LONDON, July 10 (Reuters) - Permira is negotiating a refinancing for its struggling Spanish pizza delivery business Telepizza that will see a fresh injection of cash from a new investor to repay junior debt and avoid a costly restructuring, banking sources said on Thursday.
Private equity firm Permira acquired Telepizza in 2006 for 962 million euros ($1.31 billion) and although the business has been relatively resilient, it has come under pressure as a result of broader economic turmoil. It is now looking at ways to make its 575 million euro debt pile more manageable.
The company’s debt comprises 325 million euros of senior loans, 150 million euros of mezzanine loans and a deeply subordinated 100 million euro payment-in-kind (PIK).
Permira is in discussions with banks to refinance a new senior facility that will see existing senior debt repaid at par and new terms put in place, the banking sources said.
Meanwhile, KKR is in talks with the company to inject fresh junior capital. It is expected that this new cash will repay existing mezzanine lenders at par and existing PIK lenders at a discount, the banking sources said.
The level of discount on the PIK is being negotiated. Telepizza’s PIK was quoted at 18 percent of face value on Europe’s secondary loan market on Thursday, according to Thomson Reuters LPC data.
“If the PIK lenders ask for too much a deal is unlikely to happen which could lead to a full blown restructuring where the PIK could get wiped out altogether and the sponsor gets nothing either,” one of the banking sources said.
KKR has been investing a $3.8 billion special situations fund to build a portfolio of high risk and high reward assets. Swiss vending machine business Selecta recently agreed a deal with KKR to avoid a debt restructuring and allowed owners to keep a stake in the company.
Permira has been keen to avoid a debt restructuring by keeping aggressive hedge funds from piling into its debt via the secondary loan market.
A number of the secondary trades remained unsettled because Permira held off signing them in order to buy time to agree a refinancing, traders said previously.
Permira was not immediately available to comment and KKR declined to comment. ($1 = 0.7331 Euros) (Editing by Christopher Mangham)