by Teri Buhl
Most creditors for Victoria PLC, a London based flooring company, have been left in the dark for two weeks after Octus (Reorg) reported loose details on a potential uptier in conjunction with an amend and extend offer was made for its €500 million bond due in 2026.
Sources say most Victoria creditors, which includes a ton of CLO funds, haven’t seen any A&E offers, the company hasn’t approached them with a deal, and that it was US hedge fund based Redwood Capital that came up with the uptier plan. Additionally, Victoria’s newest outside flack at the PR firm Edelman Smithfield has been telling other credit reporters behind the scenes that the company didn’t present this idea.
An uptier is when a company can arrange for new borrowing if it convinces a substantial chunk of existing creditors to rewrite the rules that govern the entire loan in order to permit it. In return for providing that new debt, the favoured creditors often can swap their existing bonds for new notes that give them higher priority to get paid first than other creditors in case of a default.
The instigators
Redwood started a new fund last year dedicated to aggressive liability management exercises in credit names, so it is unsurprising to see them make a move on Victoria. But if Redwood wants to get a deal done, they would need 50% plus majority support so they would have to convince other funds to join their plan. I have seen one news report that thinks Redwood holds 30% of Victoria’s debt.
PineBridge, Bain, Palmer Square, HPS, Alcentra, Carlyle, TPG Angelo Gordon, ICG and Ares are all listed on Bloomberg as owners of the Victoria, which Redwood could approach to join them. Bloomberg’s holders data doesn’t mean the funds are still in the name but I have been told ICG and Angelo Gordon could be aligned with Redwood. Redwood also just participated in the controversial Medical Properties Trust newly issued senior secured bond offering, which was basically an uptier deal funded by a few concentrated holders (like GoldenTree) with a long position in $MPW’s debt.
Will an uptier gather speed?
The math doesn’t exactly work too well though with the current A&E offer. Some recent analyst research has expressed concern over free cashflow, low capacity to dropdown assets and not a great growth outlook for the European building materials market.
This week Denitsa Stoyanova, 9fin’s distressed credit analyst, opined on a possible uptier deal. She believes that if they were to rely on capacity under the covenants they can use only up to £87.3 million, which is insufficient to cover a £500 million bond. In this case they would have to either amend i) the debt covenants (to increase the capacity under the baskets) or ii) the Permitted Collateral Lien definition (to allow for the creation of a super senior priority lien).
Alternatively, Victoria might decide to go for an exchange offer where they could incentivise (basically threaten) any bondholder holdouts with a covenant strip to get the necessary majority to exchange the 2026 notes into new 2028 notes, according to sources who read her report.
But since no one has seen the written details of the deal, credit analysts are unfortunately limited in their analysis. In reality it’s likely Redwood who leaked the A&E deal to Octus to get more attention on it.
Victoria is being advised by Lazard and Latham & Watkins. The bondholders are not organized with advisors to my knowledge, but can confirm that most UK law firms have been pitching them ideas over the last year.
This is not Victoria’s first (LME) rodeo.
The dropdown deal that never was
Last summer/fall I was working on a story with 9fin’s distressed legal analyst Freddie Doust and one of its top distressed credit analysts Denitsa Stoyanova (who actually has a CFA with nearly 2 decades of experience and knows the company). We felt there was no immediate maturity trigger for its August 2026 bond, but it seemed that Victoria was in a rush to refi before its operating performance took a nosedive.
I heard that two funds had gotten together to present an A&E to the company. ICG was one of the names floated working on it but I never fully confirmed who would put up money to do that kind of deal. During this time Rachel Butt, 9fin’s US-based distressed reporter and deputy editor, had also sourced that Victoria had hired Piper Sandler to pitch a dropdown deal. Other pubs dismissed the rumor but Rachel had seen the presentation and trust me it was real. She exclusively reported it in late September 2024, and it caused a huge drop in Victoria’s bond prices the next day. I have always argued against that kind of reporting, which I call “sales lead reporting”, because it’s just scoop oriented without connecting the dots and without thinking through who would or could actually do the deal.
Denitsa had noticed there would be a capacity problem of Victoria’s assets to get a dropdown deal done and wrote, “Whilst it appears there is no built up capacity under the CNI builder basket given consistently negative income, there are all sorts of ways in which the figures can be massaged.”
But 9fin’s editors held back for two days the publication of our excellent covenant and capacity analysis on whether the deal would even work. This left creditors with knee-jerk reactions to sell off. As a result of 9fin’s reporting a few large credit funds and CLO funds told me they sent angry letters to the company in October warning them against a dropdown or they’d become really aggressive. Some suspected that Victoria was advised to pitch a scary drop-down deal to force more creditors to come to the table for a future A&E instead.
Where will new money come from?
Additionally, lawyers and credit funds were asking if the Koch brothers would put more money in during that time and based on people who had spoken with Victoria and the Koch Equity Development fund the answer was a resounding no! Octus also reported two weeks ago that the Koch brothers would not be putting in new money to any A&E offer.
Total preferred equity issued to Koch Equity Development was £225m but has grown to £286.6m as it has a 8.85% PIK dividend, according to 9fin and copies of their PIPE agreement I obtained. From November 2025 (which will be year five of the deal), the dividend will change from a fixed rate to a variable rate of three-month LIBOR plus a spread (8.35% in cash or 8.85% in PIK), and the spread will increases by 1% in each subsequent year up to year nine, then stops increasing. In 2020 the KED PIPE deal was rare for a UK AIM listed company but quite common in U.S. stock deals. PIPE stands for private investment in a public entity. The Koch brothers are a Republican led influential political family.
As of FY 2024, Victoria’s gross financial debt stood at £705.8m, comprising a £150m revolver (of which £10.3m is drawn), €750m of senior secured notes across two series (€500m of 3.625% SSNs due 2026 and €250m of 3.75% SSNs due 2028) and £63.5m drawn under local lines. When you consider debt outstanding under working capital facilities, leases liabilities and preferred equity, the reported statutory gross debt jumps to £1.2bn.
Victoria’s history of fending off critics
Past and current investors I spoke with don’t tend to trust what Victoria and its controversial leader, Geoff Wilding, say about its financial projections or asset values. And it’s mostly down to their conduct. That said there are still some good flooring assets creditors wouldn’t mind getting their hands on in case of a credit default.
I first started covering Victoria at CreditSights/LFI in 2023. At the time their auditor Grant Thornton was struggling to get straight answers and the full accounting records on a small Victoria subsidiary called Hanover. It led to Grant Thorton issuing a qualified audit opinion and warning the company was at risk of material fraud. I reported this with Sandrine Bradley at LFI and the bonds dropped in price. Then time went by and Victoria (not its auditor) announced its full audit had been completed and everything was fine.
Meanwhile Robert Smith, one of the FT’s best investigative reporters has been digging into Victoria’s balance sheet and acquisitions since 2018 and found some red flags. In the fall of 2023 he reported new information about the Karim family and their link with the Hanover subsidiary. Batash Karim (an individual listed as a director of Victoria’s subsidiary) had past criminal records that included violence and involvement with a gang. Batash’s brother, Mohammed Saqib Karim (who goes by Saqib) was also involved with the company and was a prior owner of Ezi Floor with a factory in the English countryside. Ezi Floor was touted by Victoria at the time as a modern manufacturing plant but the below photos appear to show otherwise.
Ezi Floor
Robert Smith reported that “Victoria purchased Hanover in 2021 from Batash Karim, who stayed on as the manager of the carpet distribution business. He is also a director of Hanover Flooring alongside Geoff Wilding, Victoria’s executive chair, who since taking the helm in 2012 has spearheaded an acquisition spree of more than 20 flooring companies.”
Around that time a few whistleblowers approached me with evidence of money laundering at Victoria, which they believed was happening through the Hanover subsidiary. They contacted whistleblowing lawyers to help them present the evidence of fraud to the US Securities and Exchange Commission … But the SEC felt that the US investor base was too small to justify an investigation. Another obstacle was the SEC would have to find internal staff to testify to bring a case that proves scienter (intent to defraud) to secure a 10-b securities fraud charge.
Then they presented the evidence to the UK’s stock regulator, the FSA, and from there it likely sat in front of weak UK regulators who don’t have the experience and skill to bring a case like the SEC can.
The campaign didn’t end there.
A few individuals took their findings to lawyers at Jones Day who have been longtime legal representatives of the Koch brothers and the KED fund (also invested in Victoria) . In order to protect these individuals I am not going to detail the exact dates this occurred but it was in the last few years.
Allegedly when Victoria’s Geoff Wilding found out, he went on the offensive and hired PI’s to find the whistleblowers. According to multiple letters I have reviewed, written by Brown Rudnick (a UK law firm hired by Victoria) these individuals were threatened with legal action if they went public and the harassment continued for a while resulting in silencing these people.
Lawyers at Brown Rudnick and Jones Day declined to talk to me about the event when I questioned them last year. This week, Victoria’s press representative also declined to explain why the company sent the letters or hired Brown Rudnick. Predictably, I received a typical PR blanket statement that my facts were inaccurate without them elaborating. They went silent when I told them that I had documented evidence of their harassment campaign.
Circling back to Hanover, there is interesting new development. Now according to corporate ownership records filed in the UK on January 28, the Hanover asset has been transferred to Batash Karim. Companies House filings say he has at least 75% of the stock and significant control of the company. On top of that in December 2024 a TR1 (significant shareholder) stock market filing for Victoria Plc showed that his brother Saqib had taken his stake in Victoria above 6%. Several market participants speculated that Saqib bought the stock in return for Batash getting Hanover back but I have no confirmation of the economic details of the transaction.
Also in December, Geoff sold his mega yacht, which he had originally bought for over $60 million when Victoria’s stock was flying high. According to merchant shipping records I have obtained it appears Geoff pledged some Victoria stock (though a trust) to secure the boat loan. I have consistently been told Geoff uses Victoria’s stock to get margin loans and if the stock drops too low it can become an issue for him.
In December 2024 Fitch downgraded Victoria PLC to B with a negative outlook citing concern about negative free cash flow for FY25-FY28, high leverage and an increase in refinancing risk in 2026.
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