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KKR Refinances Uralita in Its Largest European Rescue Debt Deal

Kohlberg Kravis Roberts & Co.’s asset management unit provided 320 million euros ($419 million) to Uralita SA, the Spanish building materials company, in the firm’s biggest European rescue lending deal.

The seven-year financing will help Madrid-based Uralita replace its existing bank debt and bonds, the company said in a statement distributed by Business Wire. The debt is structured as a so-called unitranche financing, a single facility blending senior and junior debt, according to Nat Zilkha, the London-based co-head of KKR Asset Management’s special situations group.

“Banks are not divesting existing distressed assets and as a result their ability to underwrite new debt financing is limited, especially in periphery countries,” Zilkha said in a telephone interview. The loan to Uralita is KKR’s sixth rescue lending deal in Europe, he said.

“We see very interesting opportunities in Spain, which has a lot of very high-quality, international market-focused companies. Uralita is a classic example of a good company with bad balance sheet,” Zilkha said.

The company’s earnings before interest, tax, depreciation and amortization fell 27 percent in 2012 to 56 million euros as sales in Spain declined, according to Uralita’s earnings presentation posted on its website. The maker of pipes, roof tiles and insulation said its debt totaled 319 million euros.

Spain’s building sector is suffering from the country’s recession as well as the difficulty finding tenants for millions of homes built during the country’s construction boom. Spanish unemployment increased to more than 6 million for the first time, the National Statistics Institute in Madrid said last week.

The outlook for Spain’s banks remains negative as recession threatens to increase loan defaults in the euro area’s fourth-largest economy, Moody’s Investors Service said on April 5.

“While we have confidence in the long-term future of Spain, it’s very early to call it has reached the bottom,” Zilkha said.

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