June 5, 2012 / 4:46 PM / 6 years ago

Centerbridge to buy Culligan in debt deal-sources

* Culligan says has support for debt restructuring

* Centerbridge to swap debt for equity, put up cash-sources

* Culligan to issue $355 million in new debt-sources

By Caroline Humer

NEW YORK, June 5 (Reuters) - Private equity firm Centerbridge Partners is close to a deal to buy water filtration company Culligan International Co. through an out-of-court debt restructuring, a move that will allow the water filtration company to avoid bankruptcy, according to people involved in the sale.

Culligan, which is owned by Clayton, Dubilier & Rice, has been unable to renew its more than $700 million in debt, according to these people, who were not authorized to speak publicly. Some of the debt is related to a $375 million special dividend paid in 2007 to equity holders.

Centerbridge will put up about $90 million in cash and swap debt for equity in return for most of the company’s stock, the sources said. Culligan will use $100 million of its cash to pay down debt, the sources said, leaving the new company with about $355 million in debt plus a revolver loan.

Culligan, known for its advertisements starting in the 1950s that featured a cartoon housewife beckoning “Hey Culligan man!”, hired restructuring advisers earlier this year and was considering options including bankruptcy or a sale, sources told Reuters in March.

The Rosemont, Illinois-based company said it has already received nearly 100 percent support from its holders of first and second-lien debt for the restructuring.

“We are working to conclude the restructuring, which will substantially strengthen our balance sheet and position Culligan well for the future,” a Culligan spokeswoman said in an e-mailed statement. “We look forward to working with Centerbridge Partners as we continue to strengthen and grow the Culligan business for years to come.”

Centerbridge declined to comment.

A Clayton Dubilier spokesman said by email that there is “good progress toward a favorable, negotiated sale of the company.” Clayton Dubilier bought the company in 2004 from France’s Veolia for $610 million, including $200 million in equity.

Culligan’s new debt will be owned in part by Centerbridge and Angelo Gordon, the sources said. Angelo Gordon was not immediately available for comment.

Responses to the restructuring proposal are due on June 8, and the deal would be able to close afterward, the debt restructuring sources said. Culligan also proposed a prepackaged bankruptcy, they said.

Terms of the deal were made public in a $575 million lawsuit filed last week in New York state Supreme Court in Manhattan by a group of Culligan dealerships suing over the 2007 recapitalization and restructuring.

The dealers, who are shareholders in the company, will have their stake in Culligan cut to 0.16 percent from 7.5 percent with the restructuring, the lawsuit sad. They say that the company’s recapitalization put too much debt on the company and “left Culligan in financial ruin.”

Clayton Dubilier, Centerbridge and Culligan declined to comment on the lawsuit. (Reporting By Caroline Humer, additional reporting by Nick Brown and Nate Raymond; editing by M.D. Golan)

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