Case study
Ahlsell's Leveraged Recapitalization

Prof. Ian Giddy, New York University

October 5, 2005 – Heating and plumbing products maker Ahlsell's SEK7.665 recap has closed, banking sources said, as 25 banks and funds approved a contentious change of control provision to join the deal.

Lead banks Morgan Stanley and Nordea launched the transaction which lacked a change of control provision in the documentation. This means that banks committing to the deal will not be prepaid as is customary when the company is sold. It is no secret that the sponsor intends to sell Ahlsell soon.

Any buyer must meet certain criteria and needs to be a large European sponsor and a pan-European player. If the new buyer does not meet the criteria, then current lenders will be given change of control rights. Banks may also demand a refinancing if the buyer demands higher leverage.

The deal’s PIK and mezzanine was preplaced – the latter with Park Square and Goldman Sachs. The BC tranches have closed oversubscribed and the bank debt was fully placed, with considerable support coming from Nordic lenders according to the leads.

Lenders will be funded in on the next rollover date of October 12, sources said. Some lenders have credit committee approval to join the deal, but are waiting to pick up the debt in the secondary market after the company is sold, bankers said.

The deal will allocate in the next couple of days and is expected to be free to trade at the end of the week.

Ahlsell received pushback from the market, which is becoming increasingly sensitive to the structural weakening of LBOs, which sponsors have been demanding of late, in addition to high leverage.

Sponsors have been demanding more flexibility on covenant relief and how covenants are defined and can be remedied without gaining 100% approval from bank syndicates.

This is to circumvent any potential problems arising from the greater number of non-bank investors in deals, such as hedge funds, who are deemed likely to obstruct delicate negotiations.

“Change of control used to be sacrosanct, along with mandatory prepayment and cash to equity, but terms that were cast in stone are now under pressure – sponsors are really trying their luck,” a banker said.


1. What were the purposes of Ahlsell's financing?
2. Why were banks willing to lend to this company, givne that the company did not intend to use the funds for productive investments?
3. What is the "change of control" issue?

Appendix: Financing Details


Ahlsell AB

Deal active date:

05 Oct 2005


SKr7,040m (US$906.644m)


Stockholm Sweden

Institution type:


Organization type:



5719 - Misc. homefurnishings stores


Nordic Capital










Background: During syndication the MLAs were also managing the sale of the company. The financing does not provide a change of control clause, so banks that commit to the deal will not be repaid when the company is sold.

Tranche 1:

SKr2,240m (US$288.478m) Term Loan A 05 Oct 2005-04 Oct 2012 AIS: 225 bps/NA

Tranche 2:

SKr1,400m (US$180.299m) Term Loan B 05 Oct 2005-04 Oct 2013 AIS: 275 bps/NA

Tranche 3:

SKr1,400m (US$180.299m) Term Loan C 05 Oct 2005-04 Oct 2014 AIS: 325 bps/NA

Tranche 4:

SKr500m (US$64.392m) Revolver/Line >= 1 Yr. 05 Oct 2005-04 Oct 2012 AIS: 225 bps/NA

Tranche 5:

SKr1,500m (US$193.177m) Revolver/Line >= 1 Yr. 05 Oct 2005-04 Oct 2012 AIS: 225 bps/NA

Tranche 6:

SKr625m (US$80.49m) Term Loan 05 Oct 2005 AIS:500 bps/NA

Tranche 7:

SKr1,240m (US$159.693m) Other Loan 05 Oct 2005 AIS:1025 bps/NA

Tranche 8:

SKr500m (US$64.392m) Other Loan 05 Oct 2005

Purpose comment:

Proceeds pay sponsor Nordic Capital, a dividend.

Company financials:



Total Debt to EBITDA: 6.2:1


Sr. Debt to EBITDA: 4.5:1 | | | | contact
Copyright ©2007 Ian Giddy. All rights reseved.