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This article is provided to FT.com readers by Debtwire—the most informed news service available for financial professionals in fixed income markets across the world. www.debtwire.com


Freefalling equity markets and sovereign debt uncertainty have forced UK private equity investor CVC Capital Partners to rethink its exit strategy for portfolio company Flint Group. The printing ink manufacturer asked lenders in January for a USD 1.3bn debt refinancing ahead of an IPO before August only to yank both transactions last week, three sources familiar with the matter and a loan trader told Debtwire.

CVC bought Luxembourg-headquartered Flint in 2005 through an all-debt deal, and managed the unit aggressively with a bolt-on acquisition and two recapitalizations, including a 2006 dividend deal. Those transactions incrementally ratcheted up the manufacturer’s leverage, and a listing on the Frankfurt Stock Exchange would have trimmed debt and assured CVC a handsome return.

Hence the PE shop’s request early this year to refinance existing loans with longer-dated debt contingent upon Flint’s listing within eight months. While the new credit agreement arranged by JP Morgan never actually funded, it did trade on a when-issued basis in anticipation of an equity deal. Given the decision to ground the IPO, all grey market must now be annulled, said the loan trader.

Flint’s isn’t the first IPO blown off course by turbulence from European sovereign debt. In February a raft of leveraged IPOs imploded due to a previous round of Greece-induced volatility in European equity. Alkylamine producer Taminco – also owned by CVC – withdrew an application to list in Brussels in February, while retailer New Look ditched a planned listing citing a “poor market backdrop” in the same month.

IPO ink runs dry

CVC picked Flint up via another subsidiary, XSYS Print Solutions, itself the result of a merger between BDS (BASF Drucksysteme) and ANI. XSYS was backed with a EUR 755m debt package, levering the company at 4.8x total net debt/EBITDA in 2004.

XSYS acquired Flint with an all-debt financing comprising EUR 885m-equivalent of EUR and USD-denominated senior and second lien loans with pro-forma leverage of 4.5x. CVC received a dividend after approaching the lending market with a EUR 500m dividend add-on for Flint in 2006, re-levering the company to 6.3x. In 2007, Flint launched another USD 560m term loan B add-on backing its acquisition of Day International.

Once it decided to pursue an IPO, Flint sidestepped the loan amendment required for a listing – and attendant bargaining over fees and margin increases – by proposing a wholesale refinancing with a costlier loan. By using some of the equity proceeds for debt reduction, the company intended to slash leverage to 3x from 5.6x.

Flint will next address lenders on a quarterly earnings update call scheduled for 3 June, said the second source. The company posted strong numbers in 4Q09 and 1Q10 said a third source. Flint will need to approach lenders with a revised refinancing package if it chooses to pursue the listing at a later date, the second source noted.

The cancelled refinancing package comprised a three-year EUR 150m amortising term loan A paying Euribor+ 300bps, and a five-year EUR 1bn term loan B paying Euribor+ 375bps. A five-year EUR 215m revolver completed the package paying Euribor+ 300bps, including a 75bps undrawn fee. The financing package was oversubscribed and the revolver was upsized by EUR 65m.


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