Klöckner Pentaplast is currently facing a severe cash flow crisis
In the heart of Rhineland-Palatinate, Klöckner Pentaplast, Europe's largest producer of films for pharmaceutical and food packaging, is grappling with an acute liquidity crisis. The company, with a workforce of 5,600 and annual revenues of €2 billion, is under the majority ownership and financial control of Strategic Value Partners, a private equity firm that acquired the company in 2012 as part of a financial restructuring deal.
The company's debts, weighing heavily on its operations, stem from three takeovers by financial investors. According to S&P Frankfurt analyst Lina Sanchez, the group's debt burden relative to its free operating cash flow remains very high, which could undermine the refinancing prospects of these debts. This concern is further escalated by the credit rating agency S&P Global Ratings, which has assigned a negative outlook to Klöckner Pentaplast's 'CCC-' rating.
The liquidity crisis threatens the impending agreement with creditors on refinancing its billion-dollar debts. Strategic Value Partners had planned to provide €75 million in equity and €200 million in new loans to support the refinancing. However, the sufficiency of this funding is controversial among creditors.
The crisis has led to severe payment difficulties within management circles, with €79.4 million in invoices currently outstanding. This has not gone unnoticed by suppliers, who are limiting their deliveries, leading to some orders not being fulfilled. The debt titles will fall due in the year 2026, posing a potential refinancing challenge.
In an effort to navigate through this crisis, Klöckner Pentaplast is making changes to its structure. The PHD (Pharma, Health & Durables) and FP (Food Packaging) divisions are being made more independent, and the holding structure is being streamlined. The HR and procurement departments are being fully transferred from the corporate level to the divisions.
Klöckner Pentaplast's advisors include Kirkland & Ellis and investment boutique PJT Partners, while law firms Gibson Dunn and Hengeler, as well as investment bank Houlihan Lokey, are acting on behalf of the senior creditors. The company is urgently seeking fresh capital from its private equity owner, Strategic Value Partners, to continue operating.
The goal at Klöckner Pentaplast is to reduce costs and make the company easier to sell. Only CFO Marc Rotella and CEO Roberto Villaquiran remain on the corporate board, with the latter also serving as the head of the profitable pharma division. The company's future remains uncertain, but it is clear that drastic measures are being taken to ensure its survival.
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