Permira Debt Managers completes debt-for-equity swap for Paperchase

Paperchase has completed a debt-for-equity swap with incumbent lender Permira Debt Managers taking the keys to the business from owner Primary Capital.

The transaction was executed via a pre-pack administration sale in the U.K. PwC was last week instructed as administrator to sell the U.K. stationery firm to a newly incorporated company, Aspen Phoenix NewCo, an entity ultimately controlled by Permira Debt Managers, or PDM.

PDM has been a lender to Paperchase since 2015. At the time, the direct lender provided a £32 million six-year term loan as part of a refinancing, while Lloyds Banking Group provided £18 million of capex, revolving credit and ancillary facilities.

In 2019, Paperchase completed a company voluntary arrangement in the U.K., which is a process used to renegotiate rent and real estate terms. This process allowed Paperchase to switch to turnover-based rent payments.

Hit by lockdown restrictions last year to curb the spread of COVID-19, Paperchase's revenue came under pressure, and PDM provided further funding to the group in the summer of 2020.

Following last week's debt-for-equity swap, Paperchase has no cash-paying debt on its balance sheet, according to sources.

The deal will see up to 90 of the chain's 127 stores retained by the new owner.

Primary Capital acquired Paperchase from book retailer Borders in 2010, for £30 million. It subsequently tried to sell the company in 2014, mandating PwC and Finaco in the U.S. to undertake a strategic review in response to interest from other sponsors, but the process was pulled after bids came in below Primary's valuation expectations.