DEBT-laden waste collection company Biffa has been seized by its lenders after the private equity-owned group struggled to find a buyer.
In return for a majority stake, the lenders will invest £75m in new recycling and energy from waste technology and more than halve the firm’s £1.1bn debt pile to £520m.
Biffa chief executive Ian Wakelin said the deal with lenders Angelo Gordon & Co, Avenue Capital Group, Babson Capital Europe and Sankaty Advisors would provide long-term financial stability to the company.
Biffa, which employs around 6,000 bin workers and has household collection contracts across the UK, was saddled with large loans when it was taken over by three investment firms - Montagu, Global Infrastructure Partners and the private equity arm of Halifax Bank of Scotland in 2008.
Its debt woes have been compounded by the economic downturn which has hit the waste industry as waste volumes decline.
Increasing taxes for landfill have also hurt the industry, and Biffa now plans to invest in more recycling infrastructure.
Ian Wakelin, Biffa chief executive, said: “We are delighted to announce this important milestone towards the financial recapitalisation reaching a successful conclusion.
“The recapitalisation will provide the company with significant new investment, bring long-term financial stability to Biffa, and provide an excellent platform to move forward as we grow and develop the business further.”
This year Biffa’s owners put the business up for sale but the firm’s lenders rejected a £520m bid from a consortium led by Chinook, a recycling specialist, in August.
The company was also vulnerable because it was reliant on industrial waste, which accounts for 80% of earnings, and has failed to shift from landfill to recycling services quickly enough.
Biffa was founded more than 100 years ago and is the UK’s second-largest waste collector.
Based in High Wycombe, Buckinghamshire, it collects around four million tonnes of waste a year from around 75,000 industrial and commercial customers and one million households.
Biffa has contracts with local authorities including Portsmouth city council, East Hampshire district and Winchester city council, and the Isle of Anglesey county council
The group was spun off from Severn Trent in 2006, although it started as a haulage business collecting waste from coal-fired power stations in the London area. The company said it planned to complete the debt-for-equity swap with lenders early next year. It is thought the existing private equity owners will see their stakes wiped out.