Biffa has announced a restructuring to cut its debt by more than half – with new investors becoming the majority shareholders of the waste management company.
A cash injection of £75m has been secured from investors Angelo Gordon & Co, Avenue Capital Group, Babson Capital Europe Limited and Sankaty Advisors.
According to the Financial Times, the deal effectively means Biffa has been taken over by its lenders.
It said: “The deal comes at a pivotal point for the fragmented waste management industry, which requires investment amid a shift from landfill to recycling. The downturn in consumer spending has reduced waste volumes, while an increase in taxes for companies still reliant on landfill has hurt demand. Further compounding the problems has been a growing trend for big companies, such as Tesco, to deal with their own waste.
“Biffa was particularly vulnerable as it was bought by the private equity firms for £1.7bn in 2008 in a deal funded by £1bn of debt. About 70 banks and financial institutions participated in the venture but large interest payments wiped out profits.”
Biffa’s news release said “The proposal has support from a substantial majority of Biffa’s senior lenders and the company plans to conclude the process in early 2013.
“The £75m of new investment … will be used to fund a new infrastructure programme designed to reinforce the company’s position as a leading force in collection, recycling and technologically-led waste recovery.”
Those advancing the money will become the majority shareholders of the company.
As part of the transaction, Biffa says its capital structure will be “substantially strengthened” with total debt being reduced by approximately 55% to £520m from over £1.1bn.
Ian Wakelin, Biffa CEO, called it an “important milestone towards the financial recapitalisation reaching a successful conclusion”.
He added: “The recapitalisation will provide the company with significant new investment, bring long-term financial stability to Biffa, and provide an excellent platform to move forward as we grow and develop the business further.”