About Us  |   Contact Us  |   Register  | Login  |   

Follow HedgeWorld on Twitter HedgeWorld on LinkedIn






HEDGEWORLD NEWS
Search the News
Advanced News Search
HedgeWorld News by Region
United States / Americas
Europe
Asia / Australia
International
HedgeWorld News Sections
Managed Futures & Derivatives
Daily News
Regulatory/Legal
Strategies/Analysis
Technology
Opinion
People
Indexes
Other News Features
Most Popular
LexisNexis Headlines
Reuters Headlines
The HedgeWorld Blog
Alternative Advantage Daily Newsletter
RSS Service
Sign Up For Email News Alerts
Reprints



KKR steps into bank lending vacuum with Spanish deal
04/29/2013 Email this story  |  Printable Version

By Tommy Wilkes and Tracy Rucinski

LONDON/MADRID, April 29 (Reuters) - The U.S. private equity giant Kohlberg Kravis Roberts has agreed to lend the Spanish construction materials firm Uralita 320 million euros after banks refused to loan it any more cash.

As new regulations and rising loan losses force Europe's banks to cut back on the amount of money they lend to companies, investment houses such as KKR, Blackstone and Prudential's M&G are trying to fill the gap by lending directly to businesses facing a cash crunch.

KKR's asset management arm's (KAM) loan to Uralita is for seven years, allowing it to repay its bank creditors and bondholders and giving it more time and funds to develop plans.

Nat Zilkha, co-head of KAM's Special Situations unit, told Reuters it had agreed to do the deal - its largest European rescue lending transaction - once it became "very clear they were not going to get support from their current banks".

Zilkha said banks were "putting a gun" to their clients' heads in refusing to renew loans, while the policy of amending and extending loans, common two years ago, was coming to an end.

"These companies are so frustrated, frustrated by banks that won't support them, frustrated by hedge funds that are buying their debt in the secondary market and just looking for short-term gains," he said in a telephone interview.

KKR expects to earn significantly higher returns than those earned by banks from direct lending, but Zilkha declined to disclose the precise terms of this transaction, KKR's sixth such deal in Europe.

Last year, Uralita paid 26.9 million euros in interest and other financial costs, or about 8.4 percent of the 319.2 million euros of debt it held at year-end, according to a presentation of its 2012 results published in February.

With European banks still battling a slowdown domestic economies and struggling to offload assets, their pullback is likely to continue, Zilkha said, in some cases ending decades-old relationships between corporate treasurers and their banks.

Last week, Santander reported a 26 percent drop in first-quarter earnings, hit by rising bad loans, while Spain's second-biggest bank, BBVA, reported a drop in lending income in its home market, where net interest income was down 9 percent from a year earlier.

KKR has about $3 billion in assets in a "rescue lending" fund targeting what it believes are good companies with bad balance sheets, and is looking closely at more opportunities in Spain, Portugal, Britain, Holland and France.

Zilkha said the Madrid-based company, highly tied to the battered Spanish construction industry and with a chunk of soon-to-mature debt, is just the sort of business that banks now want to avoid.

"Certainly a lot of people in banks would look at this combination of factors and say 'No thanks' ... But we look for just these sorts of transactions," he said.

The Uralita deal involved a team of three from KKR's Special Situations group, two members of the firm's private equity unit who work closely with the industrial sector and its head of Spanish operations, Jesus Olmos.


Email This Story to a Friend   |   Display Printable Version of This Story

Story Copyright © 1999-2014 Reuters HedgeWorld All rights reserved.

HedgeWorld News is sponsored by:






Lipper    Privacy   User Policy  Legal Disclosure Copyright/DMCA  Site Map    FAQ    Glossary  Thomson Reuters for Hedge Funds
All rights reserved. Users may download and print extracts of content from this website for their own personal and non-commercial use only. Republication or redistribution of HedgeWorld content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. HedgeWorld is a registered trademark of Thomson Reuters.