The sporting goods manufacturer Head NV struck a crucial bond deal yesterday, allowing it to slash its debt levels and cementing gthe hedge fund Octavian Advisors' position on its board.
Investors supported an exchange which reduces debt levels at the Austrian maker of skis and tennis racquets by almost 40 million ($57.1 million) and which offers them a mixture of new bonds and shares.
The company was over-leveraged and its performance depends on the economy and snow conditions, making it a difficult credit, said one credit analyst, asking not to be named.
Head said 85.7 million of its 135 million high-yield bond had been tendered, which would be exchanged for
43.7 million of new secured notes and 22.5 million ordinary shares in the group.
The success of Head's exchange comes days after Germany's Escada failed to secure the support of bondholders for a similar exchange, forcing it to file for insolvency.
The deal solidifies the position of Octavian Advisors, a distressed debt fund with a major holding in Head's bonds,which now sits on the company's board.
Head's Swedish chief executive and major shareholder Johan Eliasch will provide the company with a 10 million ($14.3 million) liquidity line as part of the deal, a source with knowledge of the situation said.
"The environmental campaigner and film backer's credit line will allows Head to build up stocks ahead of the European winter season," the source said.
In July Head said it would require additional liquidity of 10 million to see it through the third and fourth quarters of the year.
The exchange deal, organised by Merrill Lynch, cuts the company's annual interest payments by about 3 million and its leverage ratio (net debt to earnings before interest, depreciation, taxes and amortisation) from about 8.5 times to 6 times, said the analyst.
First announced in April, the bond exchange was repeatedly extended as the company negotiated terms with bond holders.
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