Several banks are refusing to approve CVC Capital Partners' request for an amendment and recapitalisation of Flint Ink and XSYS Print Solutions.
The private equity sponsor is asking lenders to increase the 'B' and 'C' loans by Eu125m each. An extra Eu130m will be added to the second lien, and the mezzanine is to be enlarged by Eu125m.
Total net senior debt for the Flint Group will now be Eu1.4bn, and total debt Eu1.9bn. Existing lenders have been offered a 25bp fee.
The senior debt will now be 4.6 times Ebitda, and the total will be 6.3 times.
"There has been no material pushback on the loan," said Marc Boughton, a partner at CVC, "and the facility is three times oversubscribed. The problem is just that a handful of banks are resisting natural market evolution."
Despite a couple of banks opposing what they consider to be an "aggressive transaction", the supermajority clause contained in the loan documents allows the sponsor to disregard the non-consenting lenders.
A Standard & Poor's report released last week, entitled Ratcheting Up The Risk: European LBO Loan Documentation Gives Borrowers An Easy Ride, comments that "lender voting rights are being eroded, particularly in requirements for unanimous bank decisions".
It adds that documentation on recent loans has created the concept of super-majorities that can carry unanimous bank decisions with majorities as low as 75%.
"Given the oversubscription and level of support for the amendment amongst lenders, consent for the amendment is probably forthcoming," said one leveraged loans banker.
Another loans banker predicted the dissenting banks would just refuse to roll over into the new deal and that their debt would then be redistributed to other lenders.
Flint was last in the market in September 2005 with an add-on arranged by CIBC and JP Morgan. In that deal, the tranche 'B' was increased by Eu356.8m equivalent — split between Eu178.4m and $212.5m — and tranche 'C' was increased by the same amount.
The revolver was also increased by Eu60m, and a further Eu115.5m was added to the second lien.
