Essent Milieu Shortlist Due This Week

LONDON (Reuters) – Dutch utility Essent is likely to shortlist bidders for its waste management unit, Essent Milieu, this week, banking sources said.

The auction is one of the only European asset sales to have secured debt financing from the beleaguered leveraged loan market, which has allowed private equity firms to bid.

The staple financing, which totals 392.5 million euros ($537.5 million) of senior debt and 150 million euros of mezzanine debt, is nearly complete, according to a banker close to the deal.

Essent has received indicative bids from private equity firms, trade buyers and infrastructure funds, the banker said.

Trade buyers and infrastructure funds may have the upper hand as private equity firms are struggling to achieve the rates of return that they are looking for on the debt-financed deal, several bankers said.

Earlier this year, banking sources said the unlisted Essent, which is selling its much bigger power production and delivery businesses to Germany’s RWE (RWEG.DE), hoped to fetch more than 1 billion euros for the waste unit.

The size of the staple financing, however, would require private equity firms to fund almost half the purchase with equity to achieve such a price.

Private equity firms CVC [CVC.UL] and KKR [KKR.UL], who were bidding together, have dropped out; while Montagu Private Equity also did not submit a proposal, according to two people familiar with the matter.

All three are already investors in the sector and had been widely expected to bid. But bankers said KKR and CVC dropped out due to competition issues raised by their ownership of rival Dutch waste businesses AVR and Van Gansewinkel.

Several private equity firms remain in the running, the banker close to the deal said.

Bids came from at least one trade buyer, and a group of Dutch investors that includes infrastructure funds linked to NIBC and Fortis, other people familiar with the matter said.

The staple financing backing the sale, which is led by ING, has received four commitments on the senior debt and a total of seven or eight are anticipated.

Three mezzanine lenders have also been lined up to supply the junior debt, the banker close to the deal said.

ING and Credit Suisse are advising Essent on the sale.

Essent declined to comment. Representatives for KKR, CVC, Montagu and NIBC were not immediately available for comment. ($1=.7302 Euro)

By Tessa Walsh
(Additional reporting by Quentin Webb; editing by Simon Jessop)