Blackstone’s Service King Nears Out-of-Court Deal to Ease Debts
Blackstone’s Service King Nears Out-of-Court Deal to Ease Debts
(Bloomberg) -- Auto collision repair company Service King, suffering from rising costs and labor shortages, is nearing an out-of-court deal to ease its debt load ahead of a looming bond maturity, according to people with knowledge of the situation.
The proposal calls for bondholders led by Clearlake Capital Group to take control and inject around $100 million, said the people, who asked not to be identified because the talks are private. Clearlake, based in Santa Monica, California, and Service King’s majority owner, New York-based Blackstone Inc., declined to comment. Dallas-based Service King and minority shareholder Carlyle Group Inc. didn’t respond to messages.
Warnings of a cash crunch emerged during last year’s third quarter, when the company maxed out its sources of credit and got a new $15 million loan from its sponsors to support operations.
Repair work sagged during the pandemic as lockdowns and work-from-home kept people off the roads. While demand has recovered, Service King has struggled to obtain auto parts and get mechanics back to work, the people said. Management is focused on ways to improve production out of fewer employees, Chief Executive Officer David Cush told trade publication FenderBender on Feb. 17.
The talks have become urgent as deadlines approach to repay Service King’s debts. About $375 million of unsecured notes mature in October, and the company invoked a 30-day grace period after missing the April 1 interest payment. Service King is required to cut its bonds outstanding to less than $135 million by July 1, or else a $775 million term loan could become due.
Service King opened its first outlet in 1976, and now operates in 24 states and the District of Columbia, according to its website. Blackstone took a majority stake in 2014.
As previously reported, the company had $75 million of restricted cash to repay its notes. The $775 million term loan due December 2025 is quoted at around 92 cents, according to Bloomberg data, while the 7.875 notes due in October trade around 103 cents.
S&P Global Ratings downgraded Service King to CCC- from CCC on March 8, reflecting uncertainty over the company’s earnings recovery and increased risk of a default.
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