German Forklift Maker Kion Sets Bond Market Debut
German forklift truck maker Kion is set to make its debut on financial markets with its first ever corporate bond, helping to pave the way for a stock exchange listing in the medium term.
In a statement on Friday, the industry No. 2 behind Toyota Industries said the offering would start next week with net proceeds going to refinance its syndicated debt.
A source familiar with the matter said the issue of senior secured notes would likely be at least €400 million ($565 million) in size, or about 15% of its overall net debt, and would serve as a calling card for further bond sales.
"If you look at the private equity owned companies that classically go public on the stock exchange, they usually start with issuing a high-yield bond," the person said.
"Any listing though would be in the mid-term, and certainly not this year."
Kion was purchased by KKR and Goldman Sachs for €4 billion in 2006 after parent Linde sold its material handling business to focus on industrial gases.
The company, whose outstanding net debt amounted to €2.6 billion at the end of last year, is financed almost entirely through a first-lien loan from a banking and investor consortium, and the lion's share of its debt matures in 2014 and 2015.
Through the issue, Kion would create a basis for market transparency by publishing quarterly results, gain greater financial flexibility, broaden its investor basis and stretch its one-sided maturity profile towards 2018.
Manufacturers In Demand
Once the debt risk clustered around 2014 is done away with and Kion becomes better known to investors in financial markets, it could then take the final step and tap equity markets for financing through a stock market flotation.
Bankers say market demand for German manufacturers is robust thanks to their strong positioning in emerging markets, where Kion sells over a quarter of all new forklift and counterbalance trucks.
"Of all of the markets in Europe that an institutional asset allocator would be looking at, Germany would be one of the markets that you would go overweight in at the moment," said Adam Young, joint global head of equity capital markets at Rothschild in London.
"Clearly the whole industrial manufacturing orders situation there is far ahead of every other market in Europe. So if you've got some institutional cash that you want to put in the equity market, putting it into mainstream German manufacturing is not a difficult decision to take right now."
Kion posted a 15% sales hike to €3.5 billion last year and underlying profit of €462 million. Its free cash flow, a key metric for indebted companies, amounted to €76 million.
