Maxeda 2026 Notes Rally on GoldenTree Providing €50M Capital, Restoring Equity Cushion; WHOA Likely Implementation Route Absent Consensual Deal

Relevant Document:
Investor Update

Dutch DIY retailer Maxeda’s outstanding €434 million 5.875% 2026 bonds rose 5 points to 82.5 after the group announced over the weekend a recapitalization deal, largely viewed by the market as positive, sources told Octus.

The company said that it has reached an agreement with an ad hoc group of noteholders representing approximately 69% of the 2026 bonds on a recapitalization transaction. As part of the deal, largest shareholder GoldenTree has committed to provide a capital injection of €50 million, which combined with cash on balance sheet will facilitate a day-one cash paydown of approximately €54.34 million to participating noteholders (“the early bird consideration,” see further down).

Given rumors around a hard restructuring, bonds dropped to low 70s last week, but recovered shortly after as clarity emerged around sponsor’s support, as reported. Maxeda is a functioning and cash-generative business and there is no need for a large haircut, sources previously said.

The deal seeks to reinstate €295 million bonds from €434 million pre-deal, to be exchanged into new senior secured notes with maturity extended by five years and coupon increased to 8.125% from 5.875%. The rest of the existing 2026 SSNs will be swapped into equity, with existing shareholders retaining 59% and bondholders receiving 41% share. Following the transaction, leverage will reduce to 3x from 4.2x currently.

Maxeda’s pre-transaction and expected post-transaction capitalization is below:
 

The reduction in net leverage associated with the haircut will result in the restoration of Maxeda’s equity cushion. Octus estimates that a sensible EV/EBITDA multiple for the business at present should be around 3.5x to 4x. Based on the group’s €114 million last-twelve-month adjusted EBITDA, this implies an equity value of €57 to €114 million depending on the multiple chosen.

In conjunction with the recapitalization transaction, the SSN holders will receive a pro rata share of 41% of Maxeda’s equity. Based on the above valuation, the residual equity value attributable to bondholders is €23.4 to €46.7 million. Incumbent shareholders, led by GoldenTree, have been able to retain a post-transaction equity stake of 59%, through the aforementioned capital injection. Should GoldenTree not have committed extra capital, it likely would have had no recourse to retain any equity as Octus estimates that based on the pre-transaction capital structure, at the 3.5x to 4x EV/EBITDA multiple chosen, value would have broken in the SSNs.

Regarding the coupon uplift, Octus argued as far back as May 2024 that Maxeda would be unable to refinance in the open market, with the maximum coupon the group could bear without burning cash at 8%. The group generated €28 million of free cash flow on a levered basis in the LTM period, though this was entirely due to a release of working capital, which was partially structural as a result of changes to the group’s inventory management.

We view this as a good deal for noteholders, especially those who may have bought in during the extended period when the SSNs traded below 80. Bondholders who provide consent by Feb. 13 will be well remunerated through the provision of a 12.5 euro cents early bird consideration and 0.25 euro cents early consent fee, providing that the aggregate principal amount of the SSNs and early bird consideration shall not exceed €775 for every €1000 of existing SSNs.

The provision of the early bird consideration allows for the magnitude of the reduction in the nominal amount outstanding of the SSNs from €434 million to €295.3 million and for the coupon to be raised from 5.875% to 8.125%, with the expectation that post-transaction, the group will generate cash going forward, all things being equal. This appears as a healthy capitalization, providing justification for the five-year maturity extension and putting Maxeda in a position to “pursue and realise strategic objectives.” Concurrently, the deal offers SSN holders runaway to realize additional value later on should a successful exit be found. Regardless of whether an exit materializes, at the 8.125% amended coupon, noteholders are also being well remunerated on a cash basis going forward.

The only other alternative to the current deal would have been leaving the nominal value untouched and retaining the current 5.875% coupon. In Octus’ view, introducing a PIK component would not have made any sense as, due to Maxeda’s limited scope for EBITDA growth, this would have led to an ongoing increase in net leverage as a reduction of the accrual of PIK interest.

Market sources Octus spoke to said overall the deal was better than their expectations, with some sources saying the reinstated paper should trade into the 90s. Other sources, however, were anticipating a smaller haircut and some asset disposals to pay down debt, and noted that under the proposed deal recovery will mostly come from the equity allocation, which may be an issue for some investors. While Maxeda’s cash flows have remained under pressure due to interest expense, the coupon uplift should be sustainable following the deleveraging, the source added.

Implementation Routes

The company has highlighted in its recent investor update relating to the proposed refinancing that if 90% support for the transaction is not achieved consensually, the ad hoc group has enough support to implement the deal in relation to the senior secured notes. As the group’s center of main interest is in the Netherlands, and given the level of support already received for the proposed transaction (circa 69%), the Dutch scheme or WHOA would be an obvious choice for implementation in the absence of a consensual deal. A WHOA would require consent from at least 2/3 of creditors by value in each class in order for the scheme to be passed.

In order to use the process, the debtor must believe that it is unlikely to be able to continue to repay its debts or is already in a position that it cannot repay its debts, provided that the debtor is able to pay any new liabilities occurring during the WHOA process itself (either on the basis of the continuing business or through external DIP financing).

The WHOA benefits from a moratorium for up to four months where (i) the company files a restructuring statement and intends to submit a restructuring plan within two months, or (ii) a restructuring expert is appointed. Additionally, the moratorium must be necessary for the purposes of the continuation or controlled wind down of the company and must not harm the interests of individual creditors. A further extension of four months is possible under certain circumstances.

As part of the process creditors are split into classes; creditors and shareholders are put into their own class unless their rights are comparable in a liquidation or following the adoption of the proposed plan. New money is protected if the court is satisfied that creditors will not be prejudiced by the new money. There is also a cross-class cramdown mechanic, which can be utilized provided the plan does not violate the “priority rule” (prioriteitsregel). Out of the money classes (based on reorganization value) can be wiped out entirely.

The formal WHOA process is relatively fast and can theoretically be completed within three to five weeks (with up to eight weeks being more likely), which may be useful to Maxeda given that it needs to address its capital structure in fairly short order.