RLPC-UPDATE 1-HeidelbergCement in loan refinance talks-sources

* HeidelbergCement seeks to refinance/extend maturing loans

* Interest margin hiked to 425 basis points from 65 bp

* Larger medium-term refinancing anticipated

(Adds context, background and detail)

By Tessa Walsh and Zaida Espana

LONDON, April 20 (Reuters) - Heavily indebted German cement maker HeidelbergCement AG (HEIG.DE) is in talks with banks to refinance and extend billions of euros of syndicated loans, banking sources said on Monday.

HeidelbergCement is part of the heavily-indebted empire of the late German billionaire Adolf Merckle who committed suicide in January. His family is breaking it up to repay their late father's borrowings.

HeidelbergCement is seeking a complex two-part loan waiver that will allow the company to improve its short and medium-term liquidity and iron out a challenging debt maturity profile, a banker close to the deal said.

The loan, which is the largest European refinancing to emerge for a stressed company, follows a similar loan refinancing for sector peer Cemex (CX.N)(CMXCPO.MX), which is still struggling with its debt, he added.

"We are well on track in the process of reorganising our finances," HeidelbergCement's spokeswoman Brigitte Fickel said, declining to give further details of the waiver.

HeidelbergCement is in talks to extend the maturity of a 5.33 billion pounds tranche of a multibillion multicurrency loan that backed its acquisition of Hanson in 2007, two bankers close to the deal said.

That loan was redenominated into euros and consists of a 600 million euros tranche which matures this year and a 5 billion euros tranche which matures in 2010, according to the company.

HeidelbergCement is seeking to extend the tenor of this debt in a first phase of the waiver and has asked to postpone the maturity of the 5 billion euro tranche from May 14 2010 until July 17 2010, the two bankers said.

Bankers will receive an interest margin of 425 basis points over EURIBOR, the two bankers added, which shows a steep increase in borrowing costs from an initial margin of 65 basis points on HeidelbergCement's existing loan.

Several bankers said that the first phase of the waiver had already been discussed with lenders and that bankers were inclined to agree to the request.

That extension will buy the company time to complete a larger medium-term refinancing of around 8.8 billion euros that will extend the maturity of the maturing loans, other existing bilateral loans and one bridge loan until December 2011, the two bankers said.

The medium-term refinancing is expected to consist of three tranches - a 5.6 billion euro term loan A, a 1.3 billion euro term loan B and a 1.9 billion euro term loan C, which pay 400 basis points, the second banker close to the deal said.

This second phase is viewed as more difficult as banks will have to renew their commitments while credit committees remain wary of making large loans to the troubled sector, several bankers said.

The new waiver is being arranged by Deutsche Bank and Royal Bank of Scotland, along with Nordea and Commerzbank, the first banker said. Morgan Stanley is acting as advisor to HeidelbergCement.

Bankers say that while HeidelbergCement, the world's fourth-largest cement-maker, is profitable and is operationally sound, the company faces a difficult debt maturity profile.

"Basically the company is cashflow positive and operationally profitable, it just has issues with its debt maturity profile," the first banker said.

Despite HeidelbergCement's large looming debt maturities, the company has not breached loan covenants, he added.

HeidelbergCement's loans are quoted at around 95.75 percent of face value in the secondary loan market according to Thomson Reuters LPC data.

Five-year credit default swaps (CDS) on HeidelbergCement's debt are at 30.5 percent upfront, meaning that it requires a downpayment of 3.05 million euros to buy protection on 10 million euros of debt.

Heidelberg's CDS level is tighter against Friday's end of day level of 36.5 percent upfront, according to Markit data. Upfront trading indicates a higher perceived risk of default. (Additional reporting by Ludwig Burger in Frankfurt and Jane Baird in London; Editing by David Cowell)