August 2, 2018 / 3:49 PM / a year ago

Imerys allocates with deep discount on new second lien loan

LONDON, Aug 2 (LPC) - French roofing business Imerys has set final terms on a €580m leveraged loan with a heavy discount on a newly introduced €100m second-lien loan.

The second lien loan has been priced at 95, a level that can either wipe out fees or imply losses for arranging banks, as selective investors continue to push for better terms.

A €480m B1/B+ rated seven-year term loan B has been priced at 475bp over Euribor with a 99 discount. The B3/CCC+ rated eight-year second lien is priced at 775bp over Euribor. Both have a 0% floor.

Lenders remain wary of the French building sector after suffering losses following the financial crisis due to France’s historically borrower-friendly insolvency regime.

“There are a lot of skeletons in the closet in the French building sector so it’s not too surprising Imerys struggled,” a banker away from the deal said.

Barclays, Credit Suisse and NatWest Markets are bookrunners. Allocations on the first lien loan are expected on Thursday and the second-lien loan will allocate on Friday.

The deal was first launched as a straight €580m first-lien term loan guided at 475bp with 99.5 discount and then flexed to 500bp with a 99 OID. The second lien was then introduced and pricing reverted to 475bp at 99 when the deal was flexed for a second time.

“That helped to make the first-lien more attractive,” a banker on the deal said.

While the business is cash generative with good regional market share, Imerys has had declining revenues and Ebitda for around 10 years, a banker away from the deal said.

“It’s got a good rating ... but the fact that it’s declining is tough,” he added.

Commitments were originally due on July 20. Proceeds back Lone Star’s carve-out of Imerys’ roofing business.

Lone Star agreed to buy Imerys’ roofing business for €1bn in May at a multiple of nearly 9 times the company’s Ebitda of €115m.

The roofing unit is part of Imerys’ ceramic materials business, which saw declining earnings last year due to lower housing renovation activity and a challenging market for its kaolin product.

Lone Star previously bought German building materials business Xella for €2.2bn in late 2016, and subsequently bought Spanish peer Ursa last summer.

Imerys is issuing the debt through LSF10 Impala Investments. (Editing by Tessa Walsh)

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