Technicolor Creative Studios outlines recapitalization, refinancing plan

Chicago, March 10 – Technicolor Creative Studios SA outlined a plan for an injection of €170 million in new money and the terms of an agreement in principle the company reached with a large majority of its shareholders and lenders, in a press release.

The agreement was reached with certain of its main shareholders holding together 80% of the share capital and voting rights of the company including Vantiva, Angelo Gordon and Bpifrance and a group of lenders holding together more than 75% of the debt outstanding.

As part of the new money financing, the company will be issuing €60 million of convertible notes fully backstopped by certain funds of Angelo, Gordon & Co., LP.

When the notes are converted, bondholders will have 33% of the share capital of the company on a fully diluted pro forma basis with warrants that will be issued to the new money lenders and the existing senior secured lenders.

The company will also be borrowing a super senior credit facility fully underwritten by a lender group for €110 million. The lenders will be given warrants pro rata to their exposure to the new money credit facility.

Closing on the new money is expected by the end of the second quarter. However, the lenders and Angelo Gordon are providing a bridge financing for €85 million by the end of March or early April.

Convertible notes

The €60 million 0.75% convertibles will be due July 2026.

There will be a 4% discount.

New credit facility

The new €110 million credit facility will be due July 2026.

There are two years of call protection and then protection at 103 for the next year and then the credit facility can be repaid at par.

There is a 150 basis points commitment fee on any undrawn amounts during the availability period.

The discount would be at 96.5.

Warrants for 11% of the company’s stock on a fully diluted basis would be issued.

The ranking would be super senior with the company’s existing revolver, from the date of the first drawdown.

Interest would be at Euribor plus 50 bps in cash or 11.5% paid in kind on euro borrowings.

For U.S. dollar borrowings, interest would be SOFR plus 200 bps for cash payments or 10% paid in kind.

Existing debt

The company’s €40 million revolver will be reinstated in full. The maturity is July 2026.

Interest is either Euribor plus 200 basis points, with a 0% floor or 3.5% if paid in kind.

The company’s €621 million first-lien facility will be reinstated for a total of €421 million over September 2026.

On the euro-denominated tranche, until June 2024, interest will be Euribor plus 50 bps, with a 0% Euribor floor. Alternatively, it will be 5.5%, paid in kind.

After June 2024, interest will be Euribor plus 200 bps, with a 0% Euribor floor or 4% paid in kind.

For the dollar-denominated tranche, interest will be at SOFR plus 50 bps until June 2024 with no floor. Or, interest will be 7% payable in kind. The interest rate will go up after June 2024 to SOFR plus 200 bps, with a 0% SOFR floor, or 5.5% paid in kind.

The first-lien facility lenders will have an equity conversion of €30 million of the first-lien facility by means of capital increases by way of set-off of claims.

The other €170 million that is disappearing from the first-lien facility will convert into a subordinated instrument stapled with the reinstated first-lien facility.

Proceeds on the subordinated instrument will be used to repay a portion of the first-lien facility at par.

Interest would be 0.5%, paid in kind.

Further steps

The company will undertake a strategic review within the next 24 months to explore options for maximizing value for all stakeholders.

Technicolor Creative Studios provides VFX services to the global entertainment, media and advertising industries. Headquarters are in Paris.

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