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LBO pricing in October

Cesky Telecom

The debt financing backing the EURO1.82 billion LBO of a 51.1 per cent stake in Cesky Telecom by Deutsche Bank Private Equity and TDC is now unlikely to launch to market until early next year, via mandated arrangers Citibank/SSSB, ING and JP Morgan.

This LBO follows an extended bidding competition for Cesky Telecom. The company rejected bids from two consortia in April on the grounds that they were too low and then held a new auction. Back then, the Czech government was seeking EURO2.5 billion for the stake.

However, given the deteriorating economic environment and continuing depression of the telecom sector, the Czech government accepted this lower EURO1.82 billion offer in the second bidding round.

The buyout, which will be finalised at the end of this month, is backed by a senior debt financing of circa EURO800 million, although the precise deal size is still moving around and will not be decided until later this year.

Commodore Group

Royal Bank of Scotland has launched syndication of the GBP135 million leveraged financing package for ferry operator Commodore Group. The facility supports the GBP150 million ABN AMRO Capital-backed MBO of Commodore, a leading ferry operator between the UK and the Channel Islands.

The deal is structured with GBP115 million in senior debt and GBP20 million in mezzanine. Relatively aggressive leverage, with senior debt to EBITDA at 4.6x and total debt at 5.5x, is supported by the company’s highly stable and well-established cash flows.

The senior debt comprises a GBP64 million seven-year term loan A at 225bp over Libor, an GBP18 million eight-year term loan B at 275bp over Libor, a GBP18 million nine-year term loan C at 325bp over Libor and a GBP15 million seven-year revolving credit at 225bp over Libor. Banks are invited to join the senior debt as senior lead managers on GBP20 million or as lead managers on GBP12.5 million. RBS has also approached a small number of institutions to join the mezzanine.

The sale includes the companies Commodore Ferries, Condor Ferries and Commodore Express. Some 70 per cent of passengers travelling by sea to Jersey and Guernsey travel with Condor, while Commodore is the leading provider of freight services to the Islands.

Based in Guernsey, Commodore Shipping was established in 1947 and has been controlled by the Norman family for the last 40 years.

Coral Eurobet

Banks have now signed the GBP495 million senior debt facilities supporting the secondary MBO of Coral Eurobet, via mandated lead arranger Lehman Brothers.

Following a 40 per cent over subscription in the second sub-underwriting syndication, banks that were asked to underwrite GBP45 million with a target hold of GBP30 million are now comfortably below their sell-down targets and there will be no general syndication.

Bank of Scotland and Royal Bank of Scotland joined early on as underwriting joint lead arrangers. They are now joined by Abbey National, Allied Irish Bank, Bank of Ireland, BNP Paribas, Commerzbank, Credit Lyonnais, Danske Bank, Fortis Bank, HypoVereinsbank, Lloyds TSB Bank, Natexis Banques Populaires, NM Rothschild, SEB, SG and WestLB.

In addition, nine institutional funds joined tranches B and C on a take and hold basis.

The senior debt comprises a GBP200 million seven-year amortising term loan A at 225bp over Libor, a GBP100 million eight-year term loan B at 275bp over Libor, a GBP100 million nine-year term loan C at 325bp over Libor, a GBP80 million seven-year amortising acquisition facility at 225bp and a GBP15 million seven-year bullet revolver at 225bp with a 75bp commitment fee.

Total net debt to EBITDA is 5.6x and senior debt to EBITDA is 4.2x. These high ratios are supported by the stable and consistently high cash flows generated by the company and a low capital expenditure requirement. In addition, the total cash equity component in the buyout is 40 per cent of the capital structure.

Charterhouse Development Capital is paying Morgan Grenfell Private Equity GBP860 million for the business.

Demag

The sub-underwriting phase of the EURO1.225 billion LBO financing backing KKR’s buyout of Demag Holdings from Siemens has drawn a better-than-expected response from the market with between 12 and 15 banks joining the deal, via mandated lead arrangers CIBC World Markets, HypoVereinsbank and JP Morgan.

The arranging trio reports that banks will either be at or near their final hold levels but that a limited general syndication will still be held so that banks can sell down further.

The deal’s success comes despite early market concerns that the deal might struggle because Demag Holdings combines seven different businesses, some of them with poor credit histories. However, the deal has found support at this level, especially from Landesbanks that have a relationship with Siemens.

Senior banks are Abbey National, BNL, Commerzbank, Credit Lyonnais, HSBC, KfW, Scotia Capital, WestLB, SG and Bank of Ireland. Institutions joining this round are AXA, Harbourmaster, GECC, ICG and Prudential.

Co-lead underwriters are invited on tickets of EURO85 million for an upfront fee of 165bp, with a target hold of EURO65 million. The facility comprises a EURO435 million seven-year term loan A at 225bp over Euribor, a EURO195 million eight-year term loan B at 275bp over Euribor, a EURO195 million nine-year term loan C at 325bp and a EURO400 million seven-year revolver at 225bp, with a commitment fee of 75bp. Total and senior debt to EBITDA is 3.4x.

Elis

Mandated lead arrangers CIBC World Markets and Credit Agricole Indosuez will close books on syndication of the EURO1.2 billion debt package backing PAI’s secondary buyout of Elis. Twenty-one banks and institutions have committed to the EURO910 million senior debt so far, with a further seven lined up for credit approval. With the present commitments, the B and C loans are already oversubscribed, while the A loan is still under subscribed but should be fully circled by closing.

The EURO290 million mezzanine is oversubscribed with 14 commitments, including a chunky participation from ICG. It is thought that this is the most widely syndicated mezzanine piece seen in Europe.

Senior debt totals EURO910 million and comprises a EURO310 million seven-year term loan A at 225bp over Euribor, a EURO230 million eight-year term loan B at 275bp over Euribor, a EURO200 million nine-year term loan C at 325bp and a EURO50 million seven-year revolving credit at 225bp, with a commitment fee of 75bp. There is also a EURO120 million seven-year acquisition facility at 250bp, with a commitment fee of 75bp. The EURO290 million nine-year six-month warrantless mezzanine tranche is priced at five per cent cash plus six per cent PIK.

Bankers have complained about the repeated re-leveraging of the company since its original 1997 buyout and, at 6.2x total debt, the aggressive leverage on the deal, which backs PAI’s secondary buyout of Elis.

Esselte

Mandated lead arranger UBS Warburg has completed syndication of the $435 million leveraged financing for Swedish office supplies manufacturer Esselte. RBC Capital Markets joined the deal as senior co-arranger and sub-underwriter of the debt facilities prior to launch.

Joining as co-arrangers are Commerzbank, Fortis, Svenska Handelsbanken, Barclays and Danske Bank. Senior lead managers are Bank of Scotland and LB Kiel, while managers are Caisse de Depot et Placement du Quebec (CDP), Sumitomo Trust and two undisclosed fund investors.

Senior debt totals $369.7 million and comprises a $197.66 million seven-year term loan A at 225bp over Libor, a EURO106.5 million eight-year term loan B at 300bp and a $67.2 million seven-year multi-currency revolver at 225bp, with a commitment fee of 75bp. There is also a EURO66 million 10-year mezzanine tranche. Senior debt to EBITDA is 3.25x and total debt is 4.25x.

Three senior debt ticket levels were offered to the market, with a top level for senior lead managers of $30 million, for which banks will receive 95bp upfront.

The deal supports Esselte’s take private by private equity sponsor JW Childs Equity Partners. Esselte has subsidiaries in 25 countries, and sells office products in over 120 countries under the DYMO, Pendaflex, Leitz and Esselte brands.

Ferretti

Ferretti, the luxury yacht maker, is currently in the process of being taken private by Permira. Mediobanca will underwrite and arrange the supporting loan, which is likely to be syndicated. The bank is also advising Permira on the sale.

Permira has already tendered 93.2 per cent of Ferretti’s shares for EURO630.4 million and will now launch a residual offer for the outstanding share capital.

The takeover represents the second time that Permira has had dealings with the Italian group. In 1998, Ferretti was acquired by the fund, then known as Schroder Ventures, only to be floated two years later in June 2000 on the Milan stock exchange.

Green Property

Bank of Scotland and Merrill Lynch have been mandated to arrange the debt financing backing the EURO1.05 billion MBO of Irish property company Green Property. Syndication will take place in two take and hold phases. Tickets of EURO80 million to EURO100 million are likely to be offered at the top level, prior to a more general syndication.

The cash offer, which has been cleared by the Irish government and went unconditional in mid August, has been made in the name of bidding company Rodinheights. Rodinheights is owned by Bank of Scotland, Merrill Lynch and Steven Vernon, who is managing director of Green Property. As such, the mandated arrangers are also making an equity injection into the business.

Green Property is quoted on the Dublin and London stock exchanges. The company has gross assets of around EURO2 billion, comprising offices, shopping centres and industrial estates in Ireland, together with industrial estates and office investments in the UK.

Iberdrola

The six banks mandated for the EURO1.5 billion financing of CVC Capital Partner’s EURO577 million buyout of Iberdrola are ABN AMRO Bank (joint books), Banesto, BBVA (joint books), Credit Agricole Indosuez (documentation agent), Dresdner Kleinwort Wasserstein and JP Morgan (joint books).

That facility is equally split between 364-day and five year tranches paying competitive margins of 20bp and 25bp over Euribor with commitment fees of 6bp and 8.5bp, respectively.

Proceeds will be used to help Iberdrola pursue its strategic plan of focusing on power generation, in the light of planned liberalisation of Spain’s energy sector. CVC Capital Partners is confident of getting approval for the deal despite reports that the Spanish government has been advised to block it.

Jefferson Smurfit

The second sub-underwriting phase of the EURO3.675 billion buyout financing for Jefferson Smurfit is drawing a strong response from the market, with all of the 11 banks that joined in the first sub-underwriting phase already below their target final hold levels.

In this round, which is in effect general syndication, banks were asked to sub-underwrite EURO75 million, with a target hold of EURO45 million, for an all-in upfront fee of 125bp.

The EURO3.675 billion total debt package comprises EURO2.525 billion of senior debt, a EURO125 million asset sales bridge loan and a EURO1.15 billion bridge to a EURO900 million high yield bond issue and EURO250 million PIK piece. Total debt to EBITDA is 4.6x, while senior debt is 3.2x, although excluding the bridge loans, senior debt is 2.25x.

The EURO2.525 billion senior debt comprises a EURO1.05 billion seven-year term loan A at 225bp over Euribor, a EURO525 million eight-year term loan B at 275bp, a EURO525 million nine-year term loan C at 325bp and a EURO425 million seven-year revolver at 225bp with a 75bp commitment fee.

During the senior sub-underwriting phase, ABN AMRO Bank, Allied Irish Banks, Bank of America, Bank of Ireland, Bank of Scotland, Credit Lyonnais, HypoVereinsbank, JP Morgan and Lehman Bros joined the facility.

Jessops

HSBC is mandated lead arranger of the GBP77 million senior secured debt financing backing the secondary buyout of photographic retailer Jessops. The senior debt forms part of a GBP83 million total debt package, which also includes a GBP6 million mezzanine tranche.

Senior debt comprises a GBP43.5 million amortising seven-year term loan A priced at 225bp over Libor, a GBP13.5 million bullet eight-year term loan B at 275bp over Libor and a GBP20 million seven-year revolving credit tranche C at 225bp with a commitment fee of 75bp.

Total debt to EBITDA on a pro-forma basis is just over 4x, and will stand at 3x for the first full year following the buyout.

Sponsor ABN AMRO Capital agreed to buy out the UK-based photographic retailer from Bridgepoint Capital for GBP116 million, providing an exit for Bridgepoint, which has twice tried to float the group on the London stock exchange. The last attempt, in January this year, valued the group around the GBP80 million mark and was cancelled due to poor market conditions.

Kluwer Academic Publishers

Private equity houses Candover and Cinven have reached an agreement in principle to buy Kluwer Academic Publishers (KUW), the academic publishing arm of Dutch publishing giant Wolters Kluwer, for EURO600 million. They have mandated Barclays Capital to arrange a debt facility to support the acquisition.

Candover and Cinven will each put up EURO107.5 million, while Barclays will arrange both senior and mezzanine facilities to fund the remaining transaction costs. The acquisition should be completed in early 2003.

The two private equity houses beat off interest from UK academic publisher Taylor & Francis and US academic book house John Wiley, while other LBO shops including Apax Partners, and Paribas Affaires Industrielles expressed early interest in the company but did not submit bids.

Following this sale, Wolters Kluwer is also looking to sell its Ten Hagen & Stam trade publishing unit and its ISBW trading company.

Legrand

Mandated lead arrangers CSFB, Lehman Brothers and Royal Bank of Scotland have closed the second senior syndication of the EURO2.222 billion loan backing the buyout of French electrical engineering firm Legrand.

At this level 18 banks joined as co-arrangers plus 15 funds, leading to a 30 per cent over subscription on target holds. Co-arrangers were asked to underwrite EURO100 million for 125bp with a target hold of EURO65 million.

Ten banks joined the facility in the first stage of underwriting, as lead arrangers and, given the strong response at this level, these banks’ EURO250 million underwriting tickets were scaled back to EURO149 million prior to this second senior phase.

Senior debt comprises a EURO722 million seven-year amortising term loan A at 225bp over Euribor, a EURO425 million eight-year bullet term loan B at 275bp, a EURO425 million nine-year bullet term loan C at 325bp, a EURO300 million seven-year bullet borrowing base facility at 225bp and a EURO250 million seven-year bullet revolver, also at 225bp, with a commitment fee of 62.5bp.

There is also a EURO100 million short-term bridge, which was not syndicated, and a EURO600 million mezzanine bridge to the high-yield bond market.

Nocibe

BNP Paribas is arranging the debt financing supporting the Bridgepoint Capital and TCR Industrial Managers sponsored MBO of French luxury perfume and beauty retailer Nocibe. Proceeds will also partially repay existing debt of the Nocibe Group. Parent company Kruidvat has agreed to sell the business to Bridgepoint Capital and TCR Industrial Managers for EURO250 million.

Senior secured debt of EURO145 million has been underwritten by BNP Paribas, while ICG has provided a EURO35 million mezzanine tranche.

The buyout is expected to be completed by the end of October, with general syndication slated for the start of November. BNP has already approached up to three relationship banks of Bridgepoint to join at a senior level ahead of syndication.

Nocibe operates through a personal shopper concept and is the second largest perfume retailer in France. It has 296 stores located across the country.

Provimi

Mandated lead arranger CIBC World Markets has launched senior syndication of the EURO750 million debt financing backing CVC Capital Partners and PAI’s LBO of a 53.66 per cent controlling stake in animal nutrition specialist Provimi from Edison. Once the deal has received full regulatory approval from a number of jurisdictions, including Brazil and Russia, there will be a mandatory public offer to acquire the outstanding 46.33 per cent of the company at the same price of EURO14.5 per share, valuing the company at EURO378.3 million.

Six banks have been invited to join at this level on tickets of EURO125 million for an upfront fee of about 150bp, with a target final hold of EURO50 million. There have been no declines to date.

Senior debt comprises a EURO220 million seven-year term loan A at 225bp over Euribor, a EURO130 million eight-year term loan B at 275bp over Euribor, a EURO130 million nine-year term loan C at 325bp and a EURO100 million seven-year revolving credit at 225bp with a commitment fee of 75bp. In addition, there is a EURO170 million short-term share purchase facility, which will not be syndicated.

The revolver includes a EURO50 million acquisition line and there is also a EURO150 million short-term share purchase facility, which will not be syndicated. Total and senior debt to EBITDA is 3.5x.

Rhein Chemie

Debt financing backing the EURO215 million LBO by Advent International of Rhein Chemie will total approximately EURO200 million. Dresdner Kleinwort Wasserstein is confirmed as the mandated arranger and is currently in discussions with the sponsor regarding syndication strategy ahead of the launch, which should take place by the end of this month. Rhein Chemie is the chemical additives unit of Bayer AG. The sale is still subject to regulatory clearance, which should be given in November.

SiTeco

The EURO90 million leveraged financing backing the EURO120 million buyout of SiTeco by JP Morgan Partners is now unlikely to launch syndication until November.

Sole mandated arranger WestLB is still working with the sponsor on the transaction. The EURO90 million debt package comprises EURO75 million in senior debt and a EURO15 million mezzanine piece.

SiTeco is an industrial lighting business based in Traunreut, Germany and is being spun off by US Industries Inc.

Telediffusion de France

Syndication of the EURO1.34 billion senior debt for transmission towers business Telediffusion de France is steadily gaining commitments via BNP Paribas and Citibank/SSSB. The deal has seven firm sub-underwriting commitments, with at least two at the top EURO100 million level, plus around EURO200 million of institutional investor commitments.

Lead arrangers sub-underwriting EURO100 million will receive an underwriting fee of 50bp, with a further 100bp upfront on their EURO75 million target final take, while arrangers sub-underwriting EURO75 million with a target hold of EURO50 million will get a 35bp underwriting fee and a 80bp participation fee. In total some 30 banks and around 12 institutional investors were invited.

The facility comprises a EURO500 million seven-year three-month amortising term loan A at 225bp over Euribor, a EURO115 million eight-year three-month bullet term loan B1 and a EURO115 million bullet eight-year three-month bullet term loan B2 both at 287.5bp, a EURO255 million nine-year three-month bullet term loan C at 350bp and a EURO255 million eight-year three-month amortising capex facility D at 262.5bp. There is also a EURO100 million seven-year three-month revolver at 225bp, with a commitment fee of 75bp. Leverage is 3.8x senior debt to EBITDA and 4.9x total debt to EBITDA. TdF has 85 per cent coverage in France for broadcast services of radio and TV channels, as well as services for mobile phone operators under long term contracts, giving the company strong cash flows.

Un Jour Ailleurs

Credit Lyonnais and ING are the mandated lead arrangers for the EURO124 million loan backing the buyout of French ladies clothing retailer Un Jour Ailleurs. The facility is split between EURO104 million senior and EURO20 million mezzanine portions. The senior piece is split between a EURO46 million six-year term loan A at 225bp over Euribor, a EURO18 million seven-year capex tranche at 225bp over Euribor. The EURO20 million mezzanine will run for eight years.

French private group Astorg Partners is supporting the management buyout from Vetsoca.