Banks Working on Kalle Nalo Buyout Financing

LONDON (Reuters) – The 130 million euro ($181 million) financing to back Silverfleet Capital’s buyout of German sausage casing manufacturer Kalle Nalo is progressing, banking sources said on Monday.

Seven or eight banks are looking at the financing and will seek final credit approval on the deal when due diligence has been completed, one of the sources said.

Talks are still ongoing but bankers expect leverage on the acquisition to be around three times earnings before interest, tax, depreciation and amortisation (EBITDA), lower than earlier estimates of 3.25 times, the sources said.

Progress on the sale has been slow, in line with other European auctions due to the scarcity of debt financing and as private equity firms struggle to achieve target returns on debt-financed deals.

CVC Capital Partners [CVC.UL] sold Kalle Nalo to Montagu Private Equity in 2004 for an undisclosed price, backed by a leveraged loan from Mizuho. That loan included 120 million euros of senior debt and 20 million of mezzanine debt.

Before it was acquired by CVC, Kalle was a subsidiary of Hoechst. Kalle produces artificial sausage casings out of viscose, plastic and textiles. The company also manufactures sponge cloths. (Reporting by Alasdair Reilly; Editing by Dan Lalor) ($1 = 0.7189 euro)