
Deal in Focus: Kartesia supports ProFagus expansion

Alternative lender Kartesia has provided a new debt package for Steadfast Capital’s barbecue charcoal producer ProFagus. Katharina Semke explores the background of the deal and gets Kartesia’s take on alternative lending in Germany
This month, Kartesia supported Steadfast Capital's plan to expand ProFagus into the new market segment of natural additives via a debt replacement package. The development comes relatively late in Steadfast's ownership, with the investor originally acquiring the business in July 2010. The GP has thereby expanded the portfolio company at a time when other firms might instead be contemplating an exit.
Steadfast, however, aims to remain invested for approximately another two years, managing partner Clemens Busch tells unquote". With the holding period now potentially being extended to eight years, a key factor leading to Kartesia's debt replacement deal were the wishes of NIBC Bank – which provided the initial loan alongside DZ Bank and Commerzbank – to exit its investment.
Prior to joining the alternative lender two years ago, Kartesia's Markus Geiger worked at Steadfast from 2006 to 2014 and was one of those responsible for the initial investment in ProFagus
Busch says NIBC recently changed its strategy to exclusively target large transactions in Germany. The new lender replaced NIBC and supplied a fresh senior secured tranche to ProFagus without taking an equity stake. The existing debt-to-equity ratio of 50:50 remains roughly the same after Kartesia's debt investment, Steadfast has confirmed.
Kartesia, which was founded in 2013, is a relatively new player in the market. It has offices in London and Brussels, and made two transactions in Germany prior to ProFagus. In May 2014, it underwrote a €27.5m unitranche bond financing for the acquisition of German pub chain Sausalitos by Ergon Capital Partners. Nine months later it underwrote a €15m unitranche bond as part of the recapitalisation of German interlinings producer Kufner, a portfolio company of Austrian private equity firm Value Management Services.
Lasting ties
In a statement, Kartesia spoke of the "strong ties with all parties involved" that enabled its latest deal to take place. The strongest tie connecting both parties is likely to be Markus Geiger, Kartesia's head of the DACH region. Prior to joining the alternative lender two years ago, Geiger worked at Steadfast from 2006 to 2014 and was one of the people responsible for the initial investment in ProFagus.
Geiger describes the German market, which still relies heavily on traditional debt provided by banks, as "generally challenging", adding that "lenders like us are always looking for special situations". Nevertheless, he says: "The opportunities are there. What you definitely need is a solid network of advisers, financial sponsors, banks and auditors to generate deals that might not be openly available."
ProFagus primarily manufactures charcoal, fire lighters and fire wood. From its production facility in Bodenfelde, the company processes domestic, untreated wood from local wood processing facilities and surrounding forests, thus removing the need to harvest wood for production. It produces around 25,000 tonnes of charcoal, employs 160 people and has a turnover of €45m.
Since Steadfast's initial investment, the business has broadened its product range by capitalising on by-products. During the process of making barbecue charcoal, it now extracts acids and aromas from burning beech wood and sells these to pharmaceutical and food producing companies including meat and fish producers. The debt replacement package supplied by Kartesia will enable the business to increase its focus on this area.
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