LevFin Wrap

Resistance is Futile, Investors feast on ESGargot

Another hopeful recovery story, French catering and facilities group Elior was out on Monday with a €500m Senior Notes due 2026 offering (Ba3/BB-). LTM EBITDA sits at just €30m, compared to around €300m in FY2019, as closures limited meals served, and stricter health protocols were imposed in French schools. In response to the pandemic, the group secured a €225m PGE loan in March-2020 and lenders agreed to a covenant holiday in May (later extended through to September-2022). The estimated Covid impact was €1bn in revenue and €268m in Adjusted EBITDA for the year ended September-2020. 

Initial price talk of low 4s cut back to the 3.875% area, before settling at 3.75% with a €50m upsize. An unsecured, €100m term loan and €350m RCF also formed part of the transaction.

Next up came Ontex, a producer of disposable hygiene products - either via one of the Ontex brands (46%) or their retail customers ‘own-brand’ versions (54%) - marketing €580m Senior Notes due 2026 (B1/BB-). With existing facilities maturing in September-2022, the clock was ticking for a full capital structure refinancing, and the new Notes came alongside bank commitments for a €470m unsecured loan (including a €250m RCF). IPTs of high 3s came in slightly to price talk of 3.50-3.75%, before landing at the tight end.

As outlined in our Credit QuickTake the group has suffered margin pressure from raw material prices, with certain inputs at their highest prices since 2015 - for example, a 10% movement in the fluff pulp index (used to measure fluff prices) has a 5% impact on gross margins. Indeed, utilisation of existing inventory during Q1 means still higher raw material costs may not yet be fully reflected in Q1 figures. In June, the company announced a new strategic plan, which hopes to realise €120m in cost savings by 2023 -S&P believe these will mostly come from procurement activities and overhead cost reductions.

Making it so...

After failing to get April’s deal across the line, this week saw Picard’s return. Trimming the tenor (and call protection), an upsize on the unsecured leg, and flexibility in the book-building process helped the French frozen food group finally succeed. Alongside the enlarged €310m 5.375% SUNs due 2027, final allocations on the five year €1,400m Secured tranche emerged at €650m E+400 SS FRNs, with the Lion’s share going to a €750m 3.875% SSNs fixed tranche.

Targets on the sustainability-linked Notes were deemed ‘ambitious’ by SPO provider DNV, however, in our ESG QuickTake we might disagree. Picard looks to have chosen KPIs linked to its best performing areas, ignoring potentially rising GHG emissions and providing little evidence that they are aligned with EU net-zero targets.

On the legals front, tweaks to the pulled April deal were largely cosmetic, with a reduction in day one RP capacity and a lower portability test ratio of 6.5x (versus 6.7x previously, but still well above the opening level). Improved EBITDA performance also allows for marginally higher incremental debt capacity. You can read our full April, andJuly Legals QuickTakes for more detail.

The Notes were seen above par on the opening, with the SUNs at 100.5/101, the SSNs at 100.25/100.75, and the SS FRNs at 100.50/100.75

Full Metal Packet

This week’s sole LBO, that of Titan’s €2.1bn buyout by KPS Capital Partners, offered€375m Senior Notes due 2029 alongside a €1,175m TLB due 2028. Previously Crown’s European packaging business, Titan primarily produces metal food packaging, but also closures, aerosols and promotional materials - Crown will retain a 20% stake in the new business. A marketed pro forma Adjusted EBITDA of €272m places net leverage at 5.6x, a fairly middling figure for this year’s LBO’s. Leverage was as a point of concern for one buysider, but they took comfort from few possible M&A opportunities, commenting:

“That’s what constrained its ratings, but at least management have made it clear that M&A is not a core focus, so I don’t have any expectation that it will worsen, although I also don’t see material improvements coming”. “At 39% market share, there’s not a lot they can buy.”

Final pricing landed at 5.125% for the Caa2/CCC+/CCC+ Notes, just wider than Cerba,Foncia and BioGroup LCD’s SUNs, all of which priced at 5.00%.

A rarity for unsecured Notes, sponsor friendly terms include a 10% at 103 clause, but also uncapped permitted investments if a 5.45x leverage ratio is met (just 0.15x below opening). Portability is available day one, and use of the RP builder basket for investments is not subject to the customary FCCR test. Outlined in our preview, one buysider simply stated “Docs today are so aggressive across the board, I just put them aside and just look at the underlying credit”.

And finally, Softbank returned to European HY for the first time since early 2018, offering an impressive $6.8bn (equiv.) across eight tranches of EUR and USD debt.

In other news

  • Vivion Investments successfully tapped its €300m 3.50% SUNs due 2025 for a further €340m. Proceeds from the fungible notes will be used for general corporate purposes, and the acquisition of real estate assets.

  • Vallourec, the French producer of ‘tubular solutions’ completed its restructuring, reducing debt ~50% to €1.8bn in a debt to equity swap.

  • TDR - and long-time partners the Issa Brothers - were in the spotlight

  • We published our June edition of Sustainable Junk, highlighting further developments in the burgeoning sustainability-linked market.

Leveraged Loans Primary

The deluge of primary continues in the European loan markets, albeit at a slightly slower pace than last week. Around €6.7bn of loans are in syndication currently, across 13 tranches, against €7.5bn last week.

Variety showed itself to be the spice of life, with borrowers hailing from myriad sectors and countries. In allocated loans, the market waves goodbye to food companies Valeo Foods and Prosol and a host of industrials also, such as ThyssenKrupp ElevtaorBefesaand Titan, while analysts are still left with a number of IT-focused options, such asClaranetCegid and Datasite, as well telecommunications, pharmaceuticals and industrial firms.

Buysiders are likely celebrating the resurgence of higher-rated credits, with six B2-rated tranches versus just two B3-rated tranches currently in the market.


In allocated loans this week, much like the rest of 2021, flexing tighter was the name of the game. Investors showed themselves to be particularly enthusiastic for Befesa’s add-on loan to acquire AZR’s recycling assets. The incremental add-on was increased from €90m to €100m and issued at par after initial guidance of 99.25-99.50.

Allocated Loans

ThyssenKrupp Elevator’s repricing was similarly successful. The euro-denominated tranche of the mammoth deal priced at E+362.5 bps from guidance of E+375 bps, while the dollar-denominated tranche priced at the tight end of guidance at L+350 bps from E+350-375 bps.

TKE also managed to make its margin ratchet, which is linked to the senior secured net leverage ratio, on the existing facility more manageable. For over 4.4x, the margin on the euro tranche is E+375 bps, down from 425 bps previously, and on the dollars it is L+350-375 bps, also down from 425 bps. For a ratio of 3.92-4.42x it is unchanged at 25 bps lower than the opening spread on both loans, and for 3.92x or lower it is unchanged at 50 bps lower than the opening margin on the euro tranche and 25 bps lower on the dollar tranche.

Valeo Foods loans to fund Bain’s hotly awaited LBO also priced on the tight end of guidance. Its euro-denominated tranche priced at E+400 bps with OID of 99.5, the tight end of 99.0-99.5 guidance, while the €410m-equivalent tranche priced at E+500 bps and 99.5 having been guided at S+500-525 bps and 99.0. Both loans come with a 0% floor and six months of soft call protection at 101. The business’ weighty leverage, ravenous appetite for bolt-ons and greedy market competition failed to push away buysiders, who were lured in by strong cash-generation and a leading position in many of its European markets. See our loan preview here

Commitments were also due on Thursday for Titan’s TLB, which priced at E+375 bps and a 99.75 OID. Buysiders were bullish on the asset, despite higher leverage and lower margins than many of its competitors. “From my perspective, this was easy to understand, yes,” said one buysider. “Is it stable? Yes. Does it generate cash? Yes. Is it highly levered? Yes. Do I think EBITDA will grow? Yes, because of improving margins. And then you delever: easy.” See our loan preview here

However, Prosol was the aberration, with its TLB ((B/B2) pricing at E+400 bps, against guidance of E+375-400 bps. The planned expansion of Prosol’s loss-making sections, plus the shared control of the company between Ardian and management of Grand Frais and a lacklustre ESG ratchet, left some buysiders scratching their heads.

“I don’t think there is any default risk here, it’s just a slightly baffling corporate structure without a very attractive price to pull me in,” summarised one buysider, who passed on the deal. See our loan preview here.

In Syndication

Happening healthcare

After a brief respite, healthcare analysts are called to arms again. German pharma company Aenova has launched a €565m first-lien term loan B to repay borrowings under the company's first-lien TLB and a second-lien PIK facility. The new TLB increases the existing loan, agreed in February 2020, by €125m and extends the maturity by one-year to March 2026. Pricing is guided at a healthy E+475-500 bps from E+500 bps on the existing TLB. The launch comes amid the successful execution of an operational turnaround, buoyed by the pandemic, increased procurement savings and a less complex capital structure. S&P changed its outlook from stable to positive as a result. Commitments are due 6 July. 

Vivalto Sante has also launched a €1.09bn ESG-linked leveraged loan refinancing, which will comprise a €890m TLB with margin ratchets stepping up and down by 10 bps subject to certain KPIs. A bit late to the party, Vivalto follows a first wave of french private hospital chains coming to market with ESG angle to their loans, includingRamsay Sante and Elsan, as well as Almaviva Sante. Commitments are due 20 July.

And for any buysider missing their fix of pandemic-propelled champions, Biogroup LCD, the French laboratory testing company is back in the market with a €300m fungible add-on. The facility will be used to acquire regional private medical testing laboratories in France, Spain and Luxembourg, along with balance sheet cash and RCF draw downs. The existing €1.45bn seven-year TLB was signed in January 2021 and pays E+350 bps, with an OID of 99.75.

Keeping up the trend in industrials issuance, Altadia is back in the market for an incremental TLB to fund a shareholder dividend, which will be fungible with existing term loans. The OID has tightened on the deal from guidance of 98.75 to 99-99.25. One buysider told 9fin the pricing was attractive and that they felt confident in the company’s business plan and its ability to cut costs. 

The borrower, formerly Esmalglass, was last in the market in early 2020 when it raised a €300m acquisition line to help fund the purchase of the tile coatings business of Ferro Corporation, and also extended the €375m facility put in place to back the Lone Star acquisition of the business from Investcorp. Commitments have been brought forward to Tuesday 6 July from Thursday 8 July.

Galileo Education has launched its €1bn refinancing, which is now guided to pay E+350-375 bps with a 0% floor and a 99.5 OID. The higher education company, which is backed by a host of institutional investors such as CPPIB, Montagu, Tethys and BpiFrance, was last in the market in May 2020. At the time, it secured a €170m loan to fund its buyout by a consortium of institutional investors comprising a €90m first-lien fungible add-on and an €80m second-lien TLB. The add-on is being priced at E+325 bps with a 94.5 OID, while the second-lien TLB priced at E+600 bps and at 94 OID.

The company has pursued an ambitious acquisition strategy of late and enjoyed a prosperous pandemic period, seeing revenues increase by 22% to €668m in the year to June 2021.

Circet has released price talk on its €1.625bn TLB backing its buyout by ICG from Advent International at E+350-375 bps, an example of a market becoming increasingly friendly to investors, according to a report by LPC. The business has strong fundamentals, including underlying growth in the 5G and fiber industries, increasing recurring revenues and strong cash generation, but high leverage and customer and geographic concentration could scare some investors off.

Datasite is also looking to reprice a $560m TLB issued just last December, as well as to raise a $100m-equivalent fungible add-on. The reprice is split between a $300m TLB guided at L+375 bps, against the original price of  L+425 bps, and a €220m TLB guided at E+375-400 bps against the original price of E+425 bps. The currency split of the extra $100m is yet to be determined. Floors remain 0.75% on USD and 0% on EUR and maturity is as per the existing at 22 Dec 2027.

Our most highly rated name of the week, Tarkett is luring buysiders in with conservative financial policy, but raw materials volatility and particular reliance on oil is leaving some with the shivers. See our loan preview here.

In other news

  • Enel's electricity distribution company E-Distribuzione has signed off on the first €300m tranche of a €600m loan from the European Investment Bank. The loan has a ratchet that will step up or down against the target of reducing direct GHG emissions (Scope 1), measured in grams of CO2-equivalent per kilowatt hour equal to or below 148g by 2023.

  • Mowi, Norway’s largest seafood company, has lined up a €1.8bn sustainability-linked RCF to refinance its existing bank debt. The loan, which is subject to final documentation, has a five-year tenor and a €300m accordion option. The facility comes with a principal covenant of a minimum equity ratio which is set at 30% and is linked to ESG ratchets. 

  • Ontex has also received bank commitments for a €200m senior unsecured term loan due 2024 and €270m RCF due 2024, to extend maturities out by three years on its existing facilities. This sits alongside a host of other instruments passing through the market as the personal hygiene product manufacturer plans to be closer to customers in Europe to enhance cost competitiveness, regain market share in the retailer brand segment, and ensure continuing growth in North America and emerging markets, according to S&P. 

Leveraged Loans Secondary 

The secondary market was flat again this week. Most industries trended downwards marginally, save IT and consumer discretionary, which rose by less than 1 pt.

Comdata’s €355m TLB paying E+500 bps is once again the biggest riser. Previously mired in restructuring talks, the business said on 8 June, it had reached an agreement to reduce its financial indebtedness significantly. The reinstated debt will also be characterized by more favourable interest payment terms. The management of the company will increase its minority shareholding to 40%, with 50 key managers participating in the equity structure, alongside sponsor Carlyle, while financial creditors will convert part of their debt into equity-like participating financial instruments. The company also announced a partnership to manage Trustpilot services on 29 June. The loans increased by 1.5 pts to 65.5 this week.

As a change of pace, Pronovias €215m 2024 TLB, which pays E+450 bps, rose by 1.4 pts to 71.4. The beleaguered wedding dress retailer’s secondary price has languished in the past several months, despite S&P raising its rating to CCC from selective default last Easter. 

No credits fell particularly far, with no one tranche decreasing by more than a point this week. 

High Yield Secondary

It was another non-mover across HY this week, with an average gain of just +0.01 pts (54% -0.21 pts | 42% +0.29 pts). Real Estate (+0.20 pts), Healthcare (+0.13 pts) and IT (+0.11 pts) marked the greatest gains, with Utilities (-0.03 pts) and Communication Services (-0.08 pts) trading down the worst.

The iTraxx European Crossover held steady on the week, quoted at 229 bps today. In fund flows, HY credit funds saw further healthy inflows across US HY (+$305m), Euro HY (+$103m), and Global HY (+$162m).