(TMA International Headquarters) CHICAGO — The 2011 Turnaround of the Year Awards recognize 34 restructuring professionals who helped faltering businesses rebound to either stand on their own or be sold. The Turnaround Management Association spotlights their achievements in changing the fates of five businesses on October 26 during the 2011 TMA Annual Convention at the Hilton San Diego Bayfront. The winners of the International Turnaround of the Year for their work on La Seda de Barcelona are:

Alan Tilley, Bryan Mansell & Tilley LLP; Carlos Gila, Gila & Co; David Bryan, Bryan Mansell & Tilley LLP; Richard Tett, Freshfields Bruckhaus Deringer



In the matter of restructuring Spanish company La Seda de Barcelona, location meant everything.

The €1.4 billion publicly listed petrochemicals group and a European market leader in the manufacture of plastic drink containers faced an unpleasant brew of troubles as the financial crisis took hold in 2008: a slump in demand for its finished products, rising raw material costs and competition from the Far and Middle East.

By early 2009, Barcelona-based La Seda breached covenant on €600 million of senior notes held by a 54-member and various bilateral facilities holders, including international and regional banks and hedge funds. Auditors uncovered accounting irregularities that forced a downgrading of interim 2008 profits and the company was delisted from the Spanish stock exchange. Total debt exceeded €1billion with nearly €200 million trade credit overdue to multinational petrochemical creditors and €200 million due to bilateral lenders.

A compact team, with advisors and attorneys from Spain and the U.K., fended off moves by the members of the syndicate to force an English Law filing of the most profitable plastic drink container part of the group managed from UK, which in turn would have precipitated a Spanish filing of the parent company, and negotiated a two-month reprieve to prepare a group restructuring plan. While they worked, they also sidestepped potential filing triggers from subsidiaries in other European jurisdictions and responded to a bevy of claims and cross claims stemming from a filing of another UK facility in which English law administration was unavoidable.

Over 13 months, the team fortified operations around a core enterprise of Spanish and Italian resin and pre-form companies managed from the U.K., a location crucial to the unfolding of the restructuring plan. The plan diluted existing shareholders to 17.2 percent and proposed a €300 million capital increase, with half resulting from a debt-for-equity swap that gave lenders 41.4 percent equity. The other half would come from a €100 million investment from three major existing shareholders and an additional €50 million raised in the open market. Another €400 million in bilateral and trade debt would be repaid in full, with maturities extended from 2010 to as far as 2013.

A minority of dissenting creditors fought the €600 million syndicated loan agreement and could have ended the story, but the team’s attorneys proposed a novel solution: Restructure the syndicated debt owed by a Spanish company under an English Company Law scheme of arrangement, which required only 75 percent approval from the impaired creditor group.

Convincing stakeholders of the merits in pursuing the scheme was just one of many wrinkles on the winding path to La Seda’s recovery. But a smoother course was sure: EBITDA improved from negative €63, 805k in 2009 to positive €63,286k in 2010 and reached €20 million in the first quarter of 2011. As of 2010, the company’s stock was trading once more, on the heels of a plan that produced an oversubscription of shares. Lenders received the excess €33 million in cash payment in lieu of part of the share swap. And a new tool exists for effecting European cross-border restructurings which has since been followed in other pan European cases.