Materis Restructures Debt and Secures Liquidity

LONDON (Reuters) – French specialty construction chemicals company Materis has completed a restructuring of leveraged loans that will secure liquidity for the company, private equity owner Wendel (MWDP.PA) said on Thursday.

Wendel said the amendment request was supported by 199 lenders on the company’s 2 billion euro ($2.8 billion) leveraged loan. Mezzanine lenders gave unanimous consent, while 99 percent of senior lenders agreed.

Materis asked banks to reset loan covenants and ease its repayment schedule in mid April, but the proposal was initially rejected by lenders to the company’s amortising term loan A (TLA) and acquisition loan in May.

The terms of the waiver were improved by raising the interest margin on the mezzanine loan and the waiver was approved early last week, a banker close to the deal said.

Materis has eased pressure on its liquidity by deferring 290 million euros of repayments on its senior debt until 2013 along with 70 million euros of mezzanine interest by turning off all of the interest on the mezzanine loans, using a Payment In Kind (PIK) feature.

Lenders agreed to the mezzanine PIK feature as long as leverage is more than 5.75 times.

In return for the restructuring Materis will pay all lenders a consent fee of 25 bps, and will increase margins on its 370 million euro amortising debt by 75 bps (up from 50 bps). The incremental interest will be fully capitalised.

Materis’ loan covenants have been reset based on a revised business plan that takes the economic downturn into account and also allows the company to buy back its debt in the secondary market.

The company now has access to a 100 million euro acquisition and capital expenditure facility, and an additional 40 million euros basket for factoring, the statement said.

Wendel and Materis will also inject 36 million euros and 9 million euros of new equity in the same proportion as their original 2006 investment.

BNP Paribas arranged the debt package in 2006 backing Materis’ acquisition by Wendel which included 1,545 million euros of senior debt, 140 million euros of second lien, and 260 million euros of mezzanine financing.

Materis’ loans are trading at 50-56 percent of face value in the secondary loan trading market, up from 34.3-35.8 percent of face value in mid-May, according to Thomson Reuters LPC data, while the company’s second lien and mezzanine loans have not moved from the 12.5 percent of face value level seen in mid-May. ($1=.7177 Euro) (Reporting by Alasdair Reilly; Editing by Jon Loades-Carter)