Refresco Sale Progressing

By Tessa Walsh and Alasdair Reilly

LONDON, Dec 18 (Reuters) – Talks on the loan financing backing the sale of European soft drinks manufacturer Refresco are continuing and a sale is anticipated early next year if a compromise is reached on valuation, banking sources said.

The distressed sale of the number one European manufacturer of private label soft drinks and juices by Icelandic private equity firm Stodir is one of a handful of live auctions left in the crippled European leveraged market, sources said.

Stodir, which was formerly known as FL Group, was an early casualty of Iceland’s financial crisis. The sale was started in September before the company’s owners sought bankruptcy protection and Refresco’s equity is currently controlled by administrators.

The remaining bidders on the deal are Lion Capital, which has teamed up with Blackstone (BX.N: Quote, Profile, Research, Stock Buzz), and Pamplona Capital, which may also team up with a primary sponsor, sources said.

Progress on the sale has however slowed in recent weeks as Stodir tries to balance the price it is seeking for a well-regarded and strongly performing company against the price that buyers are willing to pay for a forced sale in a depressed market.

Stodir was looking for as much as 500 million euros for its 40 percent stake in Refresco, which it acquired in a 463 million euro buyout of the company in 2006 with Kaupthing Capital Partners and Vifilfell Bottling Group.

Bankers however expect the business to fetch 325-420 million euros based on earnings before interest, tax, depreciation and amortisation (EBITDA) of 50-60 million euros, and a purchase multiple of 6.5-7 times, banking sources said.

A new loan with leverage of around four times is expected to be put in place with a club of banks, bankers said.

Frontrunner Lion Capital has threatened to pull out of the bidding, bankers said, citing the need to create an expensive new loan rather than rolling over the existing financing.

Kaupthing Bank arranged a 523 million euro refinancing for Refresco in 2008 after the company made a number of add-on acquisitions including Kentpol, Nuits Saint-Georges, Histogram and Sun Beverages Company.

Lion Capital’s position is however seen as brinkmanship by bankers close to the deal, who said that the private equity firm is aware that the waiver and amendment required to roll the existing debt over is impossible to achieve as it needs 100 percent lender consent.

“This is posturing, this is a distressed seller that has to sell, it’s putting pressure on the seller to reduce the price as it has to sell,” a senior leveraged specialist said.

The acquisition debt is expected to include a senior loan and a mezzanine loan that will be provided directly by a couple of mezzanine firms, as banks are not willing to underwrite the mezzanine facility, banking sources said.

In 2007, Refresco’s turnover was more than 951 million euros, and turnover for 2008 is projected at 1.3 billion euros. (Editing by David Cowell)