Nov 13, 2014
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French retailer Vivarte's lenders face further losses

Nov 13, 2014

LONDON, United Kingdom - Lenders to struggling French retailer Vivarte are potentially facing further losses only two weeks after completing a painful debt restructuring after a heavy fall in the company's secondary loan price, banking sources said on Thursday.

Lenders were forced to wipe out 2 billion euros (2.49 billion US dollar) of the company's 2.8 billion euro of loans in the restructuring which closed at the end of October, after Vivarte was hit by a difficult economic and consumer environment in France.

The company's remaining 800 million euros of loans have been trading at distressed levels of around 65 percent of face value since Vivarte announced poor financial results on Nov. 7.

The loans fell to 65 percent of face value from 85.7 on Nov. 4, according to Thomson Reuters LPC data, and have not recovered.

Loans for restructured companies typically return to face value, or par, after a restructuring. Vivarte's current trading level suggests that the company's problems have not been resolved, traders said, adding that the loans could fall further.

"It would not be surprising if the loans got closer to the 60 level in the coming days. The company is still pretty levered and the restructuring did not sort it out fully. Ideally it (Vivarte) should have cut more debt as part of the process," a banker said.

Vivarte was not immediately available to comment.


Vivarte was left with 800 million euros of existing, or reinstated, term loans after the restructuring as well as a new 500 million euro super senior term loan, which was provided by funds that now own the company.

"The level of reinstated debt of 800 million euros is arguably too high and it should have been cut to around 500 million euros," a second banker said.

Oaktree, Alcentra, GoldenTree and Babson became core shareholders in Vivarte after the restructuring. Eleven funds also provided the 500 million euro super senior loan.

The fall in Vivarte's loans has already attracted interest from distressed investors. Around four million euros of the term loan traded at around 63 on November 12 to a distressed buyer, two sources said.

"Vivarte's loans are sparking interest from one or two distressed buyers, but other distressed funds think (that) the loans have further to fall before they start buying," the first banker said.

The retail sector is suffering from tough macroeconomic conditions. The average secondary price of loans for retail companies fell to 87.3 percent of face value on Wednesday from 89.5 on October 1, according to TRLPC data.

Clothing retailers were hit by warm weather in September and October, which stopped people from buying winter clothes.

Vivarte, which is facing stiff competition from other discount retailers, changed management at the end of October when Richard Simonin replaced Marc Lelandais as CEO.

"The change of management caused some uncertainty. Some question the strategy and spending of the company over the past 18 months," a third banker said.

Vivarte's Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) is expected to be 175-200 million euros in 2014, compared to 327 million euros in 2013.

"Vivarte has been an underperformer for quarters now," the second banker said.

Vivarte's new super senior term loan, which pays 1100 basis points over Euribor and is Vivarte's highest ranking debt with good recovery prospects, was trading over par at 102 on Thursday, according to TRLPC.

1 US dollar = 0.8037 euro
1 GBP = 1.26305 eur

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