In recent months, two proposals have emerged with separate plans for Kloeckner after a Lazard-led auction failed to attract bidders by a May 1 deadline.
In one group, Oaktree is proposing to take control through a debt-for-equity swap that would cut senior debt to €500 million, from €850 million. As part of the plan, Oaktree would then sell an ownership stake back to current sponsor Blackstone. The proposal has sufficient support from first-lien lenders to proceed, according to sources.
In another group, junior lenders led by hedge fund Strategic Value Partners (SVP) propose a takeover that would repay senior debt at par, plus accrued interest, sources say. A subset of the junior lenders – plus another unnamed institution – would provide equity and debt, respectively, to support the offer. Kirkland & Ellis and Rothschild are advising this group on their proposal.
The Financial Times reported on May 29 that SVP tabled its bid, but none of the parties have announced a deal yet.
Kloeckner has a covenant waiver in place that expires on June 22, and if no consensual agreement has been reached by then, senior lenders intend to proceed with the Oaktree plan, sources say.
Junior lenders previously have raised the possibility of litigation as they look to defend themselves against a write-down, hiring law firm Quinn Emanuel.
Blackstone’s 2007 buyout of Kloeckner left the firm with senior, second-lien, and mezzanine debt totaling €1.25 billion. J.P. Morgan, Lehman Brothers, and Morgan Stanley arranged the financing. – Staff reports