City Brewing lenders aiming to take control out of court
Lenders to City Brewing are in discussions with the company to take the keys of the business from existing sponsors Charlesbank Capital Partners and Oaktree Capital Management, said three sources familiar with the matter.
The lenders are eying an out of court process for a change of control after injecting bridge capital in a transaction that closed at the beginning of January, said two of the sources. It remains possible the deal will have to be executed in court, the third source said.
A group of lenders recently provided the company with a one-year USD 35m super-senior priority term loan, according to S&P Global Ratings, which said that non-backstopping lenders can join on a pro rata basis by a 14 January deadline. The funding carries the requirement that the company form a subcommittee of its board to propose a restructuring by 4 February, S&P said.
The development follows efforts by City Brewing to execute a turnaround for the alcoholic beverage contract manufacturer that include a liability management exercise in April 2024
The LME deal included a USD 115m liquidity boost from a new first-lien, first-out loan and moved assets to a new entity as collateral for the new credit facility, Bloomberg reported at the time. Around 70% of the issuer’s term loan lenders agreed to the deal, receiving a mix of lower- and higher-ranking debt.
The transaction was not intended as a bridge but ended up becoming one, said the third source, who noted the company’s business was improving at the time.
City Brewing produces beverages like White Claw hard seltzer and Pabst Blue Ribbon beer on behalf of the brands’ owners. Demand for hard seltzer has been declining in recent years at the same time as the owner of White Claw, Mark Anthony Brewing, opened its own USD 490m plant to produce the beverage.
City Brewing recently re-engaged advisers from its April LME, according to a Bloomberg report. Evercore and Sullivan & Cromwell are assisting the company, while Perella Weinberg Partners and Gibson Dunn & Crutcher are advising the lenders.
The company’s persistent financial issues triggered a ratings downgrade by S&P in early January to SD from B-. The issuer missed quarterly principal payments on its first-lien first out and first-lien second out term loans due 31 December, and subsequently entered into a forbearance agreement with its lenders, according to the downgrade.
The issuer’s USD 364m FLFO SOFR+ 350 bps term loan due April 2028 was quoted 55/62 today down from 69/73 on 2 January, according to Markit.
Messages left for City Brewing, Charlesbank, and Oaktree were not returned.