Materis Looks To Reset Loan Covenants

LONDON (Reuters) – Privately owned French construction speciality chemicals company Materis is asking lenders to reset its leveraged loan covenants and relax its repayment schedule, two bankers close to the deal said on Thursday.

The proposals to amend a 2 billion euro loan accompany a new business plan that was unveiled to lenders at a bank meeting last week, the sources said.

The loan financed Materis’ purchase by Wendel Investissements in 2006 and was arranged by BNP Paribas.

Wendel Investissements declined to comment. Materis is seeking to delay amortising repayments on a 300 million euro term loan A, and an acquisition loan which would give the company greater flexibility on its debt, the sources said.

Materis is offering lenders a 25 basis points fee, with an additional 12.5 basis points for lenders responding promptly, a senior banker close to the deal said.

Wendel sounded out Materis’ syndicate carefully prior to launching the amendment, the sources said.

While the request to amend Materis’ debt is deemed reasonable as the company is trading well compared to sector peers, Wendel could see some pushback from banks seeking a higher fee of around 50 basis points, the sources said.

Materis has been trying to conserve cash since last November, when it turned off the cash interest payments on its 260 million euro mezzanine debt by exercising a toggle feature that that turned the debt into a Payment-In-Kind loan.

The price of Materis’ loans in the secondary loan trading market has been stable since the beginning of April, according to Thomson Reuters LPC data.

Indicative bids on the senior term loan B were 34.7 percent of face value; the second lien tranche was quoted at 12.3 percent and the mezzanine at 17.3 percent, the data shows.

(Additional reporting Zaida Espana; editing by John Stonestreet)