A group of distressed investors taking a controlling stake in bankrupt GEO Specialty Chemicals are also offering to provide a high-octane exit financing that will repay pre-petition bank lenders. Holders of the company's $120 million bonds will receive 76% of GEO if the plan is achieved, transferring majority ownership from private equity firm Charter Oak Partners.
"There will be no huge restructuring of the company. We are looking at a balance sheet restructuring," said Joseph Radecki, managing director and head of the financial restructuring group at CIBC World Markets. CIBC was hired by Charter Oak a year ago to assist with the company's mounting debt. Radecki declined to comment on ownership of the company.
Airlie Opportunity Fund, leading the creditors committee, owns $30 million of the bonds, according to sources. Stanfield Capital Partners and Quadrangle Group are also said to be playing a major role. Merrill Lynch Global Investment Services, which was on the creditors committee, will be taking a piece of the company, but it was unclear whether it will lead the exit financing. Officials at the funds either declined comment or did not return calls.
Investors in the notes are now offering an approximately $125 million exit facility to repay the pre-petition lenders in full. The new line will include a five-year, $115 million term loan with pricing of LIBOR plus 8 1/2%. In addition, investors participating in the term facility will also receive 15% of the common stock of the company on a fully diluted basis. The term loan has call premiums of 105, 103, 101 for the first three years. The exit facility will include a $10-15 million revolver.
Cleveland-based GEO filed for bankruptcy last March after defaulting on its 10 1/8% bonds. The specialty chemicals company also had a $125 million credit facility that was led byDeutsche Bank, US Bank and Citigroup, which included a $105 million term loan and a $20 million revolver (LMW, 3/12). The term loan plummeted to 77 at the beginning of this year but has since climbed to 96 7/8- 98 3/8.
GEO's debt prior to bankruptcy also included $6.1 million of 15% senior promissory notes held by Charter and other investors. These will be repaid through the issuance of $6.1 million of 5% PIK notes. Charter will continue to have a stake in the company.
William Eckman, cfo of GEO, and Anthony Dowd, managing general partner at Charter Oak and board member of GEO, did not return calls.
