Messer buy-out refinancing produces E400m junk bond

High yield is to play an important role in the refinancing of Messer Griesheim’s LBO from Aventis earlier this year.

There need no longer be much concern over the lack of life in the European high yield market as Messer Griesheim prepares to partly refinance its January buy-out from Aventis via a E400m bond issue.

The deal, managed by Goldman Sachs and scheduled to go on the road next week, will be Europe’s largest so far this year. The bond, which will mature in 2011, should prove popular with investors, since high yielding industrial offerings remain thin on the ground.

Messer is owned by private equity managers Allianz Capital Partners and Goldman Sachs Private Equity, who jointly acquired the German industrial gases business in a E2bn leveraged transaction.

Plans to quickly refinance part of the deal are understood to initially have focussed on using mezzanine capital to retain as much financial flexibility as possible to manage the company’s debt going forward.

According to Financial News, Messer intends to wind down existing obligations by selling assets going forward and was concerned that a future decision to repay the bond early would incur significant penalties.

However the company eventually dropped the mezzanine plan in favour of high yield as it could see attractive terms for the deal in the current climate, the paper says.

The Messer deal, which will be co-leadmanaged by Royal Bank of Scotland and HypoVereinsbank, will add further momentum to a high yield market in Europe that has already shown significant signs of life. Earlier this month United Biscuits sold a two-tranche £220m bond, and deals for Focus-Do-It-All, Memec and Manitowoc are currently in the pipeline.