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Ferretti Misses Payment on EU1.08 Billion Buyout Loan (Update1)
2009-02-09 11:58:11.757 GMT
(Adds fund manager's comment in fourth paragraph.)
By Caroline Hyde
Feb. 9 (Bloomberg) -- Ferretti SpA, the Italian maker of luxury yachts, missed an interest payment on 1.08 billion euros
($1.4 billion) of senior loans used to finance its buyout in 2007, according to a letter from facility agent Royal Bank of Scotland Group Plc obtained by Bloomberg News.
Ferretti, whose boats sell for an average 2 million euros, failed to make a 1.4 million-euro payment on the loans Jan. 30, constituting an "event of default," the letter said. Lenders including RBS are considering a debt restructuring proposed by the Forli, Italy-based company, which was founded in 1968 by Alessandro and Norberto Ferretti, the Feb. 3 letter said.
A spokeswoman for Ferretti in Milan declined to comment. RBS is "working with the company to find the best solution," said Piers Townsend, a spokesman at the bank in London.
"We're likely to see more leveraged companies follow the way of Ferretti," said Louis Gargour, chief investment officer at LNG Capital LLP, a London-based hedge fund. "If demand is falling in the sector, very quickly we'll see companies missing interest payments and defaulting on debt."
Ferretti raised 1.28 billion euros of senior and lower- ranking so-called mezzanine loans in January 2007 to fund private equity firm Candover Investments Plc's purchase of a majority stake through a leveraged buyout, according to data compiled by Bloomberg. Sales dried up as the seizure in credit markets worsened, prompting the yachtmaker to announce last week that it's firing workers.
'Ocean's Twelve'
Ferretti generates about 75 percent of its business outside Italy, including 15 percent in the U.S. One of its Riva yachts was featured in the George Clooney movie "Ocean's Twelve,"
while the 60-meter (200 feet) long GiVi mega-yacht comes with a game room, gym, helicopter pad and what Ferretti's Web site describes as a "wellness area."
London-based Candover owns 50.2 percent of the company, while Ferretti's management holds 39.1 percent and Permira Advisers LLP, another London-based private equity firm, has 10.7 percent. The Ferrettis sold the company to outsiders after Alessandro Ferretti died in 1995.
Ferretti sought to renegotiate the loans, which were taken out "when the market was especially dynamic," the company said in a Feb. 2 statement on its Web site. NM Rothschild & Sons Ltd., the family-owned investment bank, is advising the yachtmaker, the statement said.
Credit-Default Swaps
There will be a conference call at 5:30 p.m. London time today to decide whether to seek an auction to settle credit- default swaps used to hedge against losses on Ferretti's loans, according to two people familiar with the plan, who declined to be identified because the talks aren't public. The contracts pay the buyer face value or the cash equivalent in exchange for the underlying security should a company violate its borrowing terms.
Peter Hewer, a spokesman in London for Candover, which planned to sell the yachtmaker last year in an initial public offering, declined to comment.
Ferretti earlier missed an interest payment on a 200 million-euro mezzanine portion of the LBO loan, according to a separate letter from RBS dated Jan. 27. In an LBO, firms borrow the majority of the money needed to finance their purchases in the name of the target.
The yachtmaker's senior loans traded at 22 percent of face value at the end of last week, according to pricing data from Markit Group Ltd.
2009-02-09 11:58:11.757 GMT
(Adds fund manager's comment in fourth paragraph.)
By Caroline Hyde
Feb. 9 (Bloomberg) -- Ferretti SpA, the Italian maker of luxury yachts, missed an interest payment on 1.08 billion euros
($1.4 billion) of senior loans used to finance its buyout in 2007, according to a letter from facility agent Royal Bank of Scotland Group Plc obtained by Bloomberg News.
Ferretti, whose boats sell for an average 2 million euros, failed to make a 1.4 million-euro payment on the loans Jan. 30, constituting an "event of default," the letter said. Lenders including RBS are considering a debt restructuring proposed by the Forli, Italy-based company, which was founded in 1968 by Alessandro and Norberto Ferretti, the Feb. 3 letter said.
A spokeswoman for Ferretti in Milan declined to comment. RBS is "working with the company to find the best solution," said Piers Townsend, a spokesman at the bank in London.
"We're likely to see more leveraged companies follow the way of Ferretti," said Louis Gargour, chief investment officer at LNG Capital LLP, a London-based hedge fund. "If demand is falling in the sector, very quickly we'll see companies missing interest payments and defaulting on debt."
Ferretti raised 1.28 billion euros of senior and lower- ranking so-called mezzanine loans in January 2007 to fund private equity firm Candover Investments Plc's purchase of a majority stake through a leveraged buyout, according to data compiled by Bloomberg. Sales dried up as the seizure in credit markets worsened, prompting the yachtmaker to announce last week that it's firing workers.
'Ocean's Twelve'
Ferretti generates about 75 percent of its business outside Italy, including 15 percent in the U.S. One of its Riva yachts was featured in the George Clooney movie "Ocean's Twelve,"
while the 60-meter (200 feet) long GiVi mega-yacht comes with a game room, gym, helicopter pad and what Ferretti's Web site describes as a "wellness area."
London-based Candover owns 50.2 percent of the company, while Ferretti's management holds 39.1 percent and Permira Advisers LLP, another London-based private equity firm, has 10.7 percent. The Ferrettis sold the company to outsiders after Alessandro Ferretti died in 1995.
Ferretti sought to renegotiate the loans, which were taken out "when the market was especially dynamic," the company said in a Feb. 2 statement on its Web site. NM Rothschild & Sons Ltd., the family-owned investment bank, is advising the yachtmaker, the statement said.
Credit-Default Swaps
There will be a conference call at 5:30 p.m. London time today to decide whether to seek an auction to settle credit- default swaps used to hedge against losses on Ferretti's loans, according to two people familiar with the plan, who declined to be identified because the talks aren't public. The contracts pay the buyer face value or the cash equivalent in exchange for the underlying security should a company violate its borrowing terms.
Peter Hewer, a spokesman in London for Candover, which planned to sell the yachtmaker last year in an initial public offering, declined to comment.
Ferretti earlier missed an interest payment on a 200 million-euro mezzanine portion of the LBO loan, according to a separate letter from RBS dated Jan. 27. In an LBO, firms borrow the majority of the money needed to finance their purchases in the name of the target.
The yachtmaker's senior loans traded at 22 percent of face value at the end of last week, according to pricing data from Markit Group Ltd.
