Allianz Capital's Selecta sale under threat

By Staff Reporter

Jul 31, 2012 02:36 PM EDT

The sale of European vending machine business Selecta is under threat after owner Allianz Capital Partners deemed two offers for the business as too low, forcing it to tackle its debt pile if the sale is called off, banking sources said on Tuesday.

Private equity firms Advent International and Oaktree Capital Management submitted bids but both fell short of a level that would repay Selecta's debt, banking sources said.

Allianz bought Selecta in 2007 for 772.5 million pounds ($1.21 billion) backed by 690 million pounds of debt. It decided to sell the company at the end of last year and hired HSBC to advice on the process which kicked off in May. The final deadline for bids was last week.

"Offers came in sub the debt so the sponsors can't sell as they won't be able to repay their lenders," a banker said.

The sale initially attracted a handful of private equity firms including Advent, Apax Partners, BC Partners, CVC and Oaktree. However Apax, BC Partner and CVC did not put in bids during the final round of the auction on July 25, banking sources added.

Some bidders had been put off Selecta, which has an EBITDA of around 130 million euros ($159.15 million), as it has not managed to deleverage its debt or produce large profits, bankers said.

CVC could still put in a last minute bid for the company as it could combine Selecta with its own rival vending machine operator Autobar Group.

Allianz and Advent declined to comment, while Oaktree could not immediately be reached for comment.

Lowball bids could bring an end to the sale which would have given Allianz the opportunity to exit the deal and conclude its efforts to turnaround the business, the bankers said.


The company passed its end of June debt covenant test and June figures show Selecta's performance is improving after cost cutting measures and one-off costs that no longer drag downearnings, one source said. However bankers said the company could still breach covenants in the future and undergo a debt restructuring.

Selecta's secondary loan prices are trading at distressed levels, suggesting lenders could face losses if a debt restructuring were to take place.

Loans in the company are attracting interest from distressed investors.

Selecta's mezzanine debt is currently quoted at an average of 54.6 percent of face value on Europe's secondary loan trading market. Its second lien tranche is quoted at an average of 67.4 according to Thomson Reuters LPC data.

"There is likely to be a covenant breach and it will be hard to argue against the sponsors giving the keys away to the banks. A debt restructuring would see the banks write down some of the debt and get some fresh equity in," the banker said.

Founded in 1957, Selecta has more than 150,000 vending machines in 22 countries and generates 700 million euros in revenues, according to the company's website.

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