Vivarte in talks with lenders over debt options

LONDON - Private equity firm Charterhouse is considering a range of options to tackle the 2 billion euros ($2.71 billion) debt of French clothing retailer Vivarte , banking sources said on Thursday.

Vivarte, which was bought by Charterhouse in 2007 backed by leveraged loans totalling 3.43 billion euros, has been hit by an unfavourable economic and consumer environment in France and previously breached its loan covenants.

Options to manage Vivarte's debt include proposals to inject fresh equity, use the cash on its balance sheet to repay lenders and adjust covenants to give the struggling company more headroom, banking sources said.

Charterhouse declined to comment and Vivarte was not immediately available to comment.

Charterhouse has discussed injecting 25 million euros of fresh equity into Vivarte. Some lenders however said that a larger equity injection of up to 150 million euros is required, banking sources added.

Vivarte has around 600 million euros of cash on its balance sheet, part of which could be used to repay lenders which chose not to extend the maturity of their debt when asked in 2012, banking sources said.

Another option is to give Vivarte more headroom on its loan convenants in return for increasing interest margins on the existing loans, the sources said.

With 600 million euros of cash on Vivarte's balance sheet, the company does not need a full debt restructuring as it is able to meet debt repayments for the next three years.

Charterhouse is in discussions with its lenders to try and come up with a long term solution to make Vivarte's debt pile easier to manage, the sources added.

Vivarte's term loans were tradng around 90 percent of face value on Europe's secondary loan market while its second lien loans were trading at distressed levels of around 64.5, according to Thomson Reuters LPC data. ($1 = 0.7392 euros) (Editing by Tessa Walsh)