RLPC-France's Materis launches 585 mln euro loan refinancing

LONDON, July 15 Tue Jul 15, 2014 10:17am EDT

LONDON, July 15 (Reuters) - French private equity firm Wendel has injected fresh equity into building materials business Materis and is refinancing 585 million euros ($797.97 million) of debt in the company's two remaining divisions, banking sources said on Tuesday.

Wendel bought Materis in 2006 backed by 1.9 billion euros of leveraged loans. Materis originally consisted of four divisions, but two were sold earlier this year.

The sales of industrial mortars business Parex to CVC and calcium aluminates maker Kerneos to Astorg reduced Materis' debt and cut its exposure to the construction sector.

Proceeds of the sales repaid senior loans, leaving Materis with more expensive junior mezzanine and second lien loans in two remaining divisions - paint manufacturer Paints and admixture producer Chryso.

Wendel's new equity injection reduced Materis' level of debt to earnings, or leverage, and the junior loans are now being refinanced with two cheaper senior secured loans for Paints and Chryso.

"The refinancing will create a more optimal debt structure for each company," a banking source said.

The two refinancings will be ringfenced at Paints and Chryso's operating company level, which is closer to the company's assets. Materis' debt previously sat at the holding company level, the bankers said.

BNP and HSBC are leading the refinancings. Two bank meetings will be held in London on Thursday to show the deal to institutional investors, the banking sources said.

The refinancing for Paints includes a 300 million euro, seven-year term loan B and an 80 million euro, six-year revolving credit.

Chryso's refinancing includes a 165 million euro, seven-year term loan B and a 40 million euro, six-year revolving credit facility.

Pricing will be revealed at the bank meetings.

Both of the refinancings are covenant-loose with leveraged and interest cover covenants only, instead of the customary four covenants which also include fixed charge and free cashflow covenants.

Covenant-loose loans offer more protection than covenant-lite loans, which have none of the four maintenance covenants. ($1 = 0.7331 Euros) (Editing by Tessa Walsh)