Houlihan Lokey Advises OQ Chemicals

Transaction: OQ Chemicals

Houlihan Lokey is pleased to announce the successful and fully consensual out-of-court restructuring of OQ Chemicals International GmbH (OQC or the company), which closed on September 18, 2024. The restructuring also comprises the raise of a €75 million-equivalent super senior bridge financing from a group of term loan and RCF lenders.

OQC, headquartered in Germany, is a manufacturer of oxo intermediates and oxo derivatives such as alcohols, polyols, carboxylic acids, specialty esters, and amines, ultimately owned by the Oman Investment Authority (the shareholder). The company’s products, manufactured in production sites in Germany, the United States, China, and the Netherlands, have a wide range of uses, including coatings, lubricants, cosmetics, pharmaceutical products, flavourings, fragrances, printing inks, and plastics. In fiscal year 2021, the company benefited from a robust global upturn in the chemicals market, achieving an EBITDA of €340 million. However, in the following years, OQC’s financial performance was adversely affected by volatile market prices, high stock levels, and declining demand due to the global destocking of chemical inventories, resulting in a reduced EBITDA of €136 million in fiscal year 2023.

Due to a lack of shareholder support that would have enabled a refinancing of its existing capital structure, with the RCF maturing in July 2024 and term loans maturing in October 2024, the company engaged with an ad hoc group of existing term loan lenders in March 2024. This stabilised the situation by (i) agreeing on necessary amendments to the credit agreement and deferring interest payments and (ii) proactively engaging with suppliers and trade creditors. In May 2024, Hans-Joachim Ziems was appointed as CRO, with Elmar Geissinger from the Ziems & Partner team being appointed as CFO in July 2024. After a period of negotiations, the company and its creditors entered into a restructuring support agreement. The initially envisioned U.K. Scheme of Arrangement process to implement the transaction was withdrawn due to high consent levels for the proposed deal. Instead, OQC ran a two-stage consent request, asking lenders to agree to a snooze provision for 10 business days before seeking consent for the deal. This approach enabled the company to achieve the 100% consent threshold required to implement the transaction consensually.

Houlihan Lokey’s Debt Capital Markets team was initially engaged by the company in the summer of 2022 to assist with refinancing its term loans and RCF. As a contingency measure, the company subsequently engaged Houlihan Lokey’s Financial Restructuring team.

The restructuring transaction comprises:

  • The securing of a €75 million-equivalent super senior bridge financing from a group of term loan and RCF lenders, backstopped by an ad hoc group of term loan lenders;
  • An extension of the maturities of the existing €33 million RCF as well as €555 million and $478 million term loans to December 2026; and
  • The launch of an M&A process to sell the company, aiming for a bid that would allow for full par recovery for the lenders.

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