LevFin Wrap

Boparan Plays Chicken With Spreads

By Huw Simpson | Head of Research & Analytics | huw@9fin.com

Strong demand for risk helped several credits out the door last week, from stressed refinancing to fallen angels still commanding orders from yield hungry Investment Grade investors.

Fully fledged

Last Monday saw the launch of one of this year’s final stressed refinancings, as chicken producer Boparan marketed £475m in Senior Secured Notes due 2025 (B3/B-/B). Proceeds from the Notes - alongside £83m in cash and £160m from the Fox’s disposition - will refinance the upcoming 2021s and Loan Facilities. With covenants substantially similar to the existing 2021 Notes, it was a relatively conservative package, notable for the absence of grower baskets. However, significant EBITDA add-backs include £28.3m in adjustments (21% of total), including annualisation impacts of ‘initiatives’ and Covid-19 add-backs - although we questioned if the latter are permissible under the covenant definitions of leverage.

Owned by the secretive ‘Chicken King’ Ranjit Singh Boparan, the group initially fell fowl of the pandemic, before soaring lockdown poultry demand and disposal proceeds helped bankers push the old broiler over the line. Giving management much needed breathing space on maturities, the deal successfully priced on Thursday at 7.625%, tight end of price talk in the 7.75% area. 

The successful disposal of Fox’s biscuits has helped the group move on its ‘Poultry Plus’ strategy, colourfully illustrated in its latest “volcanically scorching” bondholder report.

Another name which suffered during the pandemic, European B2B information service provider Infopro Digital marketed €685m in fixed and floating Senior Secured Notes due 2025. Both tranches guided IPTs in the low 6s, after which splits emerged for €485m fixed and €200m floating notes. The fixed notes were boosted to €700m before the coupon settled at 5.5%, with the floating pricing at E+550 bps (OID 98.5). Covenantsallow for portability day one (5.5x), and include a number of issuer friendly changes over the existing Notes. In addition, IPO Debt Pushdown language was also added - we note Sponsor TowerBrook acquired the business in 2016.

Beached Party

In a sharp turn of course, US cruise operator Carnival issued its first unsecured Notes of the year, dropping the security in order to avoid a negative pledge on older debt. Initially offering $1,000m and €350m in Senior Notes due 2026, both tranches were upsized on Friday, the dollar portion to $1,425m and euros to €500m (B2/B). Issued only months ago, the secured notes were yielding around 5-6% pre-announcement, having traded exceptionally well to yield far inside their mostly double-digit coupons. IPTs of mid-to-high 8s tightened dramatically to talk in the 8% area, and again for final guidance of 7.625-7.75% (across both currencies). Final pricing came at the tight end, late on Friday for 7.625%. 

Last Orders

On Thursday, Stonegate revealed a £120m privately placed tap of its 8.25% Senior Secured Notes due 2025 - priced at 99 (in early November they had dipped to 93). Announced as the UK crossed the halfway point of its month-long lockdown, proceeds from the offering will be used ‘for additional liquidity and general corporate purposes’. An interim trading update published on Wednesday said the positive upward trend seen during the third quarter was hampered by government restrictions, including the ‘rule of six’, tiered lockdowns, and a 10pm curfew - which negatively impacted volumes by 5-10%. Estimated cash burn during lockdown is c.£6m per month when excluding rent and interest expense.

Also printing this week two fallen angels - Renault and ZF - graced us with their presence, drawing strong demand from IG accounts. 

Renault launched on Monday, targeting €750m (min) in Senior Notes due 2026(Ba2/BB+), before increasing to €1bn on books in excess of 3.6bn - tightening from IPT of 2.750-2.875%, with the final yield set at 2.375% (par reoffer). 

Completing the pair, Auto Parts manufacturer ZF then hit the road with €500m no-grow Senior Notes due 2027 (Ba1/BB+), books were over 4.5bn (pre-rec) and IPTs in the 3.625% area was quickly whittled to price the deal at 2.75% (yield 2.875%). Adding to the tally, we’ve now tracked at least nine new fallen angels issuing ~€9bn in 2020 to date.


Secondary continued to built on recent gains, locking in average +0.50 pts for the week (71% +0.84 pts| 27% -0.33 pts). In a turn for the books, it was Industrials (+0.97 pts) who led the charge, followed by Energy (+0.83 pts) and Real Estate (+0.75 pts), while IT (+0.08 pts) and Healthcare (-0.09 pts) were showing flatter. 

Spreads continued their post Pfizer tightening, with the 5Y iTraxx Crossover hitting 283 bps today; the index was quoted at 296 bps last Friday, and 315 bps the week before. Fund flows into HY were up 0.2% this week (increase of 3.0% YTD), with HY ETFs losing 0.2%, but ETFs AUM are still up an impressive 11.5% YTD.