European private equity firm Permira is close to completing discussions with lenders to Italian fashion label Valentino about renegotiating its Euro 2.5 billion debt, according to reports.
A source told the Financial Times that Valentino was expected to announce a stand-still agreement with its banks in the coming weeks. An agreement would reportedly allow the company to negotiate the conditions of its debt and avoid breaching its banking covenants.
The source added it was unlikely that Permira would inject any more equity into the company, but that the lenders, which include Citigroup, UniCredit and Mediobanca, would probably not push for a debt-for-equity swap.
Over three quarters of Valentino’s sales are said to come from Hugo Boss, which the company owns 75% of in Germany. The Hugo Boss label provided 90% of the group’s Euro 320.4 million EBITDA last year, however, sales fell five per cent and consolidated earnings dropped two per cent in Q1 2009, according to the FT.
Valentino was bought by Permira in 2007, in a deal valued at Euro 5.3 billion. Last December the firm wrote down its investment in the fashion label, which has been worn by celebrities including Julia Roberts and Nicole Kidman, by more than half.
Permira has reportedly written several of its investments to zero, including Hungarian chemical manufacturer Borsodchem, Spanish clothing retailer Cortefiel, and Gala Coral, the UK chain of bingo halls.
Earlier this month, the firm’s chairman Damon Buffini announced he would be stepping down next year to focus on the firm’s portfolio companies and sourcing new deals.
D.C.