Bain returns for another crack at Metroglass

Bain Capital's investment in troubled Metro Performance Glass is not the first time the private equity firm has been involved in the company.

Stock Takes recalls an affiliate of Bain was a substantial shareholder prior to the Metro Glass initial public offer in 2015.

The shares were held through Sankaty Advisors which had acquired an 11.95 per cent stake in a debt for equity swap back in 2012 when Metro Glass was then known as Metro GlassTech.

Sankaty sold down in the IPO three years later along with fellow lender-turned shareholders, Deutsche Bank and JP Morgan, and private equity firms Crescent Capital Partners and Anchorage Capital.

The float raised $244 million with the shares selling at $1.70 a piece, a far cry from the 40c per share that Bain's Special Situations Asia Fund paid for a 9.4 per cent stake in Metro Glass through on-market trades worth $7m last week.

Bain's entry has added some intrigue as to whether it is positioning for a potential takeover of the struggling glass company or whether it sees it as a turnaround story.

Stephen Bennie at Castle Point Funds is one who struggles to see a quick turnaround after Metro Glass reported a 22 per cent drop in half-year net profit, lowered its full-year guidance and said it won't be paying any dividends as it struggles to turn around its Australian business.

It also highlighted the entry of new competitor APL in the New Zealand market.
"It's tough to look at Metro as a turnaround story as earnings are almost certainly going to go lower in the next two to three years, as residential activity cools in Australia and New Zealand.

"A situation that looks set to be exacerbated by increased capacity and competition in its industry. None of that is pretty but rather alarmingly the market capitalisation of Metro's equity is now less than the debt it owes its bankers."

Bennie thinks the banks may turn the screws on the company to try and raise capital to pay down debt and given where the share price sits that shapes as a brutally dilutive, discounted rights issue.