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Bathroom Fixture Maker Acquired By Lender

Creditors could be out millions if Maax Corp. is taken over by its senior lender Brookfield Bridge Lending Fund in a debt-forgiveness deal worth more than $275 million.

MONTREAL (CP) -- Creditors owed $300 million could walk away empty-handed if bathroom fixture maker Maax Corp. is taken over by Brookfield Bridge Lending Fund Inc., its senior lender, in a debt-forgiveness deal worth more than $275 million.

The Quebec-based company, taken private four years ago in a leveraged buyout, said that the sale to the Brookfield fund ''preserves the Maax business and ensures its continuance as a successful competitor in the marketplace.''

''We are securing the future of Maax through this transaction and quite frankly are improving the future of Maax with this transaction,'' CEO Paul Golden said in a conference call with media.

Brookfield is to acquire Maax's assets for the amount owed under the senior secured credit facility -- revised in January to $225 million, plus a $50-million revolving credit line -- and will assume its obligations to customers and suppliers.

Maax, with 2,100 workers at 15 plants in North America and Europe including about 1,000 in Canada, said the transaction will be implemented through a court-supervised process under the Companies' Creditors Arrangement Act.

The transaction isn't expected to have any impact on employees, suppliers or customers, Golden said.

Maax had been put up for sale as the slump in U.S. home construction ravaged its business and made its total debt of about $500 million unmanageable.

The Brookfield group (TSX:BAM.A) that runs the fund is a deep-pocketed conglomerate with $90 billion of assets under management.

Through its advisers, Maax tried to sell its operations. It received 16 firm offers from more than 160 information packages sent to potential buyers.

''At the end of the process Brookfield's debt had not been satisfied so Brookfield agreed to be the acquirer of Maax instead of any other firm.''

Under the proposed agreement, which is subject to the Quebec court's approval, none of the equity owners -- which include one of Ontario's largest public-sector pension plans -- will receive any payments. Brookfield's debt will be converted into a 100 per cent ownership of the company.

Other lenders owed $300 million won't receive anything either.

''In these circumstances, we did everything we could to maximize the value but these investors are in the business of taking risk and in this case there's not enough value to cover all the debt,'' said Denis Aubin, the chief financial officer.

''And given where everybody stands in terms of rank, whatever value we generate has to go first to the senior secured lender and that's how the transaction will occur.''

The deal, which has been approved by the board comprising these owners, will include the U.S. spa division after talks were terminated to sell it to Arctic Spas.

The company, founded in 1969 by Placide Poulin in Ste-Marie-de-Beauce, southeast of Quebec City, was sold for $640 million including debt in June 2004 to a private equity group headed by J.W. Childs Associates of Boston and including the Ontario Municipal Employees Retirement System, which owns 20 percent.

Maax, described as the third-largest supplier of tubs, spas and showers in the United States, lost $180 million on revenue of $411 million in 2007. Its workforce has been reduced by about half since the 2004 buyout.

The court has set a hearing June 26 to consider approval of the takeover by the fund, a creature of Brookfield Asset Management Inc. of Toronto.

Golden said Canadian sales remain strong and the company has plans to growing its market share in the United States.

''Our competitive position has been and remains strong and I think this improves it dramatically and we have very strong financial position going forward.''

The bankruptcy shelter covers only the company's Canadian assets and will not affect day-to-day operations, Maax stated, adding that the Quebec court's initial CCAA order includes a provision for Brookfield to provide $30 million of additional financing.

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