Changing gears

16 January 2008 By Jeffrey Goldfarb Follow @jgfarb

Two mild winters in a row are forcing the buyout firm to restructure ATU, its slumping German auto servicing chain. KKR will probably have to inject fresh equity. Other LBOs are sure to follow suit.

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AutoTeileUnger, a German auto parts retailer and servicing chain, said last week that its November performance was down against budget amid milder winter weather. That followed data from the German tyre makers trade group showing the sector fell by 15% last year compared with an earlier forecast of 5% growth. About a quarter of ATU's revenue comes from winter tyres and related coldweather sales.

Goldman Sachs and Roland Berger were appointed to advise.

Credit rating agency Standard & Poor's placed ATU's B longterm corporate credit rating on CreditWatch with negative implications. S&P added that it was concerned ATU would not be able to comply with financial covenants under its secured senior facilities.

ATU said it would seek to strengthen its capital base with the support of its main shareholders, the buyout firms Kohlberg Kravis Roberts. and Doughty Hanson. KKR bought control of ATU from Doughty in 2004 for E1.5bn.

ATU's loans were trading at about 82% of face value in the secondary market. Average secondary bids on Europe's top 40 leveraged loans fell to a low of 95.93% of face value on Wednesday, their lowest level since 2001, according to data from Reuters LPC.

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