(Bloomberg) — Creditors including Beach Point Capital Management and Monarch Alternative Capital will take a minority stake in a Spanish digital lender owned by Varde Partners as part of a debt restructuring deal.
The two funds are leading a group of bondholders that will take a 40% stake in a Varde’s special purpose vehicle, which owns almost half of WiZink Bank SA, according to people familiar with the matter, who asked not to be named because it’s private.
Varde and bondholders will inject 250 million euros ($284 million) to recapitalize the bank under a restructuring deal announced on Thursday. They also agreed to cut debt issued out of the SPV, called Mulhacen, by 45% and extend maturities by three years to 2026, the lender said. The payment-in-kind bonds were sold in 2018 to fund Varde’s acquisition of the 49% of WiZink it didn’t already own.
The agreement surprised investors that weren’t part of the negotiations, spurring the SPV’s 537 million euros of bonds to drop 26 cents on the euro to 55 cents since Thursday, according to prices compiled by Bloomberg.
The deal came almost two years after the Spanish supreme court ruled in favor of customers alleging the bank had charged usury rates in its revolving credit card business. That led to a number of legal claims, and prompted rating agencies to cut the unit’s credit grade deep into junk.
The company told bondholders on Thursday that the number of claims is now declining, and statute of limitations will further reduce them by the third quarter, according to separate people familiar. WiZink expects to report a 36 million-euro loss in 2021, they said.
Representatives for Beach Point and Monarch declined to comment. A spokesperson for Varde declined to comment beyond the terms of a statement sent to bondholders. An official at WiZink said that earnings haven’t been audited yet and may change.
(Updates with names of bondholders from first paragraph.)
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