Constellis Holdings LLC, a security contractor backed by Apollo Global Management Inc., is in talks with creditors on a deal to restructure its $1 billion of debt, according to people with knowledge of the discussions.

The firm, which has provided some security services around the U.S. embassy complex in Iraq — the site of anti-American protests this week — is seeking to restructure out of court. But it’s also considering a pre-negotiated bankruptcy filing, said the people, who asked not to be identified because the matter is private.

Reston, Virginia-based Constellis entered into a forbearance agreement with a group of lenders after missing a principle payment due Dec. 31 on an $872 million loan, the people said. Under the agreement, the company’s operations globally will continue as debt talks progress.

The company, which bought what was once Blackwater, the private-security firm founded by Erik Prince, has struggled as the U.S. scaled back operations overseas. Domestic work came with lower margins and the company has been bogged down with start-up costs on new contracts, S&P Global Ratings said in a report in November as it cut the company’s credit grades.

New Loan

Apollo bought Constellis in 2016 after a number of restructurings and name changes.

Constellis “plans to continue to operate our business, execute our business strategy and meet our obligations to our stakeholders,” the company said in an emailed statement.

The firm said it recently closed on a $110 million delayed-draw credit facility provided by some of its existing lenders. Constellis also said the forbearance agreement with lenders “provides additional time and flexibility to continue discussions around de-levering and recapitalizing our balance sheet.”

Constellis’ new loan requires that the company present a debt restructuring plan by Feb. 4, S&P said Thursday.

The loan will be used to support business and operations during the proposed restructuring, the people with knowledge of the matter said. The talks are still in flux and plans could change, they said. Once the restructuring is complete, Apollo would give up its majority equity position and hand the keys to existing lenders, who would swap their holdings for shares of the restructured company.

A representative for Apollo didn’t immediately comment.

Embassy Security

Constellis operates in 30 countries and provides risk management, security, humanitarian, training and operational support services to government and commercial customers, according to its website.

That work has included security related to individuals departing from and arriving at the U.S. embassy in Baghdad, according to one of the people. Dozens of Iraqi militiamen and their supporters this week stormed the complex to protest deadly U.S. airstrikes against their Iranian-backed force as President Donald Trump blamed Tehran for instigating the protest, and U.S. officials faulted Iraqi security forces for failing to secure the embassy’s perimeter.

The company’s $725 million first-lien loan due in 2024 trades at less than half its face value, while a $215 million second-lien loan is quoted at around 10 cents on the dollar, according to prices compiled by Bloomberg.

Constellis is working with investment bank PJT Partners Inc. while the group of lenders enlisted law firm Gibson Dunn & Crutcher LLP and investment bank Houlihan Lokey Inc., the people said.

A representative for PJT didn’t immediately respond to messages seeking comment, while a spokesman for Gibson Dunn didn’t immediately provide a comment. Houlihan declined to comment.

 

Source: Bloomberg

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