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UPDATE 1-RLPC-France's Materis adjusts refinancing to gain lender support
August 5, 2014 / 5:01 PM / 3 years ago

UPDATE 1-RLPC-France's Materis adjusts refinancing to gain lender support

(Includes changes to Chryso loan)

By Claire Ruckin

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

Wendel was due to inject 125 million euros ($167.1 million) to reduce 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 it sold two of them earlier this year to reduce debt and cut its exposure to the construction sector.

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

They 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 and will keep Paints’ debt at little more than four times its earnings.

At this level, the company found support from leveraged loan investors willing to buy the paper, bankers said.

Wendel declined to comment.

Syndication of the Paints refinancing was closed, and it was set to become eligible for trading on Europe’s secondary loan market on Tuesday.

Pricing on the 267 million euro, seven-year term loan B increased prior to the close. It 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 remained unchanged from launch and will pay 375bp over Euribor.

Changes have also been made to Chryso’s refinancing, which became eligible for trading on Europe’s secondary loan market on Tuesday.

A 165 million euro, seven-year term loan B will now pay 475bp over Euribor at 99.5 OID instead of initial guidance of 450bp over Euribor at 99.5 OID. A 40 million euro six-year revolver paying 400bp over Euribor remain unchanged from launch, 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 cash-flow covenants.

BNP Paribas and HSBC led 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 and Jane Baird

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