Synagro Technologies has agreed to sell substantially all of its assets to an investment fund controlled by EQT, a European private equity firm, in a transaction valued at $455 million, the company announced this afternoon.
The company did not provide details of the proposed transaction, although it did say that it would implement the transaction through a Section 363 sale under the Bankruptcy Code, and that it filed for Chapter 11 in Wilmington, Del., today as a result. The company said it anticipates completing the sale in 60-90 days.
The company also said that in connection with the filing, “certain existing lenders” have committed to provide it with a $30 million DIP facility. The company said that the financing, along with operating cash flow, would “provide ample liquidity to operate the business and meet ongoing obligations to customers, vendors, and employees through the completion of the sale process.” Again, no details were provided.
The complete Chapter 11 filing was not yet available from the bankruptcy court.
The company’s senior debt is through Bank of America Merrill Lynch, which provided Synagro with $540 million in first- and second-lien debt to support a 2007 buyout by the Carlyle Group. The debt comprises a $100 million revolver maturing in this month, as well as a $290 million first-lien term loan and a $150 million second-lien term loan, both maturing on April 2, 2014. The company repurchased $31.85 million of the second-lien debt pursuant to a March 2009 tender.
While included as part of the sale of assets, Synagro said its special-purpose entities, which include its facilities in Philadelphia, Baltimore, and Sacramento, were not included in the Chapter 11 filing.
The first-lien facility is a component of the S&P/LSTA Leveraged Loan Index, and with the Chapter 11 filing, the default rate of the Index by principal amount now stands at 1.91%, versus 2.21% in March and 1.27% at year-end, according to LCD. The rate is a 12-month rolling average, so the decline versus last month reflects last year’s defaults dropping out of the calculation.
By number of loans, the default rate is now at 1.67%, versus 1.83% in March and 1.36% at year-end, the data shows.
Synagro is being advised by the law firm of Skadden Arps Slate Meagher & Flom, along with financial adviser AlixPartners and investment bankers Evercore Partners. – Alan Zimmerman