Milbank Closes €1.65 Billion Refinancing on Behalf of Cognis and Its Financial Sponsors
Landmark Deal Combines Multifaceted Financing Structures To Maximize Benefits of Favorable Market Conditions
LONDON, May 23, 2007 – In one of the most significant deals of 2007, global specialty chemicals company Cognis has issued notes and loans with a total value of approximately €1.65 billion. The refinancing enabled the company to repay its existing bank facilities and its second lien notes and loans, and redeem a portion of the PIK (“pay-in-kind”) notes at its parent level. The international law firm Milbank, Tweed, Hadley & McCloy LLP, led by London–based partner Kevin Muzilla, represented Cognis and its financial sponsors Goldman Sachs and Permira in negotiating, structuring and closing the transaction.
Mr. Muzilla commented, “Taking advantage of the favorable current conditions in the leveraged and capital markets, this refinancing allows Cognis to achieve a considerable reduction in financing costs. The transaction is particularly noteworthy given the combination of “covenant-lite” financing structures involving floating-rate notes in euros and dollars, floating-rate loans in euros and dollars, and a new revolving credit facility. The deal demonstrates the increasing alignment of the European high yield and leveraged loan markets in that the notes and loans were priced on the same bookbuild basis without maintenance covenants. The notes and loans offering was significantly oversubscribed, indicating strong market confidence in Cognis.”
Previously, Milbank worked with Cognis and its financial sponsors on Cognis’complex multi-tiered €1.75 billion recapitalization in 2004.
Led by Mr. Muzilla, the Milbank team included attorneys from several of Milbank’s offices worldwide, including partners Russell Jacobs, Suhrud Mehta and Tom Siebens in London, Rainer Magold in Frankfurt, William Mahoney, Fred Kneip and Andrew Walker in New York. Assistance was provided by lead associate David Gasperow and associates Randy Ali, Merih Altay, Jeanette Cruz, Melissa Gambol, Phil Gledson, Dawn Harding, Kevin MacLeod and Gabriel Mpubani in London, Stephan Dulitz, Daniel Gubitz, Simone Jordan and Peter Memminger in Frankfurt, Thomas Kleinheisterkamp and Stefan Kroeker in Munich, Eliza McDougal in New York and Erika Evasdottir in Hong Kong. Additional support was provided by legal assistants Emma Reed and Erin Telling and summer associate Julie Constantinides in London.
About the Refinancing:
The newly raised capital consists of senior secured floating-rate notes worth €610 million and US$293 million and senior secured floating-rate loans also worth €610 million euros and US$293 million. Interest is payable on all notes and loans at 200 basis points above the respective Euribor/Libor rate. They are repayable in September 2013 with a repayment penalty in the first 18 months.
In addition to reducing financing costs, the refinancing improves Cognis’ liquidity position going forward. Interest savings will be approximately €60 million per year. Including the benefit of having no scheduled amortization, the company expects to see a cash benefit of approximately €100 million per year.
Cognis has also replaced its existing revolving credit facility with a new “covenant-lite” facility, also worth €250 million and maturing in May 2013. The interest rate is 200 basis points above the Euribor rate. Goldman Sachs and JP Morgan were the underwriters of the entire refinancing package.
As a precondition for the partial redemption of the PIK notes, Cognis received consent from the holders of its 9.5% Senior Notes due 2014 in a consent solicitation. In addition Cognis Deutschland GmbH & Co. KG was merged with Cognis GmbH and Cognis GmbH is now an operating company.
About Cognis:
Cognis is a worldwide supplier of innovative specialty chemicals and nutritional ingredients, with a particular focus on the areas of wellness and sustainability. The company employs about 8,000 people, and it operates production sites and service centers in 30 countries. Cognis has dedicated its activities to a high level of sustainability and delivers natural source raw materials and ingredients for food, nutrition and healthcare markets, and the cosmetics, detergents and cleaners industries. Another main focus is on products for a number of other industries, such as coatings and inks, lubricants, textiles, as well as agriculture and mining. The company holds a 50-percent stake in the joint venture Cognis Oleochemicals, one of the world’s leading manufacturers of oleochemicals.
Cognis is owned by private equity funds advised by Permira, Goldman Sachs Capital Partners, and SV Life Sciences.
About Milbank
Milbank, Tweed, Hadley & McCloy LLP is a preeminent global law firm that for more than 140 years has provided innovative legal solutions in many of the world’s largest, most complex, “first-ever” corporate transactions and litigation. Our transactional expertise includes capital markets, corporate finance and transactions, project finance, acquisition finance, and other major fields of law practice. Milbank litigation teams resolve disputes involving mergers and acquisitions, proxy battles, financings and securities offerings, intellectual property, white collar crime, and corporate restructurings, among others. Our clients range from prominent multinational financial, industrial and commercial enterprises to governments, institutions and individuals. The Firm is headquartered in New York with offices in Beijing, Frankfurt, Hong Kong, London, Los Angeles, Munich, Singapore, Tokyo, and Washington, DC.