Linklaters has advised the finance parties under the US$400m mezzanine facilities on the successful implementation of a highly unique cross-border enforcement and restructuring transaction, enabling the lenders to acquire 100% of the issued voting share capital of the Lycra Group, a major global manufacturer of fibre and technology solutions for the apparel and personal care industries.
This transaction is one of the most high profile and complex enforcement and restructurings implemented in the market in recent years, and provided for:
- Negotiation and receipt of highly bespoke detailed change of control, forbearance and other waiver arrangements from (i) the holders of the €250m senior secured notes, (ii) the holders of US$690m senior secured notes and (iii) the lenders under a revolving credit facility, in each case issued by/entered into by the Lycra Group, to facilitate the transaction.
- Entry by the relevant parties into a framework agreement to ensure that the enforcement process is implemented in a robust and defensible manner, whilst also preserving the ability of the Lycra Group management to continue to run the business with minimal operational impact.
- The appointment of receivers over the assets of the borrower of the mezzanine facilities and the removal from all Lycra Group companies of representatives from Shandong Ruyi Technology Group (Shandong Ruyi), the former sponsor of the Lycra Group.
- A successful application to the Netherlands Commercial Court for approval to implement the transaction by way of enforcement of a Dutch law pledge through a “credit bid” to effectively convert part of the mezzanine facilities into equity – one of the largest credit bid applications ever filed in the Netherlands.
- The successful defence of litigation brought by Shandong Ruyi in multiple jurisdictions in connection with the enforcement steps.
The groundbreaking transaction represents a junior creditor-led enforcement, implemented with the support of senior creditors, to stabilise the underlying target group and protect it from the financial distress of the former sponsor. The deal was devised and executed by Linklaters extraordinarily quickly with no adverse operational impact for the Lycra Group.
The Linklaters team was led by Hong Kong SAR-based restructuring partner James Warboys and London-based restructuring partner Liam Robinson, supported by team members across multiple offices and practice groups including:
- Hong Kong restructuring managing associate Kenneth Kong and associate Mustafa Rehman
- Hong Kong dispute resolution partner Denise Fung
- Amsterdam restructuring partner Mees Roelofs
- Amsterdam dispute resolution partner Daniella Strik and associates Frans Lambert and Jonas Poolman
- Amsterdam corporate partner Guido Portier
- London restructuring associates Tibor Korman and Ifrath Hussain
- London financial sponsors partner Andrew Lynch, who advised on the corporate aspects of the transaction
- US litigation partners James Warnot and Brenda DiLuigi, and associate Sean Mooney
- Singapore high-yield partner Michele Discepola
The success of this transaction is a testament to Linklaters’ market leading restructuring capabilities across Asia, the Netherlands, London and the US. It also reflects the expert cross-border team’s ability to work seamlessly to deliver highly tailored and novel restructuring solutions to protect clients’ interests and preserve value for all stakeholders.