Mid Europa carries out record refinancing despite credit crunch

Central and eastern European buyout firm Mid Europa Partners has carried out a rapid refinancing on Polish telecommunications company Aster, persuading banks to leverage the company seven-times and provide the largest ever senior credit facility in the region.

Central and eastern European buyout firm Mid Europa Partners has completed the €415 million refinancing of Polish telecommunications company Aster.

Matthew Strassberg

The refinancing package includes senior, mezzanine and payment-in-kind facilities from new and existing lenders. The deal is the largest recapitalisation in Poland and features the biggest local currency-denominated senior credit facility on a leveraged deal in central and eastern Europe. The financing was provided by a consortium of around ten banks.

Matthew Strassberg, a partner at Mid Europa, said: “In pretty bad conditions for the debt markets this was difficult to pull off, but the company’s performance was sufficiently strong to justify the recap.” The company’s ebitda has risen by a third on last year when the buyout firm bought the company in 2006 rising from around PLN 150 million ($55 million, €40 million) to 200 million.

The company is now seven times leveraged, having previously been given financing at 6.5 times ebitda, which has since declined to 4.5 times through natural deleveraging of the original debt package of around €250 million with an enterprise value of €415 million.

 “We have spent a sizable amount on upgrading the company’s network and this investment has now turned into a cash cow from a growth story. Banks have money to put to work  and they have very rationally decided to refinance on the strength of the underlying assets,” Strassberg said.

Mid Europa originally bought Aster alongside Lion Capital, which was then the European arm of Hicks, Muse, Tate & Furst in March 2003. Hicks, Muse, Tate & Furst bought Mid Europa’s stake in September 2004 because the investment was from the buyout firm’s first fund raised in 1999. “We sold out because we would not be able to take part in any consolidation opportunities as we would have been driven by the life cycle of our fund”.

However, by 2006 Mid Europa bought the company from Lion for PLN 1.6 billion, because its rival was keen to sell its legacy assets having separated from its former parent.

“We are fortunate that central and eastern Europe has been insulated from the direct hit from problems in the credit markets, but the region has not benefited in the same way from the froth. We were never able to get terms available in the west. Yet because CLOs have not played such a role for financing eastern European deals there is not the same liquidity problem,” Strassberg said.