LevFin Wrap

Eat your Greens

By Huw Simpson | huw@9fin.com, Kat Hidalgo | kat@9fin.com

High Yield - Primary

After two short weeks, primary was back to a full tasting menu complement, offering seven courses of new deals. With plenty of dietary options across sectors ranging from manufacturers to real estate, telecoms, retailers, payment providers, and a sugar producer. There was also a distinct green theme, as issuers build on the success of recent issues in their space.

Floor wars

The first boots on the ground, German manufacturer of engineered wood products Pfleiderer priced a €750m offering of sustainability-linked Senior Secured Notes due 2026 (B2/B/BB-). The deal was split between a €400m fixed and €350m floating tranche, with proceeds to repay a €445m Term Loan and distribute a €331m dividend to sponsor SVPGlobal. IPTs of 5% area and 500-525 bps cut down to land at 4.75% a piece on pricing.

On the sustainability element, a 0.25% coupon step-up ratchet is linked to two targets. A commitment to increase the percentage of recycled wood use to at least 44% by 2022 and 50% by 2025 (from ~40% in 2020), and reduce greenhouse emissions to 173.9 kT by 2025 (220.2 kT in 2020). For ESG enthusiasts, we highlighted Pfleiderer’s role in the ‘Chipboard Cartel’, after which fellow Deutschländer and laminate flooring manufacturer Classen filed a case against the firm seeking damages of €55m on overpricing from 2002 to 2007. As of 2021, the Court of Appeal confirmed the initial judgement against the company and Pfleiderer has filed a complaint with the German Federal Court of Justice.

Legals contained a restricted payment carve-out to allow proceeds from the sale of the groups Silekol Division - a resin manufacturer in central eastern europe. The leverage threshold was initially set at 4.9x - the marketed net leverage - although (now rare) investor push-back trimmed the test half a turn to 4.4x, meaning the group will now require meaningfully improved performance before any cash can be extracted.

Next up came Tereos, the French sugar producer, which was out with a €100m tap of its existing €300m 7.500% Senior Notes due 2025 (B+/B+). The expensive notes have traded well since issuance in Oct-2020, meaning the additional notes priced at 106.75 after a €25m upsize, yielding 5.79% to maturity. Proceeds are to pay down a Feb-2019 Term Loan facility and for general corporate purposes.

Green foundations

Last month, Spanish realtor Via Célere became the first residential developer to issue a green HY bond in the Euro market, pricing €300m of Senior Secured Notes at 5.25%(B+/BB). This week it was the turn of Neinor Homes, another developer in Spain, who came with more green for the housing sector, offering €300m 4.500% Senior Secured Notes due 2026 (B+/BB). 

Proceeds from the debut deal will fund green buildings and energy efficiency in twenty two projects reviewed for the issuance. Legals were unremarkable, although we note the presence of structurally senior asset level debt, with LTV capacity for further incurrence.

The Spanish real estate market is highly fragmented, and Fitch notes a regulatory environment that is less favourable than peers in France and Germany, leading to higher cash flow volatility, smaller scale and higher leverage. 

Consolidating payment plans

Elsewhere, european “paytech” leader Nexi (Payments) announced €2.1bn in new split maturity Senior Notes due 2026 and 2029 (Ba3/BB-/BB-). The group was formed through the combination of Nexi, Net, and SIA, and according to management will be the largest company of its type in Europe, by 2020 EBITDA. As of Dec-2020, half the group’s revenue comes from merchant services, a third from card and digital payments, with the remainder from digital banking. 

Together with €1,000m of seven year convertibles, proceeds from the offering will prefund the Nets and SIA merger, extend maturities, and cut interest costs. The €1,050m 2026’s cleared at 1.625% (the group’s lowest to date), and the €1,050m 2029sat 2.125% (the group’s longest tenor to date) - both at the tight end of IPTs.

Predictive text

Italian crossover INWIT was also in market, pricing €500m in Senior Notes - its third bond issue. The ten year notes finalised at 1.75% (OID 99.059), and were swiftly followed by a €500m four year sustainability-linked loan (BB+/BBB-). Together the proceeds will pay off a €1,000m Term Loan.

Never far from primary, and in a - perhaps partial - 9fin deal prediction, France’s second largest telecom operator, Altice France (SFR) launched €350m (min) and $2,250m (min) Senior Secured Notes due 2029 (B2/B). IPTs emerged in the 4% area for the EURs and 5.00-5.25% for the USDs, which together will repay a portion of the $5,190m 7.375% SSNs due 2026. Both tranches upsized, with the €400m 4.00% SSNs and $2,500m 5.125% SSNs pricing in-line with initial talk.

The group announced the sale of its 50.01% stake in Hivory to Cellnex for an EV (at 100%) of €5.1bn, which is expected to close in the second half of the year. The group intends to designate Hivory as an unrestricted subsidiary, with proceeds from the disposal expected to be used to repay debt of certain Holdco’s and unrestricted subsidiaries of the group.

Covenants on the deal are identical to the existing 2029 SSNs, and use a L2QA metric for EBITDA, which juices EBITDA to €4,301m versus an LTM of €4,107m.

Something for the journey?

Swiss-headquartered duty free and duty paid travel retailer Dufry rounded out the week, offering a €850m (equiv.) two-parter in Senior Notes due 2026 / 2028 (B1/B+). Publicly listed, the group generates the majority of its sales from airport retail (86.1% in FY 2020), and of that around half in EMEA countries. Sales dropped 71.1% YoY for Dec-2020 due to closures during the pandemic, although by the end of Feb-2021 around 1,300 of the group’s 2,360 shops had reopened - representing around 60% of sales capacity.

Initially suggested as €400m (min) due 2028 and CHF300m (min) due 2026, the EURs jumped up to €725m in bookbuild, while the CHF leg remained unchanged. Price talk of 3.75% area (EURs) and 3.875% area (CHFs) trimmed to 3.375% and 3.625% respectively - landing at par. Proceeds will be used to refinance portions of the 2017 EUR and USD term loan facilities, with the remainder held as cash, to be used to repay drawn amounts on the RCF during the second quarter.

You’ve Coty be kidding me

Finally, US beauty products manufacturer Coty had war paint fully applied for it’s EBITDA adjustments on Thursday’s $750m Senior Notes offering (B3/B). Consumers have shunned make-up during lockdowns, leading to a 25% decline in YoY sales to Dec-2020. Helpfully, the covenant adjusted EBITDA metric adds-back 535% to incorporate both lost revenues and additional costs during the period, alongside expected synergies. Add-backs to the adjusted figure (used for calculating covenant metrics) topped out at 706% in FY 2020 - previously these amounted to 63% and 38% in FY 2019 and FY 2018.

In other news

  • Larval Litigation - Marks & Spencer took action against Aldi, alleging trademark infringement with their “Cuthbert the Caterpillar” cake. The move was to “protect Colin, Connie and our reputation”. M&S also extended the relaxation of it’s covenant tests on a £1.1bn RCF, up to and including the period to March 2022.

  • On Friday afternoon Birkenstock sent out notice for €430m in Senior Notes due 2029, which together with a €750m USD-equivalent and €325m Term Loan B will fund the buyout by L Catterton. The roadshow launches Monday, commitments on the loans are due 26-Apr.

Leveraged Loans - Primary

Conditions remain attractive with issuers launching further refinancings and repricings and PE houses take advantage of friendly dynamics; however buysiders are growing weary of the lack of new issuance and tight pricing on sometimes badly-rated paper. Buysiders are scratching their heads on some deals, asking “how is this flying?” as one source put it.  

LBOnanza

LBOs in healthcare and consumer discretionary drove activity this week, with two such deals in Germany. Birkenstock jumped in with both feet with a €1.075bn-equivalent dual-currency TLB to back its acquisition by L Catterton. This includes a $892m (€750m-equivalent) tranche and a €325m tranche. S&P gave both the company and the tranche a single B rating.

The seven-year term loan Bs are offered at L/E+375-400 bps, with two 25 bps leverage-based step downs. Both come with a 99 original issue discount and 101 soft call protection for six months. The dollar-denominated portion is offered with a 0.5% floor and amortizes at 1% per annum, while the euro-denominated portion is offered with a 0% floor and has a bullet amortization structure, according to LPC. The TLB will sit alongside €430m in other senior unsecured debt.

L Catterton, which acquired the company in February, could be aiming to pursue a similar strategy as Permira did with Dr. Martens, mainly surrounding e-commerce expansion. Both companies have a history of founding families still involved in the business, strong brand heritage and an evangelical customer base.

Dr. Martens stomped on to the London Stock Exchange’s books in February, with a listing that valued the company at £3.7bn. Permira was also involved in the sale process for Birkenstock, which valued the business at €4bn, according to the Financial Times.

Commitments were due on Thursday for Cooper’s €920m term loan B backing the drug manufacturer’s buyout by CVC. The single B-rated €920m first-lien tranche will sit alongside a CCC+ rated €235m second-lien tranche and an €160m RCF, with a maximum senior secured net leverage springing covenant of 9.75x. The covenant-lite seven-year TLB priced at E+375 bps subject to a leverage ratchet, with a 0% floor.  Buysiders were bullish on the deal, despite a high S&P Ratings-adjusted debt to EBITDA ratio at 7.5-7.7x at the end of 2021 and were impressed by the company’s resilience to the pandemic and its strong product diversification, said a market source. To read our preview click here.

Switzerland-headquartered Ameos’ €600 TLB is also in syndication, backing its €1.5bn LBO by ICG. The covenant-lite seven-year loan is guided at E+350-375 bps, subject to a margin ratchet. The offering marks the first private hospital operator to come to market in 2021 outside of France with its DACH focus. The prospect of a pan-European private hospital acquisition race, is likely to put a smile on buysiders’ faces, with several telling 9fin they like the space. The deal follows Almaviva Sante’s €290m 2028 E+375 bps TLB and Elsan’s €350m 2028 E+350 bps TLB, both of which are rated B+ by S&P. To read our preview on Ameos click here

Refis roll on

Another example, Ramsay Sante, the largest  private hospital operator to hit the market, has priced its 2026 €700m, which it increased from €675m, at a healthy E+225bp, against initial guidance of E+250bp, and 99.75. The €750m 2027 tranche, which was also initially a €675m tranche, printed at E+275bp in line with original guidance and par against original guidance of a 99.75 OID. The loan includes an ESG ratchet worth +/-10 bps.

German market research company GfK has guided talk on its €650m TLB at E+400-450 bps with a 99.5 OID. The market research company is refinancing €640m worth of gross financial debt with the 2028 TLB alongside a €150 RCF due 2027. The company is forecasting 2021 EBITDA of €200 against a 2020 figure of €142m and 2019 EBITDA of €60m, causing some buysiders to question the sustainability of such an improvement, according to a market source. Both the company and the tranche have B+ ratings from S&P.

In what promises to be a higher-paying deal than most coming to market in 2021, Infront has launched a €300m five-year TLB to refinance an existing €450m three-year loan agreed in 2018. The Swiss sports marketing firm’s loan is currently guided at E+525-550 bps with a 98.5 OID.

In a bid to join the ESG fray, UPC has priced its $2.96bn-equivalent term loan at L/E+300 bps in line with guidance, to refinance existing $2.6bn and €800m TLBs which pay L/E+350 bps. Proceeds will also go towards introducing an ESG strategy and the loans will include an ESG margin ratchet that could rise or fall by 7.5bps. The Swiss broadband giant has a corporate family rating of B1, as does the facility.

Jazz Pharmaceuticals has guided its $2.65bn dual-currency TLB at +350-375 bps with a  99.0-99.5 OID on both tranches. The split between the two tranches is yet to be determined, but the dollar-denominated tranche will be floored at 0.5% and the euro tranche at 0%. Moody’s rated the company Ba3 and the TLB Ba2.

The financing will be combined with other secured debt, cash on hand and company stock to acquire GW Pharmaceuticals for $7.2bn. The target is focused on the discovery and development of therapeutics from its proprietary cannabinoid product platform.

Commitments were due on Wednesday for Röhm’s €977m 2026 TLB, which has a Moody’s B3 rating. Sitting on above-expected EBITDA, but also leveraged, the German plastics business is planning to refinance following a previous debacle in the leveraged loan market to support it’s €3bn March 2019 buyout by Advent International. The euro-denominated tranche had pricing guided at E+450 bps with a 99.75 OID, against pricing on the existing TLB of E+500 bps with a 86.5 OID.

Röhm is number two in an oligopolistic segment, its plans for sizable US expansion could boost EBITDA by triple digits, but substantial plant capex will impact cash flow generation prior to coming onstream. Any further increases in capacity may knock out MMA prices and reduce its revenue punch. To read our deal preview click here.

In other news

  • Greek shipping company Danaos has set sail with a $815m senior secured credit facility as part of the refinancing of its $1.3bn debt load. The four-year loan is being provided by long-term lenders Citigroup and NatWest. The financing pays a margin of L+250bp.

  • Germany-based PharmaZell has raised a €15m add-on loan and repriced an existing €290m term loan. The €305m TLB closed to pay E+400 bps, with a 0% floor at par. As well as repricing an existing May 2027 TLB, the financing will repay a drawn RCF and put cash on the drug company’s balance sheet.

  • Printing products company and Vistaprint owner Cimpress has set guidance for its $795m TLB at E+ 350-375 bps with a 0.5% floor and OID guided at 99-99.5. The facilities will refinance senior notes totalling €875m paying a 7% coupon.

High Yield - Secondary

Up again slightly on the week, Secondary made an average gain of +0.15 pts (57% +0.47 pts | 42% -0.29 pts).  By Industry, Consumer Staples (+0.55 pts) and Utilities (+0.41 pts) tracked the greatest gains, while Energy and Materials (-0.02 pts) traded flat. Healthcare (-0.13 pts) marked the only real decline for the week.

The iTraxx Crossover was seen today at 245 bps, a non-mover on 246 bps as of last Friday.

Leveraged Loans - Secondary

The secondary market stayed calm this week, moving upwards just 0.05 pts on average, but this week’s movement is notable in that no sector declined. Energy (+0.11 pts) and consumer discretionary (+0.10 pts) were the largest sector risers.

Four of the week’s five largest climbers were in the latter sector, illustrating the success of consumer discretionary this week and confidence in a return to normalcy following an accelerating vaccine rollout in Europe. Online travel agency Etraveli took off this week. Its €240m 2024 E+425 bps TLB rose 1.667-pts to 96.25. In another hopeful nod to the prospect of a return to group leisure activities, amusement park operator Merlin Entertainment’s €1.411bn 2026 E+300 bps rose 1.069 pts to 97.

Recruitment firm Alexander Mann searched for, but didn’t find success this week as the biggest faller, with its TLB dropping 1.042 pts to 95. The £200m 2025 loan pays L+550 bps.