Lambert Smith Hampton’s lender and 20% shareholder is pushing to take full ownership of the business in return for writing off half of its £53m debt.
Sankaty Advisors, part of private equity firm Bain Capital, proposes paying the firm’s 28 loan note holders nothing for their stakes in LSH, but will offer them a share in the upside if certain performance hurdles are cleared in the future.
It would also extend the term of loans due to expire next year.
Letters are expected to go out shortly inviting shareholders to a meeting at the end of September, when the restructuring plan will be presented.
A 75% majority is needed to push the deal through, meaning that Sankaty must win over shareholders representing at least 55% of the equity.
However, Sankaty’s proposal is understood to have caused significant disquiet as it renders the firm’s equity worthless. There is also no plan in the restructuring to motivate non-shareholding staff. The support of LSH chief executive, Ezra Nahome, who is thought to own 20%, will be critical.
He is among 25 shareholders within the business. The rest are former directors who still own close to 25%.
LSH’s debt pile dates back to the £46.5m management buyout of the firm in 2007, funded by Bank of Scotland. Loan notes were issued to investors in the MBO, stapled to their shares.
Sankaty bought most of LSH’s debt as part of a portfolio from Lloyds Banking Group in August 2012 and subsequently took control of the rest. Sankaty bought its equity stake in LSH from Caird Capital in April.
The national agent booked an operating profit of £4.9m on turnover of £64m last year, but this was largely eroded by £4.5m of debt and interest payments.
LSH’s client relationship management system has been earmarked for investment if capital is freed up.
julia.cahill@estatesgazette.com
