Company overview

• Ontex NV is Europe’s market leader in the own-brand / private label sector for baby products (diapers and wet wipes), feminine hygiene products (sanitary towels, panty liners and tampons) and incontinence products with approximately €1bn in sales and 18 production / sales sites throughout Europe 

Events leading to the transaction

• Due to a combination of pricing pressure from competitors, a change in product mix and rising raw material prices, the Company’s financial performance deteriorated significantly following the Company’s acquisition in 2003

• Despite a replacement of management, the Company’s failure to achieve its business plan meant that by 2006 Ontex was fundamentally overleveraged

• Following financial covenant waivers in March and June 2006, the Company informed its Lenders that it would not be able to make December 2006 Senior amortisation and Mezzanine interest payments and had breached September 2006 financial covenanants

Solution

• Close Brothers Corporate Finance was engaged to advise the Company on its financial restructuring in November 2006.  We assisted the Company in securing a standstill and covenant waivers through to July 2007 whilst we undertook significant work and led protracted negotiations with the Senior / Mezzanine Lender steering committees and the Shareholders to explore numerous restructuring alternatives

• Alternatives considered included (i) the disposal of division 'Beta' (approx 33% of the Company) to a third party and, as a further alternative, to existing shareholders; (ii) the acquisition of an independent business; and (iii) a full restructuring / refinancing of the exisiting balance sheet

• At June 2007, the Group had total debt of c.€760m, including c. €510m of Senior and c. €230m Mezzanine indebtedness. As part of the restructuring transaction, the business was refinanced by Merrill Lynch with a new sustainable capital structure comprising new Senior Facilites of €330m, a new Second Lien facility of €200m and new Preference shares of c.€179m

• This refinancing package was provided alongside €70m fresh equity from existing shareholders, including a major UK private equity firm. As a result, Senior and Mezzanine Lenders were repaid in full and the existing institutional shareholders retained ownership and control of the business

Testimonials

Commenting on the transaction, Ontex’s CFO Chris Parratt said:
 

“Ontex can open a new chapter – for the first time in two years the Company is not struggling under an unsustainable debt burden.  Delivering a successful and consensual restructuring of Ontex was the result of persistence and tenacity through extensive negotiations with numerous stakeholders.  Leveraging their deep restructuring experience, Close Brothers Corporate Finance were at the forefront of these negotiations throughout a volatile and complex process.”

The UK Private Equity Firm and Shareholder of Ontex commented:

 “The restructuring of Ontex has established an appropriate capital structure and brought a fresh equity injection that provides a stable platform for growth and enables management to focus on the creation of stakeholder value.   Close Brothers Corporate Finance's robust performance, flexible resource, industry knowledge and understanding of all the investor groups was instrumental in achieving a consensual outcome.”

For more information regarding the transaction, please contact Stephen Aulsebrook or Andrew Cleland-Bogle on +44 (0)20 7655 3100.