Montagu and GIP exit Biffa via debt-for-equity swap

Carmen Reichman
30 November 2012

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Montagu Private Equity and Global Infrastructure Partners (GIP) have exited UK waste services company Biffa via a debt-for-equity swap with the company's senior lenders.

Angelo Gordon & Co, Avenue Capital Group, Babson Capital Europe and Sankaty Advisors agreed to take over the ownership of the indebted company in exchange for a debt reduction of 55% and an additional investment of £75m. The move will ease the company's debt to £520m from more than £1.1bn.

The £75m of new investment will be used to fund a new infrastructure programme designed to bolster the company's position in collection, recycling and technologically-led waste recovery. Biffa will continue to be run by the current management.

Previous funding
Montagu and GIP acquired Biffa for an estimated £1.7bn in 2008, alongside UCIL, a wholly-owned subsidiary of HBOS and holding company for investments made by Bank of Scotland's Fund Investments team. A debt package of £1.09bn was provided by a consortium of banks comprising Bank of Scotland, Barclays Capital, Credit Suisse, HSBC, the Royal Bank of Scotland and the investment banking arm of Barclays.

Montagu and GIP each took 43% of the newco shares, equalling approximately £306m each. UCIL acquired a 14% stake in the newco, contributing £100m to the deal. At the time of exit GIP owned a 36% stake.

In August 2010, Biffa acquired recycling management company Greenstar UK. Biffa's latest recorded turnover was £1bn and the business was profitable. However, reports claim the company was hit during the downturn and was slow to move from landfill to recycling services, hampering efforts to pay back its high debt.

Company
Biffa is an integrated waste management business headquartered in High Wycombe. It provides waste collection, treatment and recycling, and disposal services nationwide to more than 52,000 customers. The company owns 1,100 collection vehicles and 65 depots. The company was founded in 1912 and now employs 6,300 people.