-RLPC-Permira lines up payout with Iglo debt deal

Mon Jul 2, 2012 11:09am EDT

* Approximate 1.9 mln euro refinancing lined up

* Permira could get around 500 mln euro dividend

* Deal could prolong Permira's exit strategy by 2-3 years

By Claire Ruckin and Simon Meads

LONDON, July 2 (Reuters) - Private equity firm Permira is gearing up to refinance the debt in frozen foods group Iglo and pay itself a hefty dividend after rejecting a 2.5 billion euro ($3.17 billion) bid for the company, banking sources said on Monday.

Permira has lined up a refinancing with Credit Suisse and Deutsche Bank, bankers said, after snubbing a joint offer for the company from Blackstone and BC Partners - the last remaining bidders in a sales process last week - ending what would have been one of the largest leveraged buyouts of the year.

Permira was hoping the company would fetch around 2.8 billion euros

Bankers who had been working on a financing package of up to 2.4 billion euros to back a new buyout deal believe a so-called dividend recapitalisation is a viable option and will be launched in the coming days, despite the fact that they have been used sparingly since the credit crisis.

At the end of 2011, Iglo had net debt of around 1.4 billion euros, equating to around four times the company's projected 2012 EBITDA of about 350 million euros.

While a new deal for Iglo could have attracted a debt package of around 6.5 times its annual earnings, a refinancing is likely to come in lower than that, as there had been such a difference of opinion over the value of the company between buyer and seller, bankers said.

"People were geared up and ready for the deal. The fact that there will be less leverage in a dividend recap than if it were a new buyout deal will make people very happy," a banker said.

Leverage in a dividend recapitalisation is more likely to be around 5.5 times Iglo's EBITDA totalling 1.9 billion euros, allowing Permira to take a dividend payment of around 500 million euros, the bankers added.

This would be the largest dividend recapitalisation since travel reservations company Amadeus's 5.2 billion euro refinancing in 2007 which included a 1.4 billion euro dividend payment, according to Thomson Reuters LPC data.

Iglo's refinancing will be provided through a mixture of senior leveraged loans and sub-debt, bankers said, adding the sub-debt is likely to have a non-call period meaning Permira could be tied into the company for another two to three years. Permira bought Iglo from Unilever in 2006.

At the peak of the buyouts bubble, dividend recapitalisations were very popular as private equity firms took advantage of cheap funding to refinance their businesses and pay themselves dividends in the process. But they have all but vanished in Europe as banks rein in lending.

However, as Iglo is such a well known credit in the debt market, a number of investors have already shown support for the deal, investors said.

"Everyone knows the credit and will go into the new financing, whether it's with new sponsors following a buyout or if it's with existing owners Permira," an investor said. ($1 = 0.7880 euros) (Editing by David Cowell)

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