RLPC-France's Materis adjusts refinancing to gain lender support

LONDON Tue Aug 5, 2014 10:47am EDT

LONDON Aug 5 (Reuters) - French private equity firm Wendel is set to increase the amount of equity it injects into its building materials business Materis as part of a debt refinancing in the company's two remaining divisions, banking sources said on Tuesday.

Wendel was due to inject 125 million euros ($167.09 million) to reduced Materis's level of debt to earnings, or leverage and will now increase that by a further 25 million euros, as part of wider concessions to lenders.

Wendel bought Materis in 2006, backed by 1.9 billion euros of leveraged loans. Materis originally consisted of four divisions, but sold two earlier this year - its industrial mortars business Parex to CVC and calcium aluminates maker Kerneos to Astorg in a bid to reduced Materis's 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 which are now being refinanced with two cheaper senior secured loans.

An extra 25 million euro equity injection will cover a shortfall after Paints' 292 million euro term loan was reduced to 267 million euros, in order to keep Paints' debt to earnings in the low 4s. At this level, the company found support from leveraged loan investors willing to buy the paper, bankers said.

Wendel declined to comment.

Syndication of Paints refinancing is now closed and is due to allocate on Europe's secondary loan market on Tuesday.

Pricing on the 267 million euro, seven-year term loan B increased prior to the close and will now pay an interest margin of 475 basis points (bps) over Euribor instead of initial guidance of 425bp over Euribor. An Original Issue Discount (OID) has also been widened to 98.75 from 99, the bankers said.

An 80 million euro, six-year revolving credit remains unchanged from launch and will pay 375bp over Euribor.

Changes could also occur on Chryso's refinancing, which is expected to close later this week. It was launched with a 165 million euro, seven-year term loan B paying 450bp over Euribor at 99.5 OID and a 40 million euro six-year revolver paying 400bp over Euribor, the bankers said.

Both 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.

BNP Paribas and HSBC are leading the financings which will be ringfenced at Paints' and Chryso's operating company level, which is closer to the company's assets. Materis's debt previously sat at the holding company level. (1 US dollar = 0.7481 euro) (Editing by David Evans)