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Banks step up efforts to sell Versatel loan: sources

By Claire Ruckin

LONDON (Reuters) - Banks are redoubling efforts to sell the 465 million euro ($619.50 million) leveraged loan backing private equity firm Kohlberg Kravis Roberts & Co.'s buyout of German telecoms company Versatel before year-end, sources said on Thursday.

Banks are offering several institutional investors deeper discounts to get rid of lingering exposure at a loss. KKR announced in May it was buying Versatel's shares for 246 million euros from Apax Partners, Cyrte and United Internet .

Arranging banks Commerzbank, Credit Agricole, Deutsche Bank and HSBC have increased the interest margin on a 350 million euro term loan B by 50 basis points (bps) to 500 bps over EURIBOR, with an Original Issue Discount (OID) of around 92 to 93 being discussed, investors close to the deal said.

Banks have stepped up efforts to sell a 5 billion euro backlog of 'hung' leveraged loans and bridge loans to high-yield bonds which could not be issued after the market turned in August.

Banks' willingness to take a bigger loss to clear their books before the end of the year is attracting investors including credit funds, CLOs and other banks to buy the paper, which offers good yields.

Standard & Poor's Ratings Services in July lowered its long-term corporate credit rating on Versatel to 'B' from 'B+', but the company's performance has improved since then.

"Versatel's recent trading has been OK. Given the lack of primary deals in the market and the fact that investors have cash to spend, it's a relatively good time to get the deal out there and sell it," one investor said.

Versatel's loan was originally launched in June but the syndication process faced delays due to difficult macro-economic conditions.

The company has deleveraged since the loan was launched in June. The deal was launched with net debt to adjusted 2011 EBITDA of 2.5 times, which has dropped to 2.25 times due to improved performance and cash levels.

Another investor said: "There is a flight to quality and if we can get the right yields we definitely have the money to put to work."

(Reporting by Claire Ruckin; editing by Tessa Walsh and Helen Massy-Beresford)

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