Razor company eyes bankruptcy, sale to UBS-sources

* American Safety Razor owned by PE firm Lion Capital

* UBS among largest debt holders

* Company tripped debt covenant

By Tom Hals and Caroline Humer

WILMINGTON, Del./NEW YORK, June 25 (BestGrowthStock) – One of the
world’s leading makers of shaving razors may file for
bankruptcy as soon as next week, with a plan to sell the
company to Swiss bank UBS AG (UBSN.VX: ), its primary lender,
according to sources close to the talks.

Privately-held Personna American Safety Razor Co, which was
founded in 1875 in Brooklyn, has given junior lenders and
creditors until the end of the month to come up with a better
offer for the company, according to two sources with direct
knowledge of the negotiations.

American Safety Razor ran into trouble early this year
after it lost a contract with Wal-Mart Stores Inc (WMT.N: ) and
sales slowed. It first missed a debt covenant in the last
quarter of 2009 and has been negotiating with its lenders — a
group that includes Apollo Investment Corp (AINV.O: ) — but
faces a waiver deadline of June 29.

Lion Capital, a European private equity fund, bought
American Safety Razor for $625 million in 2006 from
Boston-based private equity firm J.W. Childs Associates. J.W.
had taken the firm private in 1999 for $173 million.

Lion Capital declined to comment.

The razor company, based in Cedar Knolls, New Jersey, did
not return several phone calls requesting comment.

In addition to razor brands such as Matrix3, M5Magnum,
Solara and Mystique, the company makes single-edged blades used
in utility knives and surgical tools. Its shaving razors are
typically sold in drug stores such as Walgreen Co (WAG.N: ) under
the stores’ own brand.

Lion Capital typically invests in high-profile consumer
products such as Jimmy Choo luxury shoes and British cereal
brand Weetabix. It is also a lender to American Apparel Inc
(APP.A: ), which has just wrapped up its own debt renegotiations.
For details, see [ID:nSGE65N0G3]

JUNE 29 IS DEADLINE

Absent last-minute proposals from either of the two groups
of junior lenders, American Safety Razor will file for
bankruptcy with a plan to run an auction of the business in
bankruptcy court, two of the sources said.

UBS will act as the stalking horse in the auction, several
of the sources said. A stalking horse bidder establishes a
floor for an auction process. The Swiss bank will make a credit
bid, which is typically a bid for what it is owed, sources
said.

UBS declined to comment.

Sources said UBS is the largest holder of its senior debt
of about $250 million, which is nearly half of the company’s
total debt, pegged by Standard & Poor’s at $540 million as of
last fall.

The maker of private label disposable razors has about $175
million of second-lien debt and about a $55 million mezzanine
loan. The market value of the senior loan is about $235
million, while the second-lien loan is quoted at 18 cents to 24
cents on the dollar, putting its value at about $37 million.

Apollo Investment Corp was the lender on the company’s
mezzanine debt, with a par value of $57.3 million, which it
said on a conference call in late May has been written down to
$6.9 million. Apollo Investment Corp’s assets are managed by an
investment management unit of private equity firm Apollo.

Patrick Dalton, the president of Apollo Investment Corp,
said during last month’s call that the writedown reflects its
expected outcome for the loan.

“To the extent there’s something more than that, that’s
great, but we can’t over promise,” Dalton said on the call.

But a bankruptcy filing will likely not end the negotiation
and second-lien lenders would still be able to propose an
alternative plan.

American Safety Razor has been under pressure in the weak
economy from larger, better financed rivals and suffered a
serious blow this year when Wal-Mart, the largest U.S.
retailer, dropped the company’s razors, which it sold as
Personna.

Another source said Lion Capital had called in
restructuring advisors late last year to advise it on
operational changes at the razor company, including a shift to
mass market shaving products such as those sold at Wal-Mart and
away from lower volume, premium industrial blades.

Investment

(Reporting by Caroline Humer; editing by Andre Grenon)

Razor company eyes bankruptcy, sale to UBS-sources