Carlyle, which is the biggest lender to Very Group's parent company, could assume ownership of the retailer as soon as October under the terms of its financing arrangements, a Sky News report claimed.Sources said Carlyle is expected to talk with fellow creditors including IMI (the Abu Dhabi-based vehicle which assumed part of Very Group's debts) in the weeks ahead.It means Carlyle is likely to end up with a majority stake in Very Group once it exercises a 'step-in right’, which converts its debt into equity ownership, the sources said.
My wise friend wrote:
Which just goes to show you the debt holders are the true equity owners. The equity owns a black hole. How many holes are out there?
Great question. Valuations seem rather whimsical, but that likely is needed to make the debt seem reasonable, which it is, until it is not.
This isn't Carlyle's first backdoor rodeo roping of a storied family owned firm. Carlyle used the credit chute to lasso Brintons', a distinguished family owned carpet company in the United Kingdom.
The Telegraph reported:
Rather than buying the family's equity stake, Carlyle bought the company's debt (at a discount to its face value, no doubt). Once they had acquired the debt Carlyle then used a controversial pre-pack administration to seize control – placing the carpet-maker into administration, then buying it straight back.The descendants of the founding Brinton family accused Carlyle of breaking a string of promises to gain control.By using a pre-pack to acquire the business, Carlyle was able to jettison Brintons' pension fund – complete with its £10.5m deficit... 'The Pension Protection Fund has been left to pick up the pieces and will almost certainly end up taking over the 1,500-member scheme.
Very Group has a pension. I can't imagine Carlyle keeping that (unless it has ample cash and the PEU can redirect investments to Carlyle offerings).
The Barclay family is in good company with the Brintons. They should share their experiences with 401(k) holders considering private equity/private credit investments.
I wonder how much Very Group 401(k) holders will put into private credit/private equity. If their experience is anything like Brintons, that bad PEU ownership taste could linger for some time.
