LBO France portfolio company defaults

According to reports, LBO France portfolio company Terreal has defaulted on its EUR915m all-senior loan arranged by ING. The loan is currently on the secondary market with a 22-32% discount indicating the distressed situation.

The breached covenant states the company must be at 8x leverage and is now at 8.4x. Lenders must now find a solution with LBO France or accelerate the loan. ING has hired KPMG as advisers.

LBO purchased Terreal in an EUR860m secondary buyout in 2005 from The Carlyle Group and Eurazeo (September 2005, page 22). The original debt in deal was EUR795m, however LBO France recapitalised the company to EUR915m.

Terreal makes clay construction products used for roofs, structural work and wall claddings. The economic downturn and subsequent fall in the housing market caused a drop in demand for the terracotta company.

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