Background
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Johnson Service Group is a leading UK provider of managed support services. Prior to the transaction, it operated four core divisions: facilities management, drycleaning, textile rental and corporatewear
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In 2006 and 2007 a number of issues at divisional level impacted the Group, leading to a reduction in forecasts for Group profits for 2007 and 2008
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The Board decided to explore the disposal of a number of non-core businesses. However, no offers materialised which were considered satisfactory, leaving the Group fundamentally overleveraged. In November 2007 the Board announced that it expected to breach its banking covenants at the end of 2007
Process
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Close Brothers was engaged in November 2007 to carry out a strategic review and to advise the Company on any subsequent transactions that resulted from an assessment of the Group’s position. Close Brothers first assisted the Company in successfully agreeing with its banking group a waiver to its year-end covenant test through to the end of April 2008
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Close Brothers then conducted a full review of the available strategic options for reducing the Company’s indebtedness. Following the conclusion of this process, refinancing negotiations were entered into with the Group’s existing lenders. In parallel to the refinancing, a disposal of the Corporatewear division to the incumbent management team was undertaken
Gains
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New medium-term facilities of £205m were agreed which established a stable financial basis for the Group. These new facilities included a bridge facility to be paid down from disposal proceeds and were structured to incentivise the Company to further reduce indebtedness via an equity fundraising of more than £25m before 31 March 2009
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A price of £82.5m was achieved for the disposal of Corporatewear, and the transaction proceeds served to reduce leverage and the absolute exposure of the Group’s existing lenders
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Close Brothers also negotiated a solution with the pension trustees of Johnson Service Group which accommodated the banks, company and its employees, and assisted the Company in transferring its shares to AIM
Testimonial
Yvonne Monaghan, Finance Director of Johnson Service Group, commented:
“Close Brothers’ dedicated team, industry knowledge, depth of restructuring and M&A experience and understanding of all the stakeholder groups was instrumental in achieving the best possible outcome for the Company. I was particularly impressed with the ability of the team to work with management and other advisers to deliver the refinancing and disposal on such an expedited basis and in the face of numerous complexities and challenges from the outset. I would not hesitate to recommend Close Brothers to other parties in similar circumstances”
For more information regarding this transaction, please contact Matthew Prest, Grainne O’Brien or Andrew Cleland-Bogle in the Debt Advisory Group or Guy Ballantine and David Sanders in the M&A team, on +44 (0) 20 7655 3100.