(Bloomberg) -- Private Equity-backed STG Logistics reached a deal with a group of lenders that overhauls its debt stack and allows them to jump ahead of peers in the repayment priority line, according to people with knowledge of the matter.
The deal, part of a $300 million debt and equity financing package the company announced late Thursday, calls for a below-par exchange in which creditors can swap into a mix of senior and junior-ranking paper. Those that negotiated the transaction will receive a larger chunk of the higher-ranking obligations, the people said. That includes Antares Capital, which also serves as the agent to STG’s existing first-lien loan maturing in 2028, the people added.
Restructuring deals that provide select creditors with better terms on debt swaps have surged this year as cash-strapped borrowers with loose credit agreements negotiate with investors pressed to improve their returns. STG, backed by Oaktree Capital Management and Wind Point Partners, has come under earnings pressure amid depressed freight rates. Other recent deals include Del Monte Foods Inc. and software company Magenta Buyer, a former McAfee unit.
Representatives for Oaktree, Wind Point and STG didn’t respond to requests seeking comment on the deal terms, while a spokesperson for Antares declined to comment.
The containerized freight provider is also moving its assets into a newly created legal entity, the people said. The maneuver — known on Wall Street as a drop-down — lets STG raise fresh liquidity by borrowing against the transferred assets.
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The company’s reconfigured debt complex will include a first-out term loan, second-out term loan and third-out term loan. The deal also calls for STG’s owners to provide $50 million in equity to help relieve liquidity concerns, the people said.
It’s the second time this year that STG’s owners, which also includes Wind Point Partners, will provide a capital injection. Just a few months ago, the company secured $30 million from its sponsors in exchange for covenant relief from lenders.
STG has been working with long-time counsel Kirkland & Ellis on balance sheet options, while a group of negotiating lenders organized with Gibson Dunn & Crutcher. Antares retained its own legal counsel, the people said.
Messages left with Kirkland & Ellis and Gibson Dunn were not returned.
STG’s term loan due 2028 was last quoted at around 47 cents on the dollar, according to data compiled by Bloomberg.
Fitch Ratings last month downgraded STG to CCC, just three levels above default.
(Updates with loan trading level in second to last paragraph.)
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