Freshfields usurps Hogan Lovells on Biffa’s £1.1bn debt restructuring

Freshfields Bruckhaus Deringer has replaced Hogan Lovells to advise the senior lenders on the debt restructuring of waste management company Biffa, with Latham & Watkins and Linklaters also winning a role on the high-stakes negotiations.

Adam Gallagher
Adam Gallagher

Biffa’s creditors are in talks with the company, which is running out of time to pay back £1.1bn of loans. The most likely outcome is understood to be the creditors taking control, although other options include a takeover by a fund or the sponsors putting more money into the business.

The UK rubbish company is being advised by Linklaters, with the City-based team comprising banking and restructuring partner Bruce Bell, banking partner Adam Freeman and corporate partners Richard Youle and Nick Rees.

A syndicate of around 50 senior lenders led by HSBC, Dexia, GE Capital and Prudential’s investment manager M&G has hired Freshfields, with London restructuring partner Adam Gallagher leading. The senior lenders are owed £820m.

Latham has won the role for the mezzanine lenders, to which £280m of loans are owed, with the syndicate headed by Intermediate Capital Group (ICG) and Babson Capital. The US firm’s team is being led by London-based global finance vice-chair Dominic Newcomb and City restructuring partner John Houghton.

Freshfields’ and Latham’s instruction sees Hogan Lovells lose out, with legacy Lovells advising both the senior and mezzanine lenders on the 2008 take-private of Biffa. The banking mandate was split two years ago, with Latham taking on the mezzanine role and Lovells kept on as adviser to the senior lenders. Freshfields then won the mandate from the senior lenders in the spring this year when it became clear that the company was likely to breach its financial covenants.

A source close to the deal said the senior lenders had chosen Freshfields over Hogan Lovells because of the magic circle firm’s superior funds capability and connection with the banks, with press reports indicating the company was being circled by distressed debt funds including Apollo and Avenue. A proportion of the senior debt consists of non-distressed funds.

Background to this deal:

Private equity groups Montagu Funds and Global Infrastructure Partners (GIP) bought Biffa in a take-private in 2008 in which Herbert Smith partners Stephen Wilkinson and Alan Montgomery advised the waste company. Linklaters’ Youle and Freeman advised Montagu, Slaughter and May advised GIP and Lovells represented the banks (8 February 2008).

Linklaters has held on to its mandate for the restructuring four years later, while Latham’s Newcomb has leveraged his relationship with ICG to win the latest role. ICG has instructed a range of firms in the past including Latham and Ashurst, with the client’s transaction teams operating a relatively informal deal-by-deal hiring pattern.

Latham first got its foot in the door on the Biffa matter in 2010, when the company entered negotiations with the banks on acquiring Irish waste management company Greenstar, with Linklaters advising Biffa on the deal that year. Biffa re-negotiated its debt at the time, with Lovells still acting for the senior lenders but Latham snatching the mezzanine mandate.

Herbert Smith has not acted for Biffa since the take-private, with corporate duo Wilkinson and Montgomery also advising it when former owner Severn Trent spun the company off in 2006.

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