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Keter creditors tap advisers as window to refinance $1.3 billion debt narrows - sources

By Chiara Elisei and Pablo Mayo Cerqueiro

LONDON (Reuters) - A group of large creditors to Keter has tapped advisers as a deadline for the plastic furniture maker to repay 1.2 billion euros ($1.3 billion) of debt fast approaches, sources with knowledge of the situation told Reuters.

The creditors are working with financial adviser Houlihan Lokey and law firm Milbank to engage with the Luxembourg-based company and weigh options to address its debt, said the sources, a sign of the pressing need to find a solution.

Keter, which makes resin-based household and garden products and is controlled by private equity firm BC Partners, struggled to refinance last year, one of the biggest casualties of the disruption that hit highly indebted companies in the region.

The upcoming loan maturities in October could put pressure Keter's owners to inject more cash into the business to reduce its indebtedness and facilitate an extension of the loans.

Keter, which also has Canada's PSP Investments among its shareholders, is being advised by PJT Partners and law firm Kirkland & Ellis, said the sources, who declined to be named discussing private matters.

BC Partners, Houlihan Lokey, Keter and PSP Investments declined to comment. Kirkland & Ellis, Milbank and PJT Partners did not immediately respond to a request for comment.

Founded in 1986, BC Partners has grown to manage more than 40 billion euros in investments today.

It acquired a majority stake in Keter in 2016 for 1.4 billion euros and has since supported the company's expansion, including via acquisitions.

The sponsor has had a tough few months, having agreed in December to hand the keys of bridal-wear designer Pronovias to the company's lenders in a debt-for-equity swap.

Keter had shelved its original refinancing plans in January 2022 in the hopes of getting cheaper funding down the road, according to press reports.

But markets soon worsened, especially for sales of risky assets such as leveraged loans, as the war in Ukraine rattled investors and central banks rolled out aggressive interest rate rises globally. This left Keter with a narrowing refinancing window in worsening market conditions.

It has since touted various options, including raising some junior debt and tapping private debt funds, but has so far been unable to secure new funding to refinance maturing loans, said the sources.

When a company's debt is due within 12 months, it becomes current, which may raise questions from auditors at the time of signing full-year accounts.

Keter's maturing loans have been trading at about 70 to 80 cents on the dollar.

In November, Moody's cut the rating on Keter's debt to Caa1, which is seven notches below investment grade, reflecting increasing default risks. A month later, Keter withdrew plans to pursue an initial public offering (IPO) in the United States, as per a regulatory filing.

Keter generated around 1.4 billion euros in sales in the 12 months to June 2021, according to its draft IPO prospectus. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) for the same period totalled around 232 million euros.

($1 = 0.9393 euros)

(Reporting by Chiara Elisei and Pablo Mayo Cerqueiro, Editing by Elisa Martinuzzi and Sharon Singleton)