Biffa Scrutinised as Debt Funds Move In

Distressed debt funds including Apollo and Avenue are circling Biffa, the struggling UK waste management group, which looks set to become the latest indebted company to be snatched away from its private equity owners.  Biffa is undoubtedly the most well known waste management brand in the UK.  Biffa was acquired for £1.2bn by Montagu Private Equity and Global Infrastructure Partners in 2008, but has since struggled to grow, causing the price of its debts to fall.  This has made Biffa attractive to the so-called ‘distressed debt’ funds, which specialise in troubled companies.  Biffa has so far declined to comment on the speculation.

Biffa Takes a Further Hit

Biffa received a further blow when the government recently closed a landfill tax loophole, and a meeting with creditors last Friday failed to reassure Biffa lenders, many of whom are now trying to sell the loans to distressed debt funds.  “It’s a shambles,” a senior distressed debt bank trader said. “A number of funds are circling Biffa now.” Two people familiar with the matter said Apollo and Avenue Capital were among Biffa debtholders.  Both declined to comment on the Biffa issue.

Biffa Loan Repayments Under Strain

Ahead of the financial crisis buyout groups used large amounts of debt to finance acquisitions around the world, but the subsequent economic downturn has left many companies like Biffa struggling to meet their debt repayments.  Many of the companies have subsequently been taken over by distressed debt investors.  Biffa is the latest company to attract the attention of distressed debt investors. Montagu and GIP have written down the value of their ownership in Biffa to zero, and the battle for Biffa control is likely to be between senior lenders and lower ranking creditors, so-called mezzanine lenders.  The former are being advised by PwC, the consultancy, while the latter have hired Houlihan Lokey, the restructuring-focused investment banking advisory boutique. Montagu, GIP and Biffa all declined to comment.  The distressed debt trader said the price of the £920m senior loans had fallen from about 80p in the pound early this year, to about 60p after last week’s creditor meeting.

Biffa remains under scrutiny.


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