Octus on Credit: Selecta Offers Non-AHG Investors Stark Choice Under Restructuring

Selecta’s investors outside of the ad hoc group were left starved for details when broad terms of the Swiss vending machine’s restructuring were first announced. Quite possibly, they are now regretting no longer being in the dark and facing Hobson’s choice.

Non-AHG first lien bondholders can either remain in the third-out new debt, accepting a 15% haircut plus a slice of equity and retain stronger covenants. Or they can swap into the first-out new debt, with full face-value recovery but no equity and a documentation change lowering to 50% the consent threshold required to amend terms for the first twelve months from issuance. As the AHG controls about 67% of the new debt, this means other holders would be at the mercy of the leading group, should a further restructuring be needed. 

Selecta is still 6.8x levered after the current deal and its business plan is based on a sudden return to mid single topline growth, so an additional restructuring does not look completely unlikely. Investors outside the ad hoc group remain between a rock and a hard place.