Background

• ALcontrol is a leading European laboratory testing business specialising in environmental and food testing, including the testing of soil, water, food, oil and air for contaminants or hazardous substances. It has major operations in the UK, Netherlands and Sweden as well as 9 other European countries
• The business was acquired by Candover in 2004, and refinanced in the summer of 2007 with €215m of Senior, Second Lien and PIK facilities
• The downturn in the UK housebuilding market in the second half of 2007 and the onset of the recession led to a deterioration in trading particularly in the significant land testing business
• Close Brothers Corporate Finance ("CBCF") was engaged by the Board of ALcontrol to advise the company on its strategic options and approach to creditors in light of potential covenant breaches and a seemingly unsustainable capital structure

Process

• CBCF conducted a strategic options review for the Board and shareholder Candover, which evaluated solutions within the framework of the existing loan documentation, as well as restructuring and M&A options
• CBCF facilitated and conducted bilateral and multi-party negotiations with the complex syndicate of lenders, consisting of hedge funds, bank lenders and CLOs; the objective was to derive a consensual restructuring solution which would be in the best interests of the company based on the nature of the business and the potential for value destruction through, for example, an insolvency process
• CBCF supported the Board in its communication with 3rd parties, the management of 3rd party advisers  and the modelling and analysis of its liquidity position and potential new capital structure options
• Alongside legal adviser Clifford Chance, CBCF guided the Board through the restructuring process  and worked up both a preferred and an "alternative" plan to derive a sustainable solution to ALcontrol's situation

Outcome

• ALcontrol agreed a consensual restructuring transaction with all parties involved, which led to senior lenders taking equity ownership through a debt-for-equity swap, a significant de-leveraging of the balance sheet together with the provision of €11m of new money

Simon Gibbs, Chief Executive Officer, commented:

• "Close Brothers has been instrumental in deriving the consensual restructuring solution.  The personal engagement and efforts of the team, their negotiation skills and analytical insights have ultimately driven the process to a solution in the best interest for the Company."

For more information regarding this transaction, please contact Jonathan Trower, Jonathan Broome or Harry Kalmanowicz on +44 (0)20 7655 3100