Banks Prep $1.57B in Debt for Iceland Foods Deal

(Reuters) – Bankers are working on a debt package of up to 1 billion pounds ($1.57 billion) to back the potential buyout of U.K. frozen food supermarket Iceland Foods, Reuters wrote Tuesday. Failed Icelandic banks Landsbanki and Glitnir are selling a combined 77% stake in Iceland Foods. Private equity firms Bain Capital and BC Partners are expected to put in a bid, while Blackstone has renewed interest in the company having stepped back from the process at an earlier stage, Reuters wrote.

(Reuters) – Bankers are working on a debt package of up to 1 billion pounds ($1.57 billion) to back the potential buyout of U.K. frozen food supermarket Iceland Foods, banking sources said on Tuesday.

Failed Icelandic banks Landsbanki and Glitnir are selling a combined 77 percent stake in Iceland Foods, hoping to achieve a price that values the whole business for at least 1.5 billion pounds. Second round bids are due Tuesday January 31.

Private equity firms Bain and BC Partners are expected to put in a bid, the bankers said, while Blackstone has renewed interest in the company having stepped back from the process at an earlier stage, one of the bankers added.

Other interested parties include grocer Wm Morrison while Asda, the British arm of US retailer Wal-Mart, is not interested in taking a controlling stake but was keen on around 200 of Iceland’s stores and could team up with a private equity bidder.

Founder and chief executive Malcom Walker, who together with other managers owns the remaining 23 percent stake, is also working on a bid. Under a shareholder agreement, he will win the auction if he matches the highest bid within 42 days.

If a private equity sponsor is successful, the leveraged buyout will be backed by a debt package which could be provided through a mixture of senior and mezzanine loans as well as high-yield bonds, depending on who wins the auction.

The company has earnings before interest, taxes, depreciation and amortisation (EBITDA) of around 225 million and total leverage as part of the acquisition could be 4 to 4.5 times EBITDA, the bankers added.

Creditors of collapsed Icelandic banks Landsbanki and Glitnir gained control of their 67 percent and 10 percent stakes in Iceland after the demise of investment group Baugur and are now looking to maximize value through a sale. ($1 = 0.6377 British pounds) (Reporting by Claire Ruckin; Editing by Helen Massy-Beresford)