RLPC-Baxi gets breathing space with standstill accord

LONDON, June 24 (Reuters) - British boiler maker Baxi [BCPRTG.UL] said on Wednesday it had secured a standstill and waiver agreement on its leveraged loans, which will allow it to avoid breaching covenants and technical default.

In mid June Baxi warned that it was in danger of breaching cashflow and leverage covenants when they were next tested at the end of June.

Baxi also warned that if merger talks with Dutch heating systems group De Dietrich Remeha did not lead to an agreed transaction before June 27, it would not be able to make 22.3 million pounds ($36.94 million) of loan repayments that were also due on that day.

Lenders have given the company breathing space by agreeing not to demand repayment of the loan by accelerating Baxi's debt on or before August 31. Most lenders also agreed to waive any breach of cashflow and leveraged covenants until August 31.

Baxi also agreed a waiver with most of its mezzanine note lenders to ignore a cross default on the note agreement, which would be triggered by any default under the senior facility.

Baxi said in mid June that it was in discussions with the smaller Dutch rival over a merger to boost its capital position and create a company with a turnover of 1.8 billion euros ($2.53 billion) and 6,400 employees. It has not yet given an update on how the talks are proceeding.

The proposed merger will be structured as a share swap in which Baxi's shareholders - private equity firms BC Partners [BCPRT.UL] and Electra Partners - will invest around 100 million euros of additional equity in the new group as minority partners, with Remeha Group holding the majority.

Remeha and Baxi Group have entered discussions with their lenders to amend their existing financings which will be kept in place.

Baxi Group last tapped the loan market in June 2005 to finance the add-on acquisition of Spanish heating business Corporacion Empresarial Roca. After that financing, which was arranged by Royal Bank of Scotland, Baxi's senior debt totalled 574 million pounds.

On Wednesday Baxi's institutional term loans were trading at 79.67 percent of face value in the European secondary loan market, having nearly doubled from lows of 38.25 percent in January, according to Thomson Reuters LPC data. (Reporting by Alasdair Reilly; Editing by Jon Loades-Carter) ($1=.6036 POUND) ($1=.7106 EURO)