LONDON, July 6 (Reuters) - Bankers are working on debt financings of around €1.5bn to back a potential sale of CeramTec as private equity owner Cinven gears up to exit the German ceramics company, banking sources said on Thursday.
Cinven acquired CeramTec for €1.49bn in 2013 from Rockwood Holdings, backed with a US$747.5m-equivalent loan. It tried to list CeramTec in 2015 but that was pulled, according to Thomson Reuters LPC.
Cinven is now looking to exit the company, hiring Morgan Stanley and Bank of America Merrill Lynch as advisers to evaluate strategic options, the sources said.
A sale will be the focus of the process but an IPO still remains an option, the sources said.
Cinven declined to comment.
The sale process is in the early stages but a number of potential buyers are circling the company and are expected to submit first round bids in an auction process, the sources said.
Morgan Stanley and BAML are providing a staple financing that will be available to any potential buyer, giving certainty of funds for financing an acquisition, the sources said.
Other banks are also working on debt financings in an attempt to fund a deal and some €1.5bn of debt equates to around 7 times CeramTec’s approximate €195m Ebitda.
CeramTec has been popular with leveraged finance bankers and debt investors as it is seen as a strong, stable business and a good performer, the sources said.
“Seven times leverage might be seen as high but CeramTec already has a high level of leverage on it and it is a great business that everyone loves,” a head of leveraged finance said.
Senior leveraged loans and second-lien loans, denominated in euros and dollars are all being considered, the sources said.
The US$747.5m-equivalent loan backing Cinven’s 2013 buyout comprised a US$472.5m term loan and a €291.3m term loan, according to Thomson Reuters LPC data. In May 2016, CeramTec acquired US-based peer DAI Ceramics.
Headquartered in Plochingen, Germany, CeramTec manufactures high performance ceramics for medical and industrial end-markets. (Editing by Christopher Mangham)