LONDON — Private equity group Permira gave Valentino Fashion Group a vote of confidence Thursday when it agreed to re-purchase a chunk of the company’s debt from Citigroup.
This story first appeared in the December 18, 2009 issue of WWD. Subscribe Today.
According to industry sources here, Permira and the Marzotto family, which together own VFG, have agreed to pay Citigroup 250 million euros, or $362.5 million at current exchange, for an original debt load worth 730 million euros, or $1.06 billion. The purchase will reduce VFG’s outstanding debts by one-third.
“The papers are signed, and they are expected to complete the transaction by the end of the year,” said a source close to the deal. A Permira spokeswoman declined to comment.
The source said Permira, which bought Valentino two years ago for 5.3 billion euros, believed there was too much debt in the group, and was looking at opportunities to buy it back and cancel it.
The bulk of the outstanding debt came from Permira’s purchase of the group, which has a 100 percent stake in Valentino and a 70 percent share in Hugo Boss.
“Now that they’ve taken steps to deleverage the business, they are more flexible. They can now use the interest they would have had to pay to Citigroup on growth strategies for the brands,” said another source, who requested anonymity.
The buyback has whittled down Valentino Fashion Group’s total debt pile to 1.5 billion euros, or $2.17 billion. The lender banks include Italy’s Mediobanca and Unicredit.