Allegro buys controlling stake in New Zealand’s Carpet Court

The GP will restructure and recapitalize Carpet Court, making the business free of bank debt on completion of the deal. Allegro did not disclose the value of the transaction, stating only that it would put in a place a three-year growth strategy including the roll-out of a new store format and continued investment in centralized warehousing and distribution. There are currently 60 outlets nationwide.

The existing management team and staff members will remain in place. All assets will be transferred to a newly-established company called Carpet Court New Zealand Holdings, which will be chaired by Allegro co-founder Chester Moynihan.

The deal will see Lincoln Capital Partners' equity position in Carpet Court wiped out. Rodney Martin, executive director at Lincoln, told Stuff.co.nz that, although the business was not in financial difficulty, lender Westpac lost patience with the company because profits were not increasing as fast as hoped.

Allegro recently closed its second fund at A$180 million ($139 million), with Moynihan expecting to see plenty of deal flow from domestic banks seeking alternative solutions to pushing distressed companies into insolvency. Banks are reluctant to declare these companies insolvent because of the job losses - and reputational damage to their brands - that may result.

"They don't want to be seen to be quickly pulling the trigger to push businesses into receivership when they are struggling," he told AVCJ. "The workout areas of banks talk to us about buying their debt or refinancing businesses. It's not just about capital but also our turnaround expertise."

Allegro focuses on mid-market businesses in Australia and New Zealand with revenues of more than A$50 million that require investment of A$10-50 million. Prior to the Carpet Court deal, the GP had deployed A$25 million from Fund II, joining a consortium that bought distressed Australian bus bodybuilding business Custom Bus, and acquiring Great Southern Rail, which was divested as a non-core asset by UK-based Serco.

Allegro was set up in 2004 and assumed management of its first fund in 2008 as a replacement GP. This was the A$300 million ABN AMRO Capital Australia Fund II, which fully committed but every single asset was in distress. Allegro spent two years recovering value from the portfolio and, based on the reset value, has generated an IRR of 25%.

The firm has also been operating on a deal-by-deal basis, picking up a portfolio of distressed loans from Bank of Scotland International (BOSI) in partnership with KKR's special situations division and also being brought by creditors as a replacement sponsor for I-Med, Australia's largest private diagnostic imaging network. The business was bought by EQT Partners last year.

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• Topics
• Buyouts
• Credit/Special Situations
• Australasia
• Consumer
• buyout
• Consumer
• Distress
• Allegro Funds
• New Zealand
• Australia