Towergate alters restructuring deal with unsecured creditor agreement

By Kali Hays

New York, Feb. 6 – Towergate Finance plc said its senior unsecured creditors entered into an amended agreement to restructure £1.05 billion of company debt, along with a majority of the company’s senior secured creditors, according to a Friday release from the company.

As previously reported, Towergate announced the initial agreement with more than 70% of its senior secured creditors Feb. 2.

The amended joint agreement received unanimous approval from the Towergate board, in excess of 75% in aggregate of the group’s senior secured creditors and about 65% of senior unsecured creditors.

With the amendments, majority ownership of Towergate will be handed over to senior unsecured creditors, including funds managed by Highbridge Principle Strategies, LLC, KKR Credit Advisors (US) LLC and Sankaty Advisors, LLC. Highbridge will be the largest investor.

Towergate said that the amended agreement provides for £125 million of additional liquidity.

Specifically, the senior unsecured creditors will become the majority shareholders owing to a capital contribution of £250 million in cash to subscribe for equity in the restructured Towergate group and the equitization of all senior unsecured claims, giving them 80.6% of the ordinary equity.

In exchange for their existing debt claims, senior secured creditors will receive a proportionate share of £425 million in new senior secured notes, £250 million of cash and 19.4% of the ordinary equity.

The new senior secured notes will mature in March 2020 and pay an annual cash coupon of 8¾%.

Under the previous agreement, the restructuring called for the conversion of all existing claims of senior secured creditors, including accrued interest, into £375 million of new senior secured notes, £150 million of subordinated payment-in-kind notes and 100% of the ordinary shares of the new holding company of the Towergate group.

In addition to the senior unsecured creditors’ new capital contribution, a further £50 million capital increase will occur on the closing of the transaction, which will be fully backstopped by Highbridge, according to the release.

Of the £50 million, 80.6% will be available to senior unsecured creditors and 19.4% will be available to senior secured creditors. Proceeds from the capital increase will be used for additional liquidity of the Towergate group.

As under the initial agreement, senior secured creditors will provide £75 million of new financing in the form of super senior notes upon completion of the restructuring.

The super senior notes will be issued in full upon closing of the transaction at a 4% issuer discount. They will mature in February 2020 and pay annual cash interest of Libor plus 750 basis points with a 1% floor.

In consideration for each £1 of existing secured debt, senior secured creditors will receive 59p of new senior notes, 35p of cash, 6p in ordinary equity and the right to a proportionate participation in the new super senior notes and the Highbridge capital increase.

Under the initial agreement, in consideration for each £1 of existing secured debt, senior secured creditors were to receive 52p of new senior notes, 21p of structurally subordinated holding company PIK notes and 27p in ordinary equity stapled to the PIK notes, along with the right to a proportionate participation in the new super senior secured and guaranteed notes.

With the amended agreement, Towergate said it will emerge with consolidated net senior debt of £380 million, including the £75 million of new super senior notes. The company’s debt without the restructuring stands at £1.05 billion.

The company projected net senior debt of £370 million under the initial plan.

The agreement is to be implemented with two parallel schemes of arrangement in the United Kingdom and is expected to be complete by the end of March, according to the release.

Towergate is an insurance provider located in London.

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