Company Overview

• Luxfer is an international group of businesses that specialises in the production of high specification aluminium and composite gas cylinders, the processing of Zirconium and Magnesium and the manufacture of specialist aluminium alloys and components, serving the medical, automotive, defence, fire fighting, aerospace and general engineering industries

• The group has operations in the UK, USA, Europe and Australia

Events leading to the transaction

• Since 2002 the Group has suffered the effects of rising aluminium/energy prices, a deteriorating $/£ exchange rate and increasing Far Eastern competition

• Despite extensive operational restructuring measures, Luxfer struggled to generate positive free cash flow

• The need to service its £131 million 10.125% Senior Unsecured Notes due 2009 (the “Notes”) restricted the group's ability to invest in growth opportunities, whilst continuing underperformance placed the ability to redeem the Notes at maturity in doubt. The Notes began trading in the secondary debt market at prices significantly below-par; consequently the ownership structure of the Notes changed towards Hedge Funds

• In order to service the coupon payments the company was forced to continuously borrow on its Senior Secured credit facility, further subordinating the Notes. In late 2005, the senior lender declined to renew the Company's Senior Secured facilities

• In December 2005, the Company appointed Close Brothers Corporate Finance to conduct a strategic review of the Group

Solution

• Close Brothers Corporate Finance was appointed financial adviser to the company and after a period of due diligence developed a three stage plan to optimise the company's financial structure

• Assistance was given to the company in preparation and challenging of its business plan, providing enhanced robustness to the company's growth strategy and negotiating leverage

• A new asset-backed bank facility was successfully arranged to give the company sufficient headroom to service its debt and short-term capital expenditure plan, whilst a downwards leverage ratchet was negotiated to allow for declining interest payments in the event of a balance sheet de-leveraging

• A financial reorganisation was implemented to significantly de-lever the balance sheet:

• Existing Private Equity and non management shareholders were paid cash in return for their equity stake;

• Over £110 million of Preference shares, classified as liabilities on the balance sheet, were converted into equity along with existing ordinary shares;

• The £131m Notes were exchanged for around £69m of New Notes and 87% of the Company's equity;

• Management was provided a performance-based incentive plan, which ratcheted from 5-13% of the New Equity, providing incentive for delivering future growth through its business plan

For more information regarding this transaction or the industry, please contact Jonathan Trower on

+44 (0) 20 7655 3100