UPDATE 1-German forklift maker Kion sets bond market debut

* High-yield offering to begin next week

* Issue volume to begin at 400 million euros -source

* Lays foundation for eventual stock market listing
(Adds Rothschild banker)

By Christiaan Hetzner

BERLIN, April 1 (Reuters) – 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 (6201.T: Quote, Profile, Research) 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 euros ($565
million) in size, or about 15 percent 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 [KKR.UL] and Goldman Sachs (GS.N: Quote, Profile, Research)
for 4 billion euros in 2006 after parent Linde (LING.DE: Quote, Profile, Research) sold
its material handling business to focus on industrial gases.

The company, whose outstanding net debt amounted to 2.6
billion euros 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.


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 percent sales hike to 3.5 billion euros
last year and underlying profit of 462 million. Its free cash
flow, a key metric for indebted companies, amounted to 76
million euros.
(Reporting by Christiaan Hetzner; Editing by Will Waterman,
Gary Hill)
($1=.7080 Euro)

UPDATE 1-German forklift maker Kion sets bond market debut