A test case for debt workout centred on troubled Dutch property company Uni-Invest has begun with two proposals under consideration.
Investors in a €603m securitisation are set to hand over control of the portfolio of 203 secondary and tertiary Dutch office and industrial assets to either Patron Capital in partnership with TPG Capital, or Valad Europe, at a vote on 17 April.
Private equity firms Patron and TPG have teamed up to bid to purchase the senior loan that secures the defaulted Opera Uni CMBS through a vehicle called Utrecht Holdings in a “credit bid” option.
The alternative is a “consensual restructuring” option which would see Valad Europe manage an accelerated disposal of the 35%-vacant portfolio.
The proposals have been put forward by special servicer Eurohypo and its adviser, Cairn Capital, in consultation with a committee of class A noteholders.
The noteholders control the company as a result of the CMBS going into default after reaching final legal maturity last month – the first time this has happened to a European securitisation issued during the recent boom.
The work-out is being closely watched by investors and analysts as it could set a precedent for other distressed securitisations maturing in the future.
All noteholders have a vote on the consensual restructuring option and the deal needs a 75% vote in favour from each class to be approved. However, if the consensual restructuring is not approved, then only the class A noteholders are entitled to vote on the credit bid option, which also requires 75% support.
Eurohypo said 89% of class A noteholders at a recent informal steering committee – reflecting 72% of all class A noteholders – said that if the rest of the noteholders failed to approve a “consensual restructuring” with Valad, they would vote in favour of TPG’s and Patron’s “credit bid” option.
The vote is set to take place on 17 April at the offices of law firm Baker & MacKenzie in Amsterdam, although the result will need to be approved by the Dutch courts, so the final outcome may not be known until July this year.
The analysts’ take
Barclays: “We think that effectively, in the consensual restructuring alternative, Opera Uni class A noteholders would benefit to a larger extent from the equity upside of the portfolio than in the credit bid alternative.
“However, given the upside assumed in the consensual restructuring option, it could well be that the risk taken by class A noteholders is also higher, in particular taking into account that re-letting and disposing of the property portfolio has failed at least twice.
“The business plan for the credit bid option also includes property disposals, but given the deleveraging at the outset, the margin for error is smaller, in our view. That said, we think that, from a cash flow perspective, the consensual restructuring option looks more risky.”
“At this stage, putting two alternatives on the table is not without risk, in our view.
“Opera Uni could end up in a situation where class A noteholders fail to agree on the restructuring option, but also fail to agree on the credit bid option, which would leave the transaction in limbo.
“In our view, this risk seems to be remote… as we expect one of the proposals to be passed by class A noteholders.”
Bank of America Merrill Lynch: “Rejecting the consensual restructuring does not by itself result in the credit bid proposal being accepted, in our understanding. That is, to approve the credit bid proposal, the class A noteholders need to vote in the credit bid EGM.
“Effectively, the class A noteholders alone will decide the fate of Opera Uni, in our view. Assuming the class B, C and D noteholders are likely to vote in favour of the consensual restructuring proposal (because they would maintain some option value), that leaves the class A noteholders to accept or reject it. We expect the outcome will reflect the alternative that is best for the class A noteholders.”
Money upfront or play the long game?
Credit Bid option: Patron/TPG would take control of the company in a €360m cash and debt bid that reflects the cut-off price of the class A notes.
They would buy the defaulted senior loan and its security from the CMBS note trustee in an enforcement sale, returning 40% of the outstanding note balance or €143.5m in cash to the class A noteholders. New four-year bonds totalling €215m would then be issued to the class A noteholders, financing the rest of the deal. The purchase of these is optional. The new notes would pay a coupon of Euribor plus 300bp, plus a payment in kind of 100bp pa. Patron/TPG have the option for two one-year extensions, potentially pushing it to a six-year workout. The credit bid deal would see the subordinated class Bs, Cs and Ds get nothing.
Consensual restructuring option: Class A noteholders would waive the note event of default that occurred in February 2012 and all classes of Opera Uni would remain outstanding. The bonds’ maturity dates would be extended for four years to February 2016.
Valad would be appointed as a third-party assets manager to implement an accelerated property disposal plan. Under this option, all bondholders, including the subordinated classes, could receive some value recovery, with class As set to receive up to 74% of their principal within 2.5 years.
bridget.o’connell@estatesgazette.com
