Imperiled Realogy taps Icahn

It looks like the fixer-upper that billionaire investor Leon Black bought in real estate company Realogy won’t be foreclosed on just yet.

The company behind such big names as Century 21, Coldwell Banker and Corcoran Group, came thisclose to defaulting on its senior debt, but thanks to a deal struck with billionaire Carl Icahn, Realogy was able to pay down its senior loans and give itself some breathing room.

Realogy this week said it raised $515 million in new loans, with Icahn representing 30 percent of that money. It plans to use $365 million of the proceeds to reduce senior debt.

The company’s senior debt had required that Realogy’s debt load be no more than five times its cash flow, but as of the end of June, the company was slightly above that threshold. What’s more, a weak housing market has cut into cash flow, making the need to pare down the senior portion all the more urgent.

Black’s Apollo Management bought Realogy in a highly leveraged, $7.7 billion buyout in April 2007, but the weak credit markets and the mortgage crisis have helped the company to stay afloat.

Icahn earlier this year bought $311 million in Realogy loans at roughly 40 cents on the dollar, and under the deal announced this week Icahn is selling $91 million of that back to Apollo at about double what he paid, according to a source familiar with the matter.

On top of that, Icahn is swapping $220 million of the junior debt he holds for $150 million of newly issued notes that are more secure and pay a higher interest rate.

Long-term, Realogy still faces problems. The debt-to-cash-flow ratio is tested every quarter, and starting in April 2011, the ratio falls from 5 to 4.75.

What’s more, Realogy has only cut its overall debt by $70 million, leaving it on the hook for $6.3 billion that now commands a higher interest rate.

Apollo and Icahn declined to comment. Realogy declined to comment beyond clarifying what was in publicly released financial statements.