UK’s Towergate Creditors to Take Over Company in Debt Restructuring

By Julie Miecamp | February 2, 2015

Towergate Finance plc said it reached an agreement with creditors to restructure more than 1 billion pounds ($1.5 billion) of debt in exchange for control of the company.

The deal will cut the insurance broker’s net obligations by more than 60 percent to 370 million pounds, according to a statement. The restructuring will be implemented using a UK scheme of arrangement that will be completed next month.

Towergate also reported a 24 percent decline in earnings to 110 million pounds for 2014 amid rising costs stemming from organizational changes, pricing competition and regulatory investigations. The Maidstone, England-based group said in November it drew all of its 85 million-pound revolving credit facility and was downgraded in December four levels to CC, or two steps above default, by Fitch Ratings.

“This ends a long period of uncertainty for Towergate and lays the foundation for a strong future,” Alastair Lyons, interim executive chairman at Towergate, said in the statement. “We have what we need to be able to realize our strategic ambitions.”

As part of the deal, which got 70 percent of debt holders’ support, senior secured creditors will convert their debt into 375 million pounds of senior secured notes and 150 million pounds of subordinated payment-in-kind notes, according to the statement.

Towergate’s senior secured creditors are in talks with unsecured debt holders to find a way for them to participate in the restructuring, according to the statement. The groups are negotiating terms for unsecured creditors to buy equity in the company, according to two people familiar with the talks who asked not to be identified because they’re not public.

Towergate’s 305 million pounds of 10.5 percent senior unsecured notes due February 2019 dropped 3 pence on the pound to 5.7 pence, according to data compiled by Bloomberg. Its 249 million pounds of 8.5 percent notes due February 2018 fell 0.1 pence to 87 pence.

A spokesman for Towergate, who works for FTI Consulting Inc., declined to comment on the talks beyond the statement.

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