Searchlight's Survitec completes refinancing

Searchlight acquired Survitec in November 2019 in a secondary purchase from Omex, alongside the company's other two largest lenders, M&G Prudential and CQS.

Survitec's lead shareholders are now Searchlight and M&G following the restructuring, which was completed in August 2020.

The refinancing was undertaken to repay the take-back debt that the shareholders held post-restructuring, a source close to the situation told Unquote, adding that the company has performed well during the Covid-19 pandemic. The GP is not taking a dividend recap as part of the refinancing, the same source added.

Survitec is a portfolio company of Searchlight Capital III, which held a final close in November 2020 on $3.4bn. The fund deploys equity tickets of $100-200m, generally pursuing complex deal structures such as distressed debt acquisitions or bankruptcy reorganisations followed by debt-to-equity swaps, as well as LBOs and subordinated debt.

In addition to repaying the take-back debt, the refinancing will also be used to fund the acquisition of protective suit producer Hansen Protection, a portfolio company of IK Investment Partners, which was signed in March 2021; the deal will be wholly funded by debt. KPMG conducted the financial due diligence for the deal, while OC&C provided commercial due diligence.

IK acquired Hansen Protection from Montagu Private Equity in 2013 via IK VII Fund. The company had intended to complete an IPO in 2018, as reported, but the deal did not go ahead, with the company citing market turbulence as a reason for putting its plans on hold.

Previous funding
Montagu Private Equity acquired Survitec from Alchemy Partners through its SGL Holdings acquisition vehicle in 2004 in a deal valued at £146m.

In January 2010, Warburg Pincus bought Survitec from Montagu for £280m. In September that year, the company acquired Parker Knight Holdings' Seaweather with backing from the GP. In May 2011, Survitec acquired Cosalt's marine business for £31m, backed by debt from GE Capital.

In January 2015, Onex bought Survitec from Warburg Pincus via Onex Partners IV in a deal valued at £450m. BNP Paribas, ING, Natixis and Unicredit provided debt of £205m to back the buyout.

In 2019, Survitec's leverage rose as a result of a number of commercial problems, including issues with the integration of add-on Wilhelmsen Maritime Services, Unquote sister publication Debtwire reported. A spokesperson for Survitec told Unquote that although issues with the company's submarine escape suits were identified during this period, a product recall did not occur, and the company worked in collaboration with its customers to solve these issues.

Covenant breaches were anticipated for Q2 2019, although these did not come to pass, the same spokesperson told Unquote.

Searchlight subsequently began to buy Survitec's debt in the secondary market, owning around two thirds of the debt alongside M&G by the time the company was in the position of needing a restructuring under a new owner.

Other lenders included Cheyne, Bain Capital, Barclays, Pemberton and Tikehau, according to Debtwire.

M&G, Searchlight and CQS owned 75% of the company's debt at the time and owned more than 75% of the company's equity by the time the recapitalisation was completed. The deal was announced in November 2019 and completed in February 2020. The new structure was intended to reduce the company's debt facilities by 80%, comprising £100m of reinstated debt in a single facility and up to £75m of new money for the turnaround process, according to Debtwire.

Company
Founded in 1854 and headquartered in Birkenhead, Survitec produces and services marine and defence safety systems and equipment, ranging from individual equipment such as life jackets and protective suits to healthcare systems. The company also produces equipment for the energy and aviation sectors.

People
Searchlight Capital Partners – Ralf Ackerman (partner).
Survitec – Ray Leclercq (chief financial officer).
Ares – Daniel Sinclair (partner).
M&G – Rafa Cerezo (fund manager).

Correction 15/04/21: this article was amended to correct the mention of a product recall for Survitec's submarine suits and to clarify that the company's anticipated Q2 2019 covenant breaches did not come to pass.

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