Godfreys has undergone a major balance-sheet restructure that has cut direct obligation debt by 90 per cent, reports The Australian’s Andrew Main (10 January 2012, www.theaustralian.com.au).

Main notes, ‘the company, which was bought by a consortium headed by Pacific Equity Partners and Unitas Capital for more than $300 million in 2006, has been a putative turnaround story that nearly turned into administration late last year.

‘In a deal that appears to have wiped out most of PEP and Unitas’s equity, debt providers such as AMP are understood to have allowed their debt to be converted into a shareholder loan or what is called a “loan to own” process. PEP had reportedly been regularly lifting its equity investment to keep the business, which operates a franchise model in Australia and New Zealand, alive.

‘The restructure means direct obligation debt has been cut from $210 million to $20m, a closer match to earnings for a company that only earned $17m pre-tax in the year to June 30 last year.’

According to Main’s story, the consortium, whose main financiers include Nomura, hedge fund Orchard Capital, fund manager Challenger and Asian hedge fund SC Lowy, tried unsuccessfully to sell the business in mid-2011.

Godfreys’ CEO Tom Krulis is quoted as saying, “The significant reduction of debt levels will assist management and the new owners to refocus the business and materially enhance profitability.”