June 22, 2012 / 8:33 AM / 6 years ago

Carlyle in talks to refinance $1.9 billion Coates Hire debt: sources

HONG KONG (Reuters) - Private equity fund Carlyle Group (CG.O) is in talks with banks to refinance A$1.9 billion ($1.9 billion) in loans used to buy out Australian equipment hire company Coates Hire Ltd, two sources familiar with the matter told Reuters.

A general view of the lobby outside of the Carlyle Group offices in Washington, May 3, 2012. REUTERS/Jonathan Ernst

Carlyle borrowed the money in 2008 to fund its A$1.7 billion buyout of Coates, its first leveraged acquisition in Australia, said the sources, who declined to be named as they were not authorized to speak to the media.

Carlyle is among a number of private equity funds in the Asia Pacific that have been in talks to refinance debt, as frozen IPO markets and a lack of strategic buyers have left the funds holding assets longer than the usual three to five years.

The cost of leveraged debt has risen in recent years - for new leveraged buyouts, margins can be twice as high - and refinancing of existing loans at higher interest rates will add to the debt burden of the companies and squeeze returns of private equity funds, sources say.

The fact that Carlyle is looking for three-year money indicates the firm is protecting itself against an even longer wait for an exit, said one of the sources.

KKR has previously been in talks to refinance debt at Bis Industries in Australia, though those discussions have stalled and KKR has now put the business on the block.

TPG Capital and Affinity Equity Partners are mulling a high yield bond solution for Singapore’s United Test and Assembly Centre as a way to refinance maturing debt.

Coates Hire’s debt is not due until 2014, but the U.S. fund has started refinancing talks early because many banks from the original lender group are either no longer in business or not lending to leveraged deals in Australia.

The 2008 lenders included ABN AMRO Bank, Allied Irish Banks ALBK.I, Aozora Bank (8304.T), Bank of Ireland BKIR.I, Landsbanki Luxembourg and WestLB WDLGgf.F, according to Thomson Reuters LPC data.

Carlyle and Coates Hire declined comment. ($1 = 0.9874 Australian dollars)

Reporting by Stephen Aldred; Editing by Denny Thomas and Jacqueline Wong

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