Geon’s bankers pull out of print with $400m debt sale

Bank of Scotland International (BOSI) is “selling a portfolio of distressed corporate loans with a face value of $400 million Australian dollars”, according to the Wall Street Journal.

The package of companies includes its exposure to the Gresham Private Equity-owned print group, whose $80 million debt is thought to be the single largest loan in the $400 million package.

Geon’s debt had been much higher, but in 2010, the company negotiated a restructure worth more than $250 million, extending the maturity date until 30 June 2015.

ProPrint contacted a spokesperson for BOSI’s parent, Lloyds International, who confirmed that the Wall Street Journal article captured the main thrust of the situation but declined to comment further.

The deal is being handled by Fort Street Advisers, which had not returned calls at time of publication.

Industry speculators have already begun predicting major upheaval for the largest sheetfed group in the region, but Geon chief executive Graham Morgan cautioned people not to “put one and one together and make three”.

He described Geon as “a business that has gone through a lot and is on the improvement and has a very strong future”, and stressed that onlookers should not confuse the BOSI transaction with the kind of sale process taking place at Blue Star or TMA’s bid for PMP.

“This is not a change of ownership,” he told ProPrint.

This was just a case of changing from one bank to another, said Morgan, who rebutted speculation that liquidation was a possibility.

“It is no different to moving our mortgage; as long as we keep doing what we are doing, they can’t force us into liquidation.

“We have a facility that runs all the way to 2015, and as long as we keep meeting our arrangement, there will be no big event.”

In fact, Morgan said the end result of this process could actually be good news for Geon.

If a buyer was to acquire BOSI’s debt portfolio for lower than book value, as is widely expected, Geon’s debt repayments could fall, relieving the pressure on the company.

“It is not like they will put more debt in, it is not like they can change our covenants, so it is either status quo or it improves,” said Morgan.

“I can’t comment on Lloyds and BOSI other than to say they have been a great support over a number of years and this is about them coming out of a segment,” he added.

However, another industry source questioned Morgan’s positive outlook, due to the use of the term “distressed”.

“The fact it is a distressed loan means something is wrong,” he told ProPrint.

Morgan’s relatively upbeat assessment of Geon’s position doesn’t entirely gel with BOSI’s description of the loan as “distressed”, which typically means the asset has been put up for sale due to “bankruptcy, excessive debt [or] regulatory constraints”, according to a definition from the Financial Times newspaper in BOSI’s native UK.

ProPrint put this to David Williams, managing director of Melbourne-based corporate finance advisory business Kidder Williams, who didn’t have specific knowledge of this transaction but has a thorough understanding of these types of deals.

Williams agreed that “distressed” could mean a borrower had breached its covenants, but could also indicate BOSI has “just got sick of [the investment]”.

Read about the ups and downs of Geon

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