CVC Buys Into Evonik

LONDON (Reuters) – Private equity firm CVC has made its biggest ever equity investment of 1.6 billlion euros ($2.29 billion), which it has used to fund its acquisition of a minority stake in German chemicals, power generation and real estate conglomerate Evonik RUHR.UL, banking sources said.

The equity investment will be supplemented by a 1.2 billion euro leveraged loan which is expected to launch shortly after completing a senior round of syndication. A bank meeting has been scheduled for September 17, sources said.

The loan is one of the largest European leveraged loans to emerge since the credit crunch of mid 2007 severely curtailed financing for buyouts by private equity firms.

CVC paid 2.4 billion euros for a 25.1 percent stake in Evonik in June and mandated eight banks – Bank of Ireland, Calyon, Helaba, LBBW, Lloyds TSB, Mediobanca, RZB and WestLB to lead the financing. CVC agreed to hold the stake for three years.

The eight banks acting as mandated lead arrangers and bookrunners have now been joined by a further four banks, giving a total of 12 banks at the top of the transaction, sources said.

The complex loan is at holding company level, bankers said, and includes maintenance and value based covenants that afford stronger lender protection, and also benefits from substantial security, a material interest reserve account, and highly attractive yields, according to the leads.

CVC bought the stake in Evonik after plans of a share sale were shelved due to volatile equity markets. Evonik is now planning to sell shares in an initial public offering between 2011 and 2013 and focus on its chemicals unit, while it considers disposing of its real-estate division.

The sale of the minority stake has underscored a higher valuation for the eventual IPO, banking sources said.

Funds will be used to finance the winding down of the company’s coal-mining operations as Evonik transfers responsibility for its coal mining activities to the German government. Germany’s eight remaining coal mines will be closed by 2018.

Evonik comprises the energy, real estate and specialty chemicals businesses previously held by loss-making coal miner RAG. It generated earnings before interest and taxes of 1.35 billion euros last year on sales of 14.43 billion euros.

By Tessa Walsh

(Editing by Greg Mahlich)