News

Novasep completes restructuring agreement

Novasep has reached an agreement on the restructuring of its balance sheet with most of its creditors

FRANCE

Novasep, which supplies manufacturing services mainly to the pharmaceuticals industry, has reached an agreement on the restructuring of its balance sheet with most of its creditors and the French sovereign wealth fund, the Strategic Investment Fund (FSI), which will become a new shareholder. As a result, the alternative of a link-up with Minakem has been abandoned.

Expectations were that all parties will sign the agreement, including setting out the principles governing the restructuring, shortly after SCM went to press in early December. It will lead to the company's outstanding debts being reduced from some €415 million to €150 million and cash interest from €40 million/year to €150 million/year.

Founder and CEO Roger-Marc Nicoud described this as "an outstanding outcome for Novasep, our employees and all of our business partners. We believe the proposed de-levering of our balance sheet will help create long-term value," he added, as well as giving the company "more flexibility to take advantage of future growth opportunities"

Novasep, most of its creditors and the FSI had entered into a non-binding memorandum of understanding on 6 October under the supervision of France's Inter-Ministerial Committee on Industrial Restructuring. This envisaged a "significant reduction" in the company's debt and interest by converting some €200 million of it into equity, coupled with an injection of cash from the FSI.

The Novasep Synthesis site in Leverkusen is a key part of the contract manufacturing offer

Not all of the shareholders were content, however. The Netherlands-based Gilde Buy Out Fund - the former owner of CABB - reportedly floated an alternative industrial solution via a merger with Minafin, the owner of Minakem. Rumours were swirling about this at the time of CPhI Worldwide 2011 in Frankfurt in late October, despite firm denials from executives at both firms.

According to the French press, Gilde will now give up its 46% stake for only €9 million, while the management will also relinquish its 30%. The American hedge funds Tennenbaum, Silver Point and Pimco will now hold 50%, according to Le Républican Lorrain, a newspaper from near Novasep's home base of Pompey. FSI is investing €30 million, mainly to fund expansion in purification services.

Novasep dates back to 1995 but emerged in its present form by a €425 million management buy-out in 2006. It brought together the original purification activities with the custom manufacturing of the former Dynamic Synthesis, including what were Dynamit Nobel Special Chemistry in Germany and Finorga in France. The former Rohner, in Switzerland, was subsequently sold off and now trades as RohnerChem.

The custom manufacturing activities have struggled of late. According to French newspaper Les Echos in its original report in October, the loss of three key contracts from Pfizer, Gilead and Merck & Co. meant that turnover was expected to fall from €167 million last year to €128 million this year, as opposed to an expectation of €290 million when the company first came together.

In 2009, Novasep refinanced its €310 million debt structure by issuing a €375 million-equivalent Euro/dollar dual-tranche bond on the high-yield market. However, earlier this year, it breached a covenant on its loans as it struggled with these high interest payments and was left staring into the abyss. The new deal should save the jobs of some 1,200 employees across the globe, reports say.
 

 

From Online Issue: December 2011