Lenders to French plumbing group Frans Bonhomme are bracing for losses in an expected restructuring of its debt as the company prepares to default on its loan prepayments, banking sources said on Tuesday.
Private equity firm Cinven bought Frans Bonhomme in 2005 for 893 million euros ($1.16 billion) backed with 735 million euros of debt, according to Thomson Reuters LPC data. The company had to reset its debt covenants in 2011 and has run into difficulty again amid difficult economic conditions, bankers said.
Bankers said the company sent a letter to lenders on Monday stating an event of default would occur as they are not able to make a payment to reduce their debt specified in the original agreement. Some debt agreements provide for companies to make agreed prepayments early on a portion of their loan.
Frans Bonhomme's debt is also gaining attention from distressed debt investors looking to buy it cheaply in Europe's secondary loan market in the hope that they will earn more than they paid once a sale or refinancing is completed. Its term loans are currently quoted at 74 percent of face value, traders said - a level that is considered distressed in the leveraged loan market.
Cinven was not immediately available to comment.
Frans Bonhomme is the market leader in the distribution of plastic pipes and fittings in France, according to Cinven's website. ($1 = 0.7705 euros) (Editing by Patrick Graham)