Service King nears out-of-court deal to ease debts
Collision repair MSO Service King is nearing an out-of-court deal to ease its debt load ahead of a looming bond maturity due to rising costs and labor shortages, according to Bloomberg.
The article states the proposal calls for bondholders, led by Clearlake Capital Group, to take control and inject around $100 million,
Clearlake, based in Santa Monica, Calif, and Service King’s majority owner, Blackstone Inc, based in New York, declined to comment. Dallas-based Service King and minority shareholder Carlyle Group Inc. didn’t respond to messages, according to the article.
Bloomberg says warnings of a cash crunch emerged during last year’s third quarter when the company maxed out its sources of credit and got a new $15 million loan from its sponsors to support operations.
Repair work sagged during the pandemic as lockdowns kept people off the roads. While demand has recovered, Service King has struggled to obtain auto parts and get mechanics back to work.
The talks have become urgent as the deadline approaches to repay Service King’s debts. According to the article, about $375 million of unsecured notes mature in October, and the company invoked a 30-day grace period after missing the April 1 interest payment. Service King is required to cut its bonds outstanding to less than $135 million by July 1 or a $775 million term loan could become due.
The article mentions Service King opened its first outlet in 1976 and now operates in 24 states and the District of Columbia while Blackstone took a majority stake in 2014.
Service King had $75 million of restricted cash to repay its notes. The $775 million term loan due December 2025 is quoted at around 92 cents, according to Bloomberg. The 7,875 notes due in October trade around 103 cents.
Bloomberg notes S&P Global Ratings downgraded Service King to CCC- from CCC on March 8, reflecting uncertainty over the company’s earnings recovery and increased risk of a default.
Read the full article here.