The case illustrates the acquisition of a group through a leveraged buyout operation (LBO) and its unwanted takeover of the junior bank creditors outcome following covenant breaches.
In 2008, Lion Capital, a British private equity fund, acquired through a LBO Foodvest group (renamed Findus group) previously held by the private equity fund CapVest for a price of more than £ 1.1b. Financing syndication of the LBO is accompanied by traditional banking covenants. In December 2010, the group experiences for the first time a covenant breach. Another covenant breach occurs in March 2011. December 2011 and March 2012 covenant breaches caused the restructuring of the debt of the Findus group and its takeover by the junior creditors.
The case illustrates how changes in the economic environment, funding constraints via financial covenants and the underestimation of financial risks may affect drastically a LBO success.