LONDON (Reuters) - Debt-laden steel trader Stemcor, one of Britain’s largest private companies, has agreed a deal with U.S. distressed investment fund Apollo (APO.N) and with its other creditors which “secures its future”, it said on Monday.
According to an industry source, Apollo has an ‘agreement in principal’ to swap its debt for equity in Stemcor, giving it a majority stake. Stemcor’s other creditors have also agreed a debt for equity swap and will run the firm alongside Apollo.
“Stemcor has agreed a deal with Apollo and with its lenders which secures the future of the core global business and provides us with a strong balance sheet with which to grow and develop the group,” a Stemcor spokesman said.
Apollo was not immediately available to comment.
It became Stemcor’s largest lender after buying the company’s debt in the secondary loan market.
Stemcor, controlled by the Oppenheimer family, was hard hit by the 2008 financial crisis and accumulated a large debt pile when it bought an iron ore asset in India.
The company was facing a December maturity on a $1.15 billion syndicated trade finance loan that it signed in March 2014 with lenders - including ABN AMRO Bank, HSBC (HSBA.L), ING ING.AS, Natixis (CNAT.PA), Societe Generale SOGN.PA. - as part of a restructuring. It also had a separate $1.3 billion debt, mostly accumulated in buying the India iron ore asset.
The new deal with Apollo and the other creditors is for Stemcor’s core steel trading and distribution business, not for the Indian asset, which has been spun off into a separate entity, according to the industry source.
Stemcor has been trying to sell its India business since 2013, but the sale has been hampered by changes in Indian legislation, including a Supreme Court order last year to close nearly half of the mines in Odisha state, including Stemcor‘s.
Reporting by Maytaal Angel; Editing by Susan Fenton