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Thursday, 14 October 2010

Endless Plans New Fund; Plenty of targets Out There?

Yorkshire based Endless Group announced that it will shortly be raising a new buyout / turnaround fund of £300m.

Interesting to note that Endless is receiving around "500 approaches a year from organisations looking for investment, from which it might make six or seven decisions on funding".

We forecast that the number of companies looking for new funding will rise sharply in the next 12 months, many bank and private equity backed firms are "zombies" or living dead. Many have broken bank covenants, cannot refinance or even service their debts, but the banks are continuing to avoid the haircut that is patently needed.

KSA has looked at several such companies this year. The most interesting example was a professional services firm with £60m sales, probable enterprise value of £10-12m and bank debt of £66m. This included a unsecured £28m PIK note. Does the bank seriously believe that the PIK (payment in kind) note will be repaid in the event of a sale?

We suggested a debt restructure and sale of the company, but the bank (LTSB) was having nothing to do with it.

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