Willkie Advises on Comprehensive Financial Restructuring of the Lecta Group

February 5, 2020

The Business Reorganization and Restructuring team advised the coordinating committee of noteholders on the successful financial restructuring of Lecta.

Willkie’s Business Reorganization and Restructuring team advised the coordinating committee of noteholders comprising certain holders of the Luxembourg-incorporated issuer Lecta S.A.’s (the “Issuer”) senior secured notes on the successful completion of a comprehensive financial restructuring transaction in respect of the Issuer, one of the largest paper manufacturers in Europe. The transaction closed on February 4, 2020.

Willkie was appointed in September 2019 by the CoCom to advise, alongside financial advisors Houlihan Lokey, in respect of the anticipated transaction. Willkie negotiated and executed a comprehensive restructuring of the Lecta group’s existing capital structure which required extensive negotiations between the CoCom, the Issuer and other stakeholders, including the French government, and the implementation of emergency funding prior to the finalization of the restructuring, in order to ensure sufficient liquidity in the interim period.

The restructuring was implemented via an English Scheme of Arrangement (the “Scheme”), which was sanctioned by the English High Court on January 28, 2020. In order to ensure sufficient jurisdiction of the English High Court for the Scheme, the governing law of the Issuer’s existing senior secured notes (“Existing SSNs”) was amended from New York to English law and an English subsidiary in the Lecta group (Lecta Paper UK Limited) acceded as a co-issuer of the Existing SSNs and assumed full liability for the obligations under the Existing SSNs, together with the Issuer. The Scheme was approved with unanimous consent of holders of the Existing SSNs who voted in the Scheme, representing over 96% in value of the Existing SSNs. The Scheme was also granted recognition by the Bankruptcy Court for the Southern District of New York under Chapter 15 of the US Bankruptcy Code, and subject to a subsequent Spanish “homologacion” proceeding. In addition, a number of other restructuring steps, including the refinancing of the company’s existing revolving credit facility, took place outside of the Scheme.

The transaction involved the transfer of equity ownership of the group to a newly incorporated UK company owned by the holders of the Existing SSNs, which will be known as Lecta Ltd (“New Lecta” and together with its subsidiaries, the “Group”), and the exchange of Existing SNNs to new longer dated debt instruments. The restructuring results in a materially improved capital structure for the Group, and will strongly position the Group as it enters its next phase of transformation and growth.

In addition to the recapitalization, Willkie also advised on the Group’s agreement with NatWest Markets Plc to provide €115 million super senior facilities (“New SSF”) – consisting of a super senior €60 million term loan and a super senior €55 million revolving credit facility – to refinance and replace the Group’s existing €65 million super senior revolving credit facility. The incremental borrowing capacity under the New SSF provides the Group with additional liquidity and financial flexibility, as it continues its transformation towards a specialty paper company.

In addition, different measures of support from the French authorities for the Group’s operations in France have been approved and are expected to be finalized following completion.

The cross-border, multidisciplinary Willkie deal team, led out of London by restructuring partners Graham Lane and Iben Madsen, included attorneys from Willkie’s restructuring, capital markets, private equity, finance, tax, competition and compliance, investigations and enforcement teams across Willkie’s London, Paris, Milan, New York and Washington offices. Willkie was assisted on the transaction by Cuatrecasas, Gonçalves Pereira (advising in respect of Spanish law) and Loyens & Loeff (advising in respect of Luxembourg law). The Cuatrecasas team was led by Ignacio Buil Aldana and Michael Scott led the Loyens team.

The Willkie deal team was led by partners Graham Lane and Iben Madsen, and included partners Jennifer Tait, Lionel Spizzichino, Mark Fine and Gavin Gordon.