Essent to test the market

First round bids in the auction of Essent Milieu, the Dutch waste management and disposal unit, are due by March 11 with the outcome set to provide an indication of whether the market remains open to fund anything beyond small regional buyouts.

Sale-side adviser ING is putting together a staple financing for the group with private equity, infrastructure funds and trade buyers all looking at the asset. The auction was first mooted in January with delays after revised sale reports from the vendor, which impacted on the financing case.

RWE recently acquired Essent in a transaction that did not include Essent Milieu or the company’s electricity and gas network.

Since the collapse of Lehman Brothers last year, leveraged lending in Europe has been at a virtual standstill with activity limited to small regionally placed transactions. Essent Milieu is expected to reach a purchase price of up to €1bn and with an equity cheque of at least 45%, debt will emerge around the €500m quantum. While debt packages of this size were being sold to the bank market until the third quarter of last year, it is now far more of a challenge.

That said, with up to 11 banks looking to fund the deal, bankers remain confident that a club could be put together. Indeed, some have even suggested that an underwritten package could be possible, though this is thought to be unlikely.

Buyers are being sought for German sausage skin maker Kalle, which is currently owned by Montagu Private Equity. It is not clear what sort of metrics would be involved in the sale, or whether a private equity buyer would be interested.

When Kalle was acquired by Montagu in 2004, lenders put together a €140m senior and mezzanine debt package to back the secondary buyout. The MLA was Mizuho Corporate Bank. Bank of Scotland was joint lead arranger and AIB, Bank of Ireland, Dresdner Kleinwort and NIB Capital were co-arrangers.

BTC, the Bulgarian telecoms operator, is also believed to be on the block. When the company was sold to AIG in the summer of 2007, the €1.64bn of leveraged debt that backed the deal was a CEE record – and swiftly sold off in secondary. Bookrunners were RBS, Deutsche Bank and UBS.

The senior debt was split between a €400m eight-year term loan B priced at 250bp over Euribor, a €525m nine-year term loan C at 325bp, a €60m seven-year revolver at 225bp and a €125m seven-year capex facility at 225bp.

There was a €200m nine-and-a-half-year second-lien loan priced at 500bp and a €325m 10-year mezzanine loan at 925bp. The equity contribution from AIG was €469.7m or 24.5% of the capitalisation.

Private equity deals now, on highly-coveted assets such as Essent Milieu, are expected to see equity contributions of 45% and more. Furthermore, the amount of debt that could be raised on a company like BTC, which has exposure to EM risk and investment needs, is likely to be much lower than it was in 2007.

Borsodchem is in talks with banks on a waiver. The Hungarian chemicals company was bought out by Permira in 2007 with €1.15bn in financing arranged by UniCredit, Lehman Brothers and RBS.

The deal, which came at the height of the market was reverse-flexed during syndication. The structure comprised a €275m eight-year B tranche down 25bp to 250bp, a €275m nine-year C tranche down 25bp to 300bp, a €100m seven-year revolver at 225bp, a €300m capex facility at 250bp, and €200m of mezzanine. The mezzanine was reduced to 975bp over Euribor, with 450bp for cash and 525bp for PIK.

Seven banks joined the senior phase of the deal. They were BayernLB, Erste Bank, HBOS, KBC, Mizuho Corporate Bank, RZB and WestLB. Each committed to €125m sub-underwriting tickets, from which they were scaled back.

Invitel has completed its €197m refinancing. In syndication mandated lead arrangers and bookrunners BNP Paribas and Calyon were joined by Nordea as arranger, along with UniCredit, MKB, Nykredit, Natixis and Dexia.

Senior debt totals €165m and is split between a €150m amortising term loan A, a €10m capex line and a €5m revolver. All tranches have a final maturity of three years and pay 350bp over Euribor. In addition BNP Paribas and Calyon underwrote a €32m subordinated loan.

Proceeds refinance debt including a bridge loan that was used to fund the acquisition of Memorex in 2008. Leverage multiples are set at 0.9x senior debt rising to 3x total debt based on 2008 pro forma Ebitda.

TDC is the majority shareholder of Invitel, which is the largest alternative and second-largest fixed line telecommunications and broadband internet provider in Hungary.