Complex and Long-running Theatre Hospitals CMBS Restructuring Closes

June 05, 2015

London, UK – Paul Hastings LLP, a leading global firm, announced that the long-running Theatre Hospitals CMBS restructuring, described in the press as ‘arguably the most complex European securitisation restructuring ever’, has closed on 28 May.
Paul Hastings represented Capita Asset Services in connection with the restructuring of the £1.65 billion loan financing, which included a restructuring of the existing swap positions with an approximate value of £600 million. Capita Asset Services acted as Servicer of the £960 million senior loans, held by a syndicate that included two separate CMBS transactions (Theatre Hospitals No 1 plc and Theatre Hospitals No 2 plc) as well as other senior lenders. It was the Servicer’s role to negotiate the position of the senior lenders in the restructuring. The debt was secured by properties leased to BMI Heathcare Limited, which is part of the General Healthcare Group (GHG).

The Servicer, on behalf of the senior lenders, led the restructuring which maneuvered many complex issues, such as:

court directions to clarify Noteholder voting rights for the CMBS;
competition commission investigations relating to the operations of the tenant;
restructuring of “out-of-the money” long-dated swaps (including the conversion of swap mark-to-market into a super senior term loan);
re-negotiation of complex intercreditor provisions relating to the rights of the various classes of lenders; and
obtaining approval for the restructuring through a CMBS noteholder vote from two different CMBS transactions.

Notwithstanding the complexity of the issues confronting this restructuring, a restructuring agreement was reached in December 2014.

As part of the restructuring, Noteholder consent from all classes of Notes from both of the Theatre Hospitals No 1 plc and Theatre Hospitals No 2 plc CMBS transactions was required before the restructuring could be implemented. On 5 May 2015, the Servicer obtained noteholder approval from almost 100% of all classes of Notes, one of the highest results obtained in any CMBS restructuring to date.

“Paul Hastings has either led or been involved with some of the largest CMBS restructurings in Europe,” said lead partner Charles Roberts. “The Theatre Hospitals restructuring has been one of the most complex CMBS restructurings that we have seen in the European market. Our unique experience in this area, coupled with our expertise in real estate finance and restructuring, enabled us to provide tremendous support for Capita Asset Services in seeing the implementation of this successful restructuring.”
Paul Hastings led on the drafting and negotiation of the restructuring agreement that set out the framework for resolving all of the issues in the restructuring. In addition, Paul Hastings led on the drafting and negotiation of the majority of transaction documents that implemented the restructuring.

The Paul Hastings team in London was led by partner Charles Roberts and included partners Michelle Duncan and Arun Birla and associates Ed Bellamy, Natalie Hill,Danielle Hirsch, Ian McKim, Karen Stretch, Jiten Tank and George Weston.

Paul Hastings is a leading global law firm with a strong presence throughout Asia, Europe, Latin America, and the United States. Through a collaborative approach, entrepreneurial spirit, and commitment to client service, the professionals of Paul Hastings deliver innovative solutions to many of the world’s top financial institutions and Fortune 500 companies.