LONDON, Feb 26 (LPC) - Banks are circling two investor groups bidding for Thyssenkrupp’s €16bn elevator business, offering underwritten financings of €9.5bn to back Wednesday’s final bids, banking sources said.
A consortium of Blackstone, Carlyle and the Canada Pension Plan Investment Board is competing with Advent and Cinven, which are supported by Germany’s RAG foundation and the Abu Dhabi Investment Authority.
M&A advisers Deutsche Bank, Goldman Sachs and JP Morgan are expected to win a financing spot on whichever consortium wins, alongside an initial bank group that will commit to underwriting around €7bn of funded debt and an unusually large €2.5bn of unfunded facilities.
The three banks held meetings with a broad array of banks and insurance companies in January to discuss raising the unfunded facilities.
The unfunded facilities comprise €1.2bn of guarantee facilities, a €500m revolving credit facility and €800m of surety bonds.
It is expected that the existing investors in the surety bonds will roll into the new ones, and while formal commitments haven’t been received to cover all the guarantee and revolving credit facilities, there have been strong indications of support.
“The unfunded facilities are not fully accounted for and while it is an issue it is not an insurmountable issue because the market has been sounded out and banks are pleased with the indications of appetite,” a senior banker said.
The expectation is that an initial underwriting group backing the winning bid will be joined at a later stage by a number of other banks agreeing to take the unfunded facilities.
Thyssenkrupp’s existing commercial banks could soak up the unfunded facilities and take some of the funded facilities on a non-pro rata basis.
On Double B rated Thyssenkrupp’s outstanding €2bn revolver, BBVA, MUFG, BayernLB, BNP Paribas, Citibank, Commerzbank, Credit Agricole, Deutsche Bank, SEB and UniCredit are mandated lead arrangers. There are another seven lead arrangers and 10 arrangers.
Both bidders submitted binding offers of close to €16bn for Elevator Technology on February 11, with the Blackstone-led consortium’s bid slightly higher, Reuters reported.
Whichever consortium wins, the funded facilities are expected to be a combination of senior leveraged loans and senior and subordinated high-yield bonds. Both are expected to be highly leveraged although the Ebitda adjustments vary between the bids, sources said.
Different scenarios, producing different predicted rating outcomes, have been considered but the most highly leveraged projection is around 5.25 times through the senior and around 7.0 times in total, based on a €1bn Ebitda, to give a B-/B3 rating.
While both groups are aiming to buy the business in full, Advent and Cinven are more open to letting Thyssenkrupp take a minority stake following the sale as they would be slightly stretched in a full offer.
A deal worth around €16bn would give the business a valuation of 18.1 times its core earnings, while Schindler and Kone trade at 12.5 and 15.3 times their core earnings respectively.
Thyssenkrupp’s management board, led by Chief Executive Martina Merz, has to make a recommendation to the group’s supervisory board ahead of a meeting on Feb. 27, when a decision is expected.
The sale would be the largest buyout since Blackstone’s purchase of US industrial warehouse properties from Singapore-based logistics provider GLP for US$18.7bn last year, according to Refinitiv data.
Editing by Christopher Mangham