September 15, 2023
Weil advised an ad-hoc group of noteholders of Ideal Standard’s €325 million 6.375% senior secured notes due 2026 in relation to its Exchange Offer, Consent Solicitation and Scheme Solicitation launched on August 15, 2023 (the Exchange Offer). Ideal Standard is a leading manufacturer of bathroom products in Europe and MENA, providing a broad range of branded products in more than 100 countries.
The Exchange Offer was launched with the support of the ad-hoc group who had previously entered into a transaction support agreement with the company on July 14, 2023, which outlined the agreed terms to be included in the Exchange Offer.
The key purpose of the Exchange Offer was to insert a new special mandatory redemption provision into the notes that would require the issuer to redeem the notes at a price of €720 per outstanding €1000 of notes (plus the cash consent fee described at point 3 below) upon a disposal or change of control of the group to a third party M&A purchaser by an agreed longstop date.
Amendment of the notes to introduce the special mandatory redemption provision was a ‘sacred right’ requiring the consent of holders of 90% of the outstanding principal amount of notes. The Exchange Offer used a number of liability management mechanisms to incentivize maximum noteholder participation in the exchange, as follows:
- Up-tier and covenant strip: Where the issuer received consent from more than 50% of noteholders, but less than 90% of noteholders:
- the issuer would issue new notes to consenting noteholders in exchange for their existing notes (€-for-€), which would be on the same terms as the existing notes (save for inclusion of a bankruptcy make-whole, MFN protections and entitlement to the consent fee described below) but would rank senior as to collateral enforcement versus the existing notes (the up-tier); and
- the existing notes would be amended to remove substantially all of the covenants and other obligations and certain events of default (the covenant strip).
- Scheme of Arrangement support: The Exchange Offer provided optionality for the issuer to utilize a scheme of arrangement to implement the changes to the notes where it received the support of 75% or more of the noteholders and consenting noteholders were required to provide certain commitments to support a scheme as part of the Exchange Offer.
- Consent Fees: To incentivize noteholders to participate in the Exchange Offer, additional consideration was offered to noteholders who participated by the early consent deadline as follows:
- Cash consideration at a price equal to €100 in cash for each €1000 of notes, to be paid upon the exercise of the special mandatory redemption mechanism; and
- B Preferred Units in a newly incorporated Cayman limited partnership, to be distributed shortly following settlement of the Exchange Offer on a pro rata basis, that would provide for early consenting noteholders to share in the upside from any M&A transaction following the exercise of the special mandatory redemption mechanism.
Ultimately, the Exchange Offer received the support of 99.14% of noteholders entitled to vote by the early consent deadline (5pm London time, August 29, 2023) and 99.25% of noteholders entitled to vote prior to expiration time (5pm London time, September 14, 2023).
The Weil team was led by Restructuring partners Neil Devaney and Matt Benson. They were assisted by associates Fergus Kent and Angus Napier; Finance partners Gilles Teerlinck and Paul Stewart, counsel Giorgia Sosio de Rosa and associate Fabio Pazzini; Corporate partner Simon Lyell and associate Fiona Coffee; Tax partner Jenny Doak and counsel Stuart Pibworth; and Litigation partner Christopher Marks.