US buyout firm KKR has put Bis Industries up for sale, valued at around $1.8 billion including debt, after talks to refinance the loans used to buy the Australian company stalled, writes Reuters. KKR faces a June 2013 deadline to repay A$905 million ($922.06 million) in loans it used to acquire Bis in 2006.
(Reuters) – U.S. buyout firm KKR & Co has put up for sale Bis Industries Ltd, valued at around $1.8 billion including debt, after talks to refinance the loans used to buy the Australian company stalled, sources familiar with the matter said.
KKR, which faces a June 2013 deadline to repay A$905 million ($922.06 million) in loans it used to acquire Bis in 2006, has opened a data room for prospective buyers, the sources said.
With IPO markets frozen and buyers in short supply, private equity funds are being forced to hold assets longer than the usual three to five years. The debt used to fund these deals usually expires after five years and now needs to be refinanced at more expensive rates.
KKR had been in discussions with commercial banks to refinance the debt, said the sources, who declined to be named because the talks were private.
The debt on KKR’s original loan for Bis, which has operations in coal mining, steel and iron ore, paid a margin of 225 basis points over the benchmark Australian Bank Bill Swap Bid Rate (BBSY).
Thomson Reuters publication Basis Point reported that leveraged loan margins for new five-year deals in Australia are at least 450 basis points over BBSY, although KKR will pay less as it is seeking debt for only 18 months on an existing business.
Companies in Asia are tapping non-traditional funding avenues to overcome difficult IPO and bank loans markets. TPG Capital is considering an expensive high-yield bond, a path taken earlier this year by KKR, according to a source familiar with the matter.
KKR, which has around $62 billion in assets under management globally, became the first private equity fund to use a high-yield bond to refinance a buyout loan in Asia when it took out a $300 million five-year bond for Singapore technology company MMI International.
KKR had previously looked at IPO exits for both MMI and Bis, while TPG had previously looked at an IPO for Singapore precision engineering firm United Test & Assembly Centre.
Bis and KKR declined comment. TPG could not immediately be reached for comment.
Basis Point reported KKR’s plan to sell Bis on Wednesday. ($1=0.9815 Australian dollars) (Reporting by Stephen Aldred and Narayanan Somasundaram; Editing by Denny Thomas and Ryan Woo)