LONDON, May 17 (LPC) - Lenders to UK engineering group Doncasters are in the process of appointing debt restructuring advisers as the company struggles with its circa £800m debt load, several sources close to the situation said.
Doncasters has appointed Deloitte to help it sell a number of its assets to pay down the debt and now its lenders, concerned about looming maturities, have decided to appoint a financial adviser. Latham & Watkins have already been appointed legal adviser, the sources said.
“Presumably lenders are organising now because they are worried about the ability of the company to repay and they want to understand what the plans are for asset realisations,” said one of the sources.
Doncasters’ debt includes a US$615m first-lien loan that matures in March 2020, a US$290m second-lien loan maturing in September 2020, and a US$153m ABL facility from banks including Bank of America Merrill Lynch, Credit Suisse, Royal Bank of Scotland and Wells Fargo that matures in January 2020, according to LPC data.
However, the situation with Doncasters is further complicated as the repayment of circa US$1bn of debt belonging to its now defunct private equity owner Dubai International Capital – the private equity arm of Dubai Holdings – is now contingent on the success of Doncasters’ asset sales and any potential debt refinancing.
Doncasters is the remaining asset of DIC, which was founded in 2004 and acquired Doncasters in 2006, and has now ceased trading after finalising its own US$1bn debt restructuring two weeks ago.
Under the terms of that restructuring agreement, lenders have agreed that DIC’s main shareholder Dubai Holding has no responsibility for DIC’s remaining debt, which will now be paid from any funds that can be funnelled up from Doncasters following the asset sales and the repayment of Doncasters’ own debt.
The maturities on the remaining US$1bn debt have been pushed out until December 2020, with an option to extend it further depending on how the debt situation with Doncasters stands.
“DIC’s lenders are very exposed to Doncasters. DIC has shut down and the only way its lenders will get paid is with whatever is left once Doncasters lenders are repaid,” said one source close to the situation.
“Everyone is extensively focussed on the value of Doncasters’ many businesses. They would have to generate a lot of value (through sales) for any of it to flow up to DIC – that prospect is very remote.”
The expectation is that DIC’s lenders – predominately Middle Eastern banks — will have to write off the debt, he said.
DIC has been selling off its assets over the last seven years after completing a US$2.5bn debt restructuring in 2012. The firm held stakes in British-based budget hotel chain Travelodge and German alumina products maker Almatis among others, but Doncasters is now its single remaining asset after a failed attempt to sell it to Chinese telecoms engineering firm Beijing Xinwei in 2017.
Doncasters makes parts for aerospace, automotive and energy sectors and has a number of subsidiaries globally including Doncasters Precision Castings and Doncasters Storms Forge in the US, Doncasters Airmotive and Doncasters Blaenavon in the UK and Doncasters Precision Castings in Germany.
Doncasters, Dubai Holdings and Latham & Watkins could not be immediately reached for comment. DIC could not be reached for comment. (Editing by Christopher Mangham)