New York-based private equity firm KKR & Co has agreed to an arrangement that will restructure the debt of Germany-based car repair chain Auto-Teile Unger or ATU, which has been beset with losses. According to a Reuters report, both companies have struck a debt-for-equity swap with the main creditors of ATU. In a statement, ATU said its main creditors are credit investment firms Centerbridge and Babson Capital and funds that are overseen by Goldman Sachs.
The terms of the deal stipulate that ATU will get EUR 100 million or USD 136 million in fresh equity. Meanwhile, its debt will decrease to EUR 150 million which represents a debt reduction of over EUR 600 million. This includes the credit line that HayFin Capital Management will provide worth EUR 75 million. ATU also said that their coupon payments each year will also go down by over 90%.
The equity stake of KKR in ATU, a household name in Germany, will also be reduced to about 3%. Meanwhile, Centerbridge will hold a majority stake in the company.
According to a Reuters report, a slowdown in customer demand in the car market in Europe has hit ATU. The economic continent that has swept the region has led hard-pressed customers to postpone car purchases. Online competition, such as that from Delticom, which enables customers to buy car parts through the Internet, is also causing a dent in ATU's business.
The debt-for-equity swap between private equity peers KKR and Centerbridge was first reported by Reuters in August.
In 2004, KKR purchased ATU from Doughty Hanson, another private equity firm in a deal worth EUR 1.45 billion. The purchase was funded largely with debt that was also loaded to the books of ATU. Four years later, in 2008, KKR infused EUR 140 million of equity in ATU so it can prevent the car repair from going bankrupt.
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