LONDON, May 15 (Reuters) - German industrial weighing specialist Schenck Process is set to raise 605 million euros ($686.80 million) of leveraged loans to refinance existing debt, the company announced on Friday.
The new loan will also be used to pay a dividend to shareholders, in a bid to extract value from the company which has performed well and delevered, banking sources said.
IK Investment acquired Schenck in 2007 from HgCapital for 450 million euros backed with a 340 million euro senior financing arranged by CIBC and Dresdner and a 70 million euro mezzanine facility, pre-placed with Babson Capital, according to Thomson Reuters LPC data.
IK attempted to sell the business in 2012 but pulled the sale process after offers for the business were deemed too low, below the 700-800 million euro price tag, leading IK to amend and extend the company’s debt, according to Thomson Reuters LPC.
It has now decided to conduct a dividend recapitalisation, a process whereby existing debt is refinanced and new debt raised in order to facilitate the dividend payout.
Dividend recapitalisations are proving popular with cash-rich investors eager to invest fresh capital in deals they are familiar with, amid a lack of new deals in the leveraged loan market.
They are also viewed more positively than the surge of repricings that have hit the market as borrowers, in light of low dealflow, revisit existing portfolio companies and reprice loans on lower interest margins.
Commerzbank, HSBC and Unicredit are leading the deal, for which a bank meeting to show the deal to investors has been scheduled to take place in London on May 19, the announcement said.
The 605 million euro covenant-loose financing is split between first- and second-lien loans, as well as a revolving credit and guarantee facility, mainly denominated in euros but will include US and Australian dollar carve outs. It will have one leveraged covenant, the announcement said.
Headquartered in Germany, Schenck operates across 23 countries. Since acquiring Schenck, IK Investment has expanded the business with a number of acquisitions and the company now has over 3,200 employees and a turnover of around 600 million euros. ($1 = 0.8809 euros) (Editing by Christopher Mangham)