The relationship between MPT and it’s long bondholders has been a game of one-up-manship for nearly a year now. Creditor groups have formed, advisors hired and fired (Evercore & Paul Weiss), and money wasted trying to get the company to engage in refi talks but MPT refused to bend. GoldenTree even tried their own one off priming offer over the last year but failed because MPT’s leadership keeps with the line that their bonds are ‘investment grade’. But now with a rush to convince new and existing bondholders to buy into a secured new issue, at what many consider too low of a coupon, a few of the most aggressive funds in the global distressed debt market, who are long MPT bonds, have gotten together to finally try and force MPT into restructuring talks that could prime other bondholders.
A point of resistances in refi talks comes from MPT’s bank lenders who I previously reported had been asking for more cash sweeps and secured assets. A source familiar with the talks said any refi suggestions that include the investors in the RCF not being paid first is a roadblock because the bank lenders know they can call in a covenant default via the Unsecured Leverage Ratio or their Tangible Net Worth covenant after impairments are made; so why give up the terms they have now that make them structurally senior to everyone else.
In the meantime since Tuesday, Goldman Sachs and MPT have been running their own private calls with investors and held a non-deal roadshow that some called a waste of time because of the lack of transparency and future revenue predictions MPT keeps spinning with its creditors without explaining capex loans or expenses. MPT won’t even disclose what assets they would put up as collateral, according to sources who spoke with the company.
All of this frantic rush to get capital is to starve off a liquidity crisis after MPT drew down around $1.1 billion from their RCF, according to sources, to pay off a term loan this month. Now MPT has to pony up another $500mn in March for a unsecured bond maturity and appear to resist expensive financing counteroffers with coupons over 10%.
None of the funds/companies involved in this story gave me anything worth reporting as a comment.
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