GST AutoLeather retains workout advisors, TL holders mobilize with legal

27 July 2017
GST AutoLeather has retained advisors Alvarez & Marsal and Lazard for restructuring assistance, according to two sources familiar with the situation.
 
GST is a supplier of interior automotive leather products. But the company’s earnings have come under pressure as a number of a contracts with major auto-suppliers are in jeopardy, noted two additional sources.
 
In response, the borrower’s capital structure has tumbled in recent months. Its USD 30m revolver due 2019 is quoted 80.913/83.913 today, according to Markit. The revolver traded as high as 94.123/95.623 on 3 July, before collapsing to 81.413/84.413 on 5 July. The USD 140m Libor+ 550bps (1% floor) due 2020 was bid at 97 in mid-April, but is now quoted in the low 80s, said one of the sources.
 
For their part, a group of lenders has organized with legal counsel Paul Hastings, said three sources. The group is close to bringing on FTI Consulting as an advisor, said two of those sources.
The company finds itself in an uneasy spot, as auto sales in the US have been in a state of decline. The pace of new vehicle retail sales in July is pegged to decline for the fourth consecutive month, according to J.D. Power and LMC Automotive.
 
In 2014, GST launched a US-based financing package via RBC. The credit facility included a USD 150m TLB. At the time, the issuer also placed a USD 30m mezzanine tranche with two funds, with pricing at 11% cash/2% PIK.
 
Japan-based sponsor Advantage Partners acquired GST in 2008 for USD 300m, but after financial and operational problems, the company teetered on the brink of insolvency by 2011. Unable to cover working capital and the integration costs of Seton, which it acquired in January 2011, GST was temporarily supported later that year by bridge financing from Advantage Partners and was forced to mortgage USD 15m of its receivables.
 
HMS Income Fund, which has a USD 12.194m stake in the company’s TL, recently marked its position at 97, according to SEC filings. Main Street, which holds a USD 14.3m stake in the TL, also marked its position in 97. Alcentra Capital, which holds a USD 8.435m position in the 11% cash/2% PIK senior sub loan due 2021 marked its stake at PAR, SEC filings showed.
 
Last year GST had retained Lazard to sell the company, according to sister publication MergerMarket. But Lazard’s mandate has now shifted to a restructuring, sources noted.
 
Messages left with the company, Alvarez, Lazard, Paul Hasting and FTI were not returned.