Reuters: Private Equity: Biffa plans disposals to tackle debt pile

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Biffa plans disposals to tackle debt pile May 3rd 2012, 17:07 By Isabell Witt LONDON | Thu May 3, 2012 1:07pm EDT LONDON May 3 (Reuters) - U.K. waste management firm Biffa is preparing to sell certain divisions to reduce its 1 billion pound ($1.62 billion) debt pile and avoid a potential breach on its loan covenants, banking sources said on Thursday. The private equity-owned group met its lenders at a bank meeting in London on Wednesday to present its budget, which showed that the company's performance is below expectations and risks breaching its debt to earnings covenant by the end of this year, the sources said. The company's revenues are still up by 10 percent but Biffa has been hit by a combination of too much debt following its 2008 leveraged buyout by Montagu Private Equity and Global Infrastructure Partners (GIP) and a difficult trading environment with reduced waste volumes due to lower consumption, the sources said. "Biffa is implementing measures to address the current challenges it is facing and is confident that in time it will resolve the situation," said one of the sources. Biffa and its owners declined to comment. Biffa's management told lenders including U.K. banks HSBC and RBS that it will need to address its existing capital structure and has hired DC Advisory to advise on a strategic review, the sources added. Montague and GIP raised 860 million pounds of senior debt and 280 million pounds of mezzanine debt to back its buyout in 2008, according to Thomson Reuters LPC data. The private equity firms have held discussions with potential buyers regarding a sale of Biffa. Although no decision has been made on a sale, some of the parties have expressed interest in parts of Biffa, the sources said. The group's recycling division is growing faster than other parts, one of the sources said. Biffa is likely to use proceeds from disposals to pay down a portion of its senior debt, in return for asking lenders to reset covenants. A more detailed restructuring plan will be presented to lenders in June. ($1 = 0.6172 British pounds) (Reporting by Isabell Witt; Editing by Helen Massy-Beresford) Link this Share this Digg this Email Reprints

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