London, Nov 17 - Final bids for the biscuit unit of Spanish food group SOS Cuetara are expected in the next two to three weeks, bankers close to the deal said.
Ongoing difficulties in securing financing in a thin and illiquid syndicated loan market could reduce the company's ability to achieve a 300 million euro ($378.7 million) price tag.
"We believe 300 million euros is too much. The way we see it here, the price will be more in the 220-250 million euros range," one banker said.
The mismatch in price expectations between buyers and sellers continues to restrict merger and acquisition (M&A) activity.
Private equity buyers are crippled by a lack of financing as deleveraging continues, while trade buyers are seeing their own stock plummeting in value along with targets.
"We're hoping to be able to achieve 300 million euros, but as you know the process works like an auction," a source close to SOS Cuetara said.
SOS Cuetara appointed Ahorro Corporacion to conduct the sale of its biscuits unit, which kicked off in September, sources said.
"At the end of the day, expectations are not being met in most of the sale processes," a leveraged specialist said.
TOUGH SECTOR TO FOLLOW
Around five companies are said to be currently interested in SOS' biscuit unit, including Nutrexpa, Gullon, Delaviuda, Kraft Foods and Apax-owned Panrico, while a source close to Dulcesol said the company was no longer interested in the sale.
Bankers said that although cash-rich trade buyers could be seen as preferred buyers, private equity firms have still been able to finance some smaller-scale buyouts with club loans.
However, pricing and structuring leveraged loans for consumer-related sectors remains challenging in Europe since Lehman Brothers' collapse in mid September, bankers said.
"We are looking at it (a leveraged loan) as a club deal, we are not certain about underwritings between now and the end of the year," the leveraged specialist said.
Secondary loan prices for Spanish sector peer Panrico remain under pressure in line with a weak market, which could hamper the chances of sell-down of a similar leveraged loan.
"Panrico is below budget at the moment, so there's no real reason to do another biscuit deal in Spain," a third banker said.
Panrico's senior term loan B was quoted at 68.9 percent of face value according to RLPC data, while the group's second lien tranche was quoted at 53.83 percent and its payment-in-kind (PIK) tranche is 24.5 percent of face value.
Panrico, which counts brands such as Donuts, Chiquilin and Bollycao in its stable, was acquired by private equity sponsor Apax Partners in 2005 backed by a 650 million euro leveraged loan.