Vita for for £668m in 2005 after a hostile takeover battle. But the highly leveraged buyout left the company saddled with huge interest payments.

Latest available accounts, for 2007, show that British Vita (UK) Ltd, made a £22m pre-tax loss after £74.8m of interest charges more than wiped out operating profits of £52.8m.

Last December it was in danger of defaulting on payments and agreed a standstill with lenders, initially until the end of March.

Last year the company cut more than 10 per cent of its North West workforce, partly due to the strain of meeting its interest bills and partly because of weakening trading conditions

The group's North West sites include Vitafoam Ltd in Middleton and Dukinfield, Vita Industrial Polymers Ltd in Salford, Vita Liquid Polymers Ltd in Wythenshawe, Perrite in Warrington, Chemical Innovations Ltd Preston, and Kay-Metzeler Ltd in Bollington, Macclesfield.

As well as foam, British Vita makes thermoplastic sheet and compounded plastics used in furniture, construction, packaging, carpet underlay and filters.

From Crain's Manchester Business (A Crain publication)