Deal in Focus: Idea CCR I in turnaround for Pigna

Amedeo Goria
11 May 2017

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Italian fund Idea Corporate Credit Recovery I (Idea CCR I) has completed its third debt-for-equity swap by acquiring Italian pulp and paper company Cartiere Paolo Pigna. Amedeo Goria takes an in-depth look at the deal

Idea CCR I, the Italian debtor-in-possession vehicle, acquired a 51% stake in Cartiere Paolo Pigna following a debt restructuring process that started when the business filed for bankruptcy protection under the Bergamo tribunal on 25 September 2015. After a long history of activity – Pigna was established in 1839, ahead of Italy's foundation – the company was facing a critical situation, following reported losses of €3.6m in 2013 and €3.3m in 2014.

According to a source close to the situation, Pigna saw its turnover drop from €50m in 2013 to €30m in 2015, while several local press reports estimated the company's net debt stood at €28.8m in 2016, with revenues at €28m. Additionally, Pigna halved its headcount over the last three years, and, according to a statement, currently employs 90 people.

Against this backdrop, the business is understood to have been on the market seeking investors to refinance its debt since June 2015. At the end of the year, the business received a formal expression of interest from an industrial player, which unquote" sister publication Mergermarket identifies as Bavaria Industries Group, a listed German investment holding company. French group Hamelin and an unknown Russian player were also reportedly in the running.

Pigna saw its turnover drop from €50m in 2013 to €30m in 2015, while its headcount halved over the last three years

Subsequently, the local court eventually rejected Bavaria's turnaround plan, the source says, and Idea CCR I acquired a €10m loan from Pigna's lenders BPM, BNL, MPS and UniCredit in June 2016, with the aim of converting it to equity.

In March 2017, the GP's turnaround plan received the green light from 85% of the company's creditors and the Bergamo Court, allowing Idea CCR I to request a debt-for-equity swap, which led to the current acquisition of a 51% stake. As part of the deal, the existing shareholder Gruppo Jannone reduced its stake from 82.8% to a 49%, while the heirs of founder Paolo Pigna fully exited their combined 15.9% holding.

Following the deal, the GP aims to support the company's relaunch focusing on product development and improving the efficiency of the core business. It has also nominated a new management board to lead the business. The Italian entrepreneur Alberto De Matthaeis was appointed chairperson and CEO, while Idea's managing director Vincenzo Manganelli and Giorgio Jannone will take the remaining seats on the company's management board. Matthaeis joined Pigna from Fondazione Salvatore Maugeri (currently in Carlyle Europe's portfolio) and Burgo Group, where he worked as managing director. Prior to that, Matthaeis was CEO at Mondadori and JK Group, as well as operational director at Pirelli.

Deployments in sub-performing assets
The deal is the third equity investment for Idea CCR I following the full acquisition of Italian light fixtures manufacturer Targetti Sankey in March 2017 and the purchase of a 70% stake in auto parts manufacturer Util Group in April 2017. According to the source, Idea CCR I invests in Italian sub-performing assets: businesses held by institutional lenders, which are not filed for insolvency but face a looming distressed situation.

Co-managed by Idea Capital Funds and HIG Bayside Capital, the fund is divided in two pockets: credit and new finance. In exchange for stock units in the credit pocket, lenders submit their sub-performing asset to the GP. The new-finance pocket provides fresh capital to finance the turnaround plans. To date, UniCredit, BNL and BNP Paribas, Banca Popolare di Vicenza, MPS, BPM and Biverbanca have sold nine credits linked to eight companies, unquote" understands.

Pigna is the third of these loans to be converted into equity. In the wake of the recent activity, Paolo Cerretti, CEO of DeA Capital – the parent company of Idea Capital Funds – recently announced the intention to launch a second corporate credit recovery vehicle, Idea CCR II. The new fund will have the same target and investment strategy as it predecessor, unquote" understands.

People
Idea Capital Funds – Vincenzo Manganelli (managing director).
Cartiere Paolo Pigna – Giorgio Jannone (chair).

Advisers
Equity – Gianni Origoni Grippo Cappelli & Partners (legal).
Company – Studio Legale Associato DMC (legal).