Creditors of French building materials manufacturer Terreal are urgently seeking dialogue with its private equity owner, LBO France, after Terreal defaulted on a 915 million euro loan, Reuters reported today. Terreal failed a leverage covenant test last Friday on the loan, which specified that its leverage ratio must be eight times and the company instead reported leverage of 8.4 times, banking sources said. Terreal's all-senior loan, which was arranged by ING, is now quoted in the secondary market at a steep discount of 22-32 percent of face value, which indicates distress. Terreal's lenders now have a period ranging from three weeks to three months to find a solution and are considering their options. These include accelerating the debt, or reaching a consensual agreement with LBO France, and lenders are forming a steering committee, sources said. Terreal, which specialises in terracotta products including clay roof tiles and clay wall claddings, was bought by LBO France from private equity firm Eurazeo in 2005. Read more.