LevFin Wrap

Paper Pushers cut loans pricing; Revlon Tip Sticks

By Huw Simpson (huw@9fin.com), Laura Thompson (laura@9fin.com)

High yield was more or less eclipsed by the Lev loan market this week, as swathes of repricings looked to take advantage of tight spreads. 

High Yield - Primary

The largest offering of the week came from IQVIA, the US healthcare data service giant, marketing €1,450m in dual tranche Senior Notes due 2026 and 2029 (Ba3/BB). Proceeds from the deal will refinance the €1,425m 3.25% Senior Notes due 2025(Ba3/BB+). 

Tranche allocations emerged on Wednesday, with €550m on the shorter piece at 1.75% (tight end of 1.75-1.875% PT, and IPT 2.00-2.5%), and the bulk given to the longer dated €900m piece, pricing at 2.25% (tight end of 2.25-2.375% PT, IPT 2.5% area). The five year tranche now marks the lowest non-telco EUR coupon printed this year.

Moody’s believes credit metrics are set to improve throughout 2021, with double digit EBITDA growth thanks to strong underlying demand in the group’s CRO and technology & analytics business.

No More Paper Pushing

Having announced investor calls last week, pulp and paper company Norske Skogofficially launched its €150m Senior Secured FRNs due 2026 on Tuesday (unrated). IPTs on the intraday refinancing were sent out at E+550-575 bps, with books already covered by indications of interest, and final pricing settled at the tight end for par.

As demand structurally declines for publication paper (CAGR -6.9% 2008-2020), the group plans to enter the packaging market, transitioning toward the growing and high margin containerboard sector, where it hopes to become a top-10 recycled containerboard producer (Smurfit Kappa currently occupies the top spot). Expected to start up in 2023 and require around a €350m investment, the converted facilities hope to contribute around €70-80m in EBITDA from 2025-2026. Norske expects 70-80% of the €350m capex to be funded via new project financing at a cost of 250-300 bps.

Elsewhere, UK-headquartered natural gas firm Siccar Point Energy announced investor calls on Monday, hoping to refinance its existing $200m SUNs. New $200m 5NC2 SUNspriced on Friday morning, offering a chunky 9% coupon with a slight OID of 99 (IPTs 97-99). DNB Markets, Pareto Securities, and SpareBank 1 ran the deal. Outpacing Danaos, and in contrast to IQVIA, SPE’s Notes printed the highest coupon this year.

In other news

Lenders to Revlon, the US cosmetics firm, were the unexpected recipients of a favourable court ruling this week, which determined that the $500m mistakenly wired by loan agent Citi was “final and complete” and “not subject to revocation”. You can imagine the upset for those funds who returned the accidental payments. Citi plans to appeal.

Bain Capital has reportedly hired a trio of banks to explore an IPO exit to Autodis, the French car parts manufacturer. Acquired on an EV of €615m in 2015, Reuters suggests the latest valuation could be more than €1.5bn.

On Wednesday, Thyssenkrupp halted talks with Liberty Steel on the disposal of its steel division on valuation disagreements. Dr. Klaus Keysberg commented, “We opened the door for negotiations, but in the end our ideas about the corporate value and the structure of the transaction were far apart.”

Loans Primary - “Get me out of these repricings”

Buysiders continued to grumble on the glut of repricings and refis in the market this week. “January had a good pickup of new lev loans, but it’s been a fairly boring couple of weeks since then,” admitted one buysider, reflecting a general sense of eagerness for fresh meat. A second was more emotive: “Get me out of these repricings please.”

9fin data shows that 62% of loan issues in Q1 so far have a use of proceeds that includes refinancing and/or repricing:

Loans in the market continue to bear this out. Alongside a refi, French roofing firm Edilians is partially propping up a potentially eyebrow raising €111m dividend recap to owners Lone Star with its new seven-year €660m TLB (B2/B, Moody’s/S&P), guiding at E+400-425 bps and an OID of 99.6. Buysiders expect to see more sponsor-friendly moves like this while demand is high - “whether the fundamentals of the business support them is a different question,” remarked a third buysider. 

Another partial refi, Netherlands-based healthcare firm Mediq’s€500m TLB (B2/B, Moody’s/S&P), will also repay its purchase price by Advent. The loan will repay an earlier €350m 2022 TLB, pushing Mediq’s maturity wall out to 2028. Funds could also reportedly back the sale of Mediq between two Advent funds. The sponsor, which took the firm private for €819m in 2013, abandoned a €1.2bn sale in January, with Bain and CD&R the remaining bidders, according to Media reports.

And, of course, repricing muddles on. US BMC Software’s now $2.884bn TLB (B2/B-, Moody’s/S&P) firmed at L+375 bps from L+375-400 bps, while its now €1.2bn TLB(B2/B-, Moody’s/S&P) firmed at E+400bp from E+400-425 bps guidance. Prior spreads stood at L+425 bps and E+475 bps. The company transferred $530m from its dollar loan to its euro loan in the process due to increased euro demand, buysiders said. 

New repricings, meanwhile, include Clarios and Solenis. US automotive batteries supplier Clarios seeks to squash margins on a jumbo dual-currency loans package, powering down margins on a $4,072m TLB from L+350 bps to L+300-325 bps and from E+375 bps to E+325-350 bps on a €1.89bn TLB. Solenis, meanwhile, which produces water treatment chemicals, wants to clean up its current E+425 bps €783m TLB to E+400-425 bps, guiding with an OID of 99.875.

Away from refi land, Dutch pharma firm Centrient is looking to top its acquisition of India’s Astral SteriTech, announced on 15 February, with a €180m add-on. The first-lien TLB is guided to pay E+475 bps with a 0% floor and margin ratchet. Centrient itself is relatively fresh off the shelves, being bought by Bain Capital in 2018, backed by a €335m TLB.

Finally, several loans wrapped up this week. Luxembourg-based fund administration provider Alter Domus’ €600m-equivalent loan, funding an acquisition of Strata Fund Solutions, came in at E+350 bps on a bullet-repayment €400m TLB and L+375 bps on an amortising $245m TLB. The euro offering launched at 350-375 bps and the dollar at 375-400 bps.

Automotive retail software business CDK International also wound up its €585m TLB(B2/B-, Moody’s/S&P) this week, upsized by €70m and firming at E+400 bps after guidance of E+425-450 bps. The funds support its $1.45bn acquisition by Francisco.

And keeping up with the market’s growing ESG taste, French telecom firm Sogetrel also finalised its ESG-linked €230m TLB to back a buyout by management and a consortium of investors led by Andera Partners. 

Nordic building materials firm Stark Group also priced its seven-year €1.345bn TLB(B+/B2, Fitch/Moody’s) at E+350 bps after wooing investors with its +/-7.5 bps ESG margin ratchet. Buysiders were impressed by a margin that actually penalised based on increased greenhouse emissions, where any proceeds would be reinvested in growing Stark’s green efforts (read more here).

High Yield - Secondary

Secondary movement was fairly tepid on the week, tracking a very slight -0.05 pt decline (39% +0.40 pts | 57% -0.36 pts). By Industry, Energy was the only sector on the up (+0.40 pts), while IT (-0.28 pts), Industrials (-0.10 pts), and Healthcare (-0.09 pts) saw small slides.

Among single names, French mining and metallurgy group ERAMET saw the greatest gain on the week, as it’s 2025s and 2024s traded up +4.5 / +1.5 pts on the back of ‘resilient’ H2 earnings. French confrère Vallourec, provider of ‘Tubular Solutions’ to the energy market also marked gains following earnings, the 2022s and 2023s were up +3.5 / +2.5 pts to around 90. As reported, the group unveiled the terms of its long awaited restructuring earlier this month, targeting a debt reduction of just over half to €1.75bn.

At the other end, K+S SUNs have traded off -1.5 to -3.5 pts this week on news that BaFin are examining the accuracy of certain impairment losses recognized in their Dec-19 and Jun-20 statements. BaFin has ‘concrete indications’ that the €2bn impairment requirement for the Europe+ operating unit may not have been determined correctly, and should have been recognized in full or part at an earlier date. The company states it will provide further information upon request by DPR with ‘maximum transparency’.

Finally, iTraxx Europe Crossover was quoted at 248 bps on Friday, moving just outside the 244 bps level seen last week. It was more of the same in fund flows, European domiciled HY credit funds continued last week's inflows (+$196m), and US High Yield likewise (+$323m), meanwhile Global High Yield saw further outflows (-$802m).

Loans Secondary - On the hunt 

Secondary buysiders were frequently as grumpy as their primary peers this week: with demand this hot, “it’s hard to find companies at the right price point to buy into,” admitted one secondary buysider. “Of course, there are opportunities, but there’s a general feeling that loans are overpriced.”

This feeling of frustration roughly bears out in the numbers. Where 9fin recorded price movements, both euro and dollar loans stayed buoyant at +0.2pts up from last week each. 

On the euro side, Energy companies led, trading at +0.8 pts on last week. IT (+0.6 pts) comes up next and both Communication Services and Consumer Discretionary (+0.3) follow in joint third. 

Only one industry saw downwards movement: USD Energy (-0.2 pts), dragged down by Norway’s offshore seismic surveyor Petroleum Geo-Services (L+700 bps $377m TLB). The sector is still suffering as oil companies, despite an uptick in oil prices, remain cautious on offshore seismic spending – competitor, Oslo-based Polarcus, defaulted on its bonds and loans in late January.

Looking at the individuals, this week’s winner was German cloud service provider PlusServer’s E+375 bps €190m TLB and E+375 bps €70m TLB, both of which floated +8.5 pts to a still-shaky 55.25 apiece. PlusServer was bought by BC Partners in 2017 for an EV of €397 million.

Downsides, meanwhile, were minimal. Belgian outdoor clothing retailer AS Adventureagain took this week’s trophy, continuing the downhill trek on its L+500 £200m TLB, this week -2.0 pts into the 40s (48.50). Elsewhere, vegan food producer Upfield’s PLN2.09bn (€465m) TLB is down -1.5 bpts as Europe’s diary industry lobbies for a new law that would ban plant-based products from even evoking diary imagery on their goods.