EQT gathers support for Springer Science loan

(Reuters) Private equity firm EQT’s lenders are meeting next week to discuss a 1 billion pound ($1.7 billion) underwritten loan as it moves closer to a bid for German publisher Springer Science and Business Media, bankers said on Thursday.

The financing, one of biggest European leveraged loans of the year, marks the return of underwriting to the market as banks become more willing to take risk and investors more receptive to new issue.

The deal is relatively far advanced after gathering support from existing bank and fund lenders and new investors in the past week, indicating that a bid is imminent, bankers said.

“A bid must be imminent if there is a potential bank meeting,” a senior banker close to the deal said.

The financing is expected to have a U.S.-style structure and include a LIBOR floor guaranteeing a specific LIBOR rate, which increases returns for fund investors, particularly U.S. investors.

EQT’s prospects of bid success were improved this week when British media group Informa (INF.L) pulled out of the running, saying it could not manage a deal in the time required by Springer’s private equity owners.

Springer Science, valued at around 2.6 billion euros including debt, was put up for sale earlier this year by its owners Candover and Cinven in a bid to solve the company’s looming loan maturity problems.

Appetite for new leveraged loans is growing in Europe, which has been starved of new deals this year, and the lead banks said they have been pleasantly surprised by the number of investors interested in joining the deal, which includes some new investors.

The loan, which has been underwritten by Barclays, Goldman Sachs and UniCredit has been shown to banks and funds in a pre-sounding process that could reduce the amount of the underwriting.

“If I was them I’d underwrite the deal when I know I’ve got 40 percent of the debt sorted out,” a second leveraged banker said.

Goldman Sachs is considering putting some of the debt into its mezzanine fund, as well as taking some senior debt, one source said.

The deal resolves Springer Science’s looming loan maturity problems by refinancing its existing debt. The new equity injection also deleverages the company and offers investors some repayment at par.

“A sponsor could not raise this debt without an existing bank group, they’re using secondhand leverage,” an investor said. (Reporting by Tessa Walsh, editing by Will Waterman) ((tessa.walsh@reuters.com; +44 20 7542 4048; Reuters Messaging: tessa.walsh.reuters.com@reuters.net))