Maxeda refinancing shelved despite sweeteners

The troubled refinancing of Dutch retailer Maxeda has fallen prey to the current jitters in the credit markets, despite the KKR-led buyout consortium sweetening the offering earlier this month.

A consortium of Kohlberg Kravis Roberts, Permira, Cinven and AlpInvest has indefinitely postponed a €1 billion ($1.4 billion) refinancing of Dutch retailer Maxeda.

Citigroup and ABN AMRO, the banks guaranteeing the financing, have abandoned plans to syndicate the loans due to the current volatility in the debt markets.

A spokesperson for ABN AMRO said: “Neither the borrower nor the lenders felt there was any advantage in syndicating the loan at this time”.

The banks had sweetened the offer earlier this month by providing higher yields on the debt and adding extra covenants to the agreement, abandoning plans to use the controversial covenant-lite structure, according to a banking source.

The loans were designed to refinance €275 million of high-yield bonds at 7.875 percent annual interest, according to news agency Bloomberg.

Problems in the debt markets have constrained the amount of finance available for leveraged buyouts, with numerous deals affected in the last three weeks.

A senior leveraged finance banker at one of the large US investment banks told PEO today that covenant-lite loan packages were likely to disappear due to upheavals in the debt markets. His comments come after ratings agency Standard & Poor’s head of European leveraged finance, Paul Watters, voiced concerns to PEO that “covenant-loose” loans, packages with only one or two notional maintenance tests, were cov-lite by the back door. 

KKR bought Maxeda in 2004, alongside Permira, Cinven and AlpInvest, and successfully recapitalised the business last year. According to figures published in March by SVG Capital, Permira’s biggest investor, this generated proceeds of 1.2 times the firms’ original equity investment.