Debt purchase predicted to grow

THE TACTIC of investors buying bank debt to gain control of distressed companies is set to increase, a leading insolvency expert has predicted.

Tom Kavanagh, a partner in Kavanagh Fennell, acted as receiver for the Irish operations of Calyx Group, which was forced into receivership on September 3rd after Better Capital bought its debt from Anglo Irish Bank.

Calyx, a diverse group of technology companies with operations in Ireland and Britain, had been struggling with debts of more than €100 million. Better Capital, run by the former boss of British buyout firm Alchemy Partners, Jon Moulton, is believed to have bought the debt for just €10 million. By purchasing the debt it effectively controlled the sale process.

“Better Capital’s decision to purchase the Calyx Group’s debt from Anglo Irish Bank is unique in that an outside investor purchased a distressed business’ outstanding debts, allowing it to quickly dispose of assets and ensure that the future of the business was secured,” said Mr Kavanagh.

Better Capital has acquired the British operations of Calyx and its Irish software business, which sold finance software internationally.

The remaining Irish services business, which has about 7,500 customers, has been acquired in a management buyout led by David Hargaden, former Calyx chief financial officer, and Declan Hughes, group general manager of Calyx Ireland. It will be rebranded as Unity Technology Solutions.

The buyout is backed by private investors and leaves Unity debt-free and fully-funded for the next 18 months according to Mr Hargaden, who will act as executive chairman.

Mr Hughes has been appointed chief executive. In total about 150 jobs at Calyx have been rescued due to the buyout.

While at Alchemy Mr Moulton backed Calyx being taken private in 2007, but he is understood to have made losses of over €30 million on the transaction.