Private Credit Firms to Swap Debt for Equity in Stressed 48Forty

Private lenders are poised to take control of pallet company 48Forty Solutions, about a year after providing $1.75 billion in debt to support Summit Partners’ acquisition of the business, according to people with knowledge of the matter.

A group of lenders, including Antares Capital, is preparing to take equity in 48Forty as part of a restructuring proposal scheduled to be completed by the end of the year, said the people, who asked not to be identified discussing private information. Other lenders include KKR & Co., BlackRock Inc., sources said. and Carlyle Group Inc. It is located.

The deal would eliminate about $1 billion of debt on 48Forty’s balance sheet, with lenders swapping debt for a stake, the sources said. As part of the offering, lenders including Antares will inject approximately $75 million of new debt into 48Forty.

Representatives for Antares, KKR, BlackRock and Carlyle declined to comment. 48Forty and Summit did not respond to requests for comment.

In cases where borrowers are struggling with their obligations, private lending firms are replacing debt positions with equity stakes more frequently to avoid losses. While swaps can produce positive results, they also offer more unpredictable returns than direct loans, which are designed to provide stable income over time.

Lenders proposed a debt restructuring for 48Forty earlier this year. The company, which was already paying most of the interest on its in-kind debt, stopped paying interest in August, according to sources.

FS KKR Capital Corp., a fund jointly managed by KKR and Future Standard, reduced the value of a loan to 48 cents on the dollar in the third quarter, down from about 86 cents on the dollar a year ago, according to a filing.

Plans to cut costs along with the restructuring could include closing multiple pallet recycling facilities, but no decisions have been made on the closure, sources said. 48Forty, which provides recycled wood pallets and pallet management services throughout the U.S. and Canada, currently has 73 facilities, according to its website.

The lenders also want to appoint a new board of directors for the company, sources said. Antares and KKR will each have two appointments, Carlyle and BlackRock will jointly agree to one appointment, and the senior lenders will all agree to another appointment. The last board seat will be reserved for the company’s chief executive officer.

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