DEBT MANAGEMENT

Leading building materials manufacturer secures
family-held stake after ceding equity in acquisitions.

Debt covenants can put pressure on your balancesheet. See how we helped this company manage its debt and gain more leverage.

Profile
This leading manufacturer of building materials, with a turnover of around €900m, operates a global network of 20 production plants and employs over 4,000 people, with 50% located on its home soil in southern Europe. The Company exports more than two-thirds of its production to 130 countries.

Through extensive acquisitions over a decade, it has consolidated its footprint in key Western European markets and North America and expanded into Russia and China.

Context
Run by third-generation descendants of the founder, the Company’s owners nonetheless sold a 33% equity stake in 2004 to accelerate its growth and facilitate a planned IPO. After the flotation, the family wished to retain its 65% stake. To protect the credit risk in its financial structure, and shore up the possibility of defaulting on its covenants, the Company came to us.

Transaction
The Company sold its receivables to Bank X, financed through the sale of commercial paper to third-party investors and an equity tranche to Ocean.

Our role in the transaction was to acquire the equity tranche (or first-loss piece). Ocean’s investment enabled the Company to meet IAS 39 regulations and achieve full off-balance-sheet treatment. As well as providing credit enhancement for the mezzanine and senior debt, our involvement meant the Company, in partnership with us, could retain an element of control over the assets.

Outcome
Through our transaction, the Company was able to diversify its funding sources while making their family’s stake in the business more secure. As an added benefit, the off-balance-sheet treatment favourably impacted its valuation.

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Testimonial

“Edouard and Pedro understand entrepreneurs because they are entrepreneurs themselves, putting their own equity at stake. They value a partner who will be around for the long haul. In turn, they enter into any transaction as a reliable and faithful collaborator.

“The beauty of Ocean’s approach is that it can work for anyone—from manufacturing to the entertainment industry; from the telecoms sector to hospitality groups. I myself work across all these sectors and have no hesitation in recommending Ocean to clients who need to raise additional capital. The only criterion that unites all their clients is a willingness to engage in business over the long term.”

William Charnley,
Corporate Finance Partner at Mayer Brown