Transaction of the Year
Company revenue at the onset of the transaction of between $300 million and $1 billion
Aquilex Holdings LLC
On the verge of default, Aquilex
Holdings swiftly entered a forbearance
agreement followed by a restructuring
support agreement that allowed the
company to successfully reduce
debt obligations and regain the
liquidity necessary to operate.
Aquilex Holdings conducts business
through two primary segments that
service more than 600 customers in the
energy industry: specialty repair and
overhaul, and industrial cleaning. In
2010, the company began to experience
a significant decline in revenue and
earnings, in large part due to a decline
in demand for its services and lower
than expected operating margins.
As of September 2011, Aquilex found
itself with no remaining capacity
under its revolving credit facility. The
company was no longer compliant with
certain financial covenants under the
credit agreement, and it had determined
that as a result of its financial condition,
including its limited liquidity, it did
not expect to make the next scheduled
interest payment on its senior notes.
To restructure its debt obligation
and obtain additional liquidity, the
company and its lenders entered
into an agreement in October 2011
in which the lenders agreed to
forbear until December 2011 from
exercising default-related rights and
remedies against the company.
The defaults under the credit agreement
triggered the right of its lenders to
declare all of its indebtedness under
the credit agreement immediately
due and payable. Because the senior
notes contained cross payment default
and cross acceleration provisions,
they would also be in default.
In November 2011, the company
addressed its short-term liquidity issues
by entering into an agreement for
$15 million in bridge financing from
a group of senior noteholders led by
affiliates of Centerbridge Partners L.P.
In December 2011, Aquilex entered into
a restructuring support agreement with
institutions holding 100 percent of its
first and second lien debt and holders
of 92 percent of its senior notes.
The restructuring terms were designed
to reduce Aquilex’s debt by $322
million and infuse the company
with $80 million of new equity. In
February 2012, Aquilex announced
that it had successfully completed
the out-of-court exchange offer, with
holders representing 98.33 percent
of the aggregate principal amount
of the senior notes ($221.25 million)
tendering into the exchange offer.
The restructuring reduced Aquilex’s
outstanding debt by 70 percent ($318
million) and its debt service costs by
69 percent (to $13 million annually).
In addition, the infusion of equity
resulting from the rights offering,
together with the GECC revolver,
provided Aquilex with the liquidity
that had been sorely lacking.
Although changes were made at
executive management levels following
the closing of the restructuring,
the success of the out-of court
restructuring ensured that no
employees lost their jobs as a result of
the company’s financial condition.