LevFin Wrap

Casino clips its coupons, Gatwick gains runway

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

This week we published our March edition of ‘Sustainable Junk’ - where we cover all things ESG for leveraged finance. We tracked more than €2,475m of new ESG-linked debt issued in the month of March, almost the same amount as issued throughout the whole of 2020. 

On the whole, 2021’s names have performed well - trading up an average of more than a point on the reoffer, with Novelis SUNs out ahead (+3.40 pts). Telecom Italia’s inaugural sustainability bond less so; trading down -0.91 pts since issuance in mid-Jan.

High Yield Primary

In a flighty Holy Week, the UK’s second airport launched £400m in Senior Secured Notes due 2026 (Ba3/BB-) - its HY debut. The notes are to be issued by Gatwick Airport Finance, a Holdco for the ring fenced Gatwick airport group (Baa2/BBB/BBB+). IPTs were first sent out at 4.75-5.00%, and on Tuesday price talk came in 25 bps to 4.50-4.75%. Final pricing emerged on Wednesday, at 4.375%.

The notes upsized by £50m, with additional proceeds to be used for incremental group liquidity, primarily downstreamed to the OpCo. OpCo-HoldCo structures remain vulnerable to ‘cash traps’, whereby maintenance covenants prevent upstreaming of cash for debt service at the HoldCo level. To mitigate this, a £70m ‘debt service reserve account’ (DSRA) has been set up to pre-fund several years' interest expense. On the initial deal size, the DSRA would cover interest fees (£17.5m pa) up until Apr-2025, however the upsize will increase interest fees (£19.7m pa), and reduce coverage to just over 3.5 years, to Oct-2024.

Fitch reports the current lock-up on dividend distributions at the group level, which is expected to last until mid-2024. Moody’s is marginally less conservative, expecting the lock-up to halt upstreaming until at least 2023.

The UKs largest airport, Heathrow, made its last HY appearance in last Nov-2019 with £300m 10NCL 4.125% SSN (Ba3/BB+) - issued out of ‘Heathrow Finance Plc’ Holdco. The IG issuer, ‘Heathrow Funding Limited’ recently placed £350m Class B bonds at 2.625% in early March, and then reappeared again this week with €500m Class A bonds. The group operates a whole business security model, with the Class A (BBB+/A-) and Class B (BBB-/BBB) debt at the Funding Limited level.

Also on Monday, French retailer Groupe Casino hit the shop floor targeting €425m in new unsecured Notes due 2027 (B3/B). As part of a wider refinancing, the firm also announced a new €800m TLB due 2025, which together with the Notes will redeem a €1,225m TLB due 2024.

Both tranches of the new debt upsized during bookbuild, the loans by €200m and bonds by €100m - with the €300m of excess cash held on for future refinancings. The transaction is net leverage neutral, and will extend average debt maturities from 3.1 to 3.7 years, lower interest expense on the loans, and shuffle €225m out of the secured level. 

The €525m Senior Notes priced at 5.250%, inside IPTs in the 5.5% area. The group last issued SUNs in December's heated market, which priced at a 137.5 bps premium to this week's offering - all the more impressive given the December offering had already tightened 87.5 bps during marketing from its initial mid-7 levels.

Legals on the deal broadly track the existing 2025s, with a per annum concept in the Restricted Payments Basket and a J-Crew blocker restricting the transfer of IP to unrestricted subsidiaries.

In a similar concept to the HoldCo-OpCo setup of the airports, there is a post-payment 3.5x consolidated gross leverage limit for the distribution of dividends - including those to Casino’s 52% shareholder Rallye. As of Dec-2020, and adjusting for the transaction this increased from 5.0x to 5.4x EBITDA for the France Retail & E-commerce segment. As we outline in the Workout, a €4.5bn disposal programme is planned to reduce leverage below this limit, with Rallye facing a debt maturity wall in 2023.

Meanwhile, DDM Group - the ‘small but nimble’ debt purchaser - remains in market with €225m Senior Secured Notes due 2026 (B/B), which will be used to refinance existing debt. Global investor calls and one-to-one’s were held on Monday, and price talk is in the mid-high 8% area.

In other news:

  • Asda won’t sell George. Although speculators had suggested the group’s new owners might sell the fashion brand, it was reported on Wednesday that this is not the case - “George has been a crucial part of the Asda family and continues to be a key part of our strategy”, commented chief executive Roger Burnley. Interestingly, George is the second largest retailer of clothing in the UK by volume.

  • Petr Kellner, the Czech billionaire who built PPF into an investment group whose assets amounted to €44bn in mid 2020, died in a heli skiing accident in Alaska. The group is still considering a series of transactions despite this, including the Moneta takeover, and a Cetin minority stake sale.

  • What ever happened to EBITAC? We looked at Covid add-backs in new deals and reported numbers this year.

  • European HY Covenants. We published our debut round-up analytical report on covenant trends, read in full here.

Leveraged Loan - Primary

In an anti-climatic end to a quarter that has seen a fiery issuers’ market, this week saw a drop in the number of new issues, though there is still plenty of paper for buysiders to consider. Borrowers were welcomed to the market, though investors have begun to show signs of disappointment with what is on offer, pushing back against some cheeky terms, with signs of pricing fatigue with some deals pricing at the wider end of guidance or flexing wider. 

Brand new issue

Just two companies launched loans this week, both are a little different to the usual fare. 

Veterinary care provider IVC let the dogs out on a £975m loan refinancing. Proceeds will refinance its existing term loan, repay drawings under an RCF and prepay a more expensive PIK, according to banking sources. The deal will comprise a £437m TLB3 and £538m-equivalent (€608m) euro-denominated TLB4 to refinance a TLB2. Terms of the deal are broadly in line with IVC’s existing loans (launched last August) which mature in February 2026 and pay L+450 bps with 101 soft-call for six-months.

In France, Babilou is not kidding around with the repricing it has launched. Following investor demand, the nurseries operator attached a €95m add-on TLB to back the acquisition of a Dutch competitor. The €582m TLB priced at the tight end paying E+425 bps, against guidance of E+425-450 bps.

In the early stages of its process, MasMovil has tapped five banks to back its bid for competitor Euskatel, for which it is paying €2bn in an all cash offer. This has resulted in Moody’s placing the existing €2.2bn senior secured credit facility on negative watch.

Refinancing rampage

Refinancings continue at pace as borrowers take advantage of buyersiders showing themselves to be virtually desperate to deploy dry powder. 

Idemia firmed pricing on its €1.385bn tranche and $625m tranche at E+450 bps and L+450 bps, respectively, at the wider end of initial guidance. The first-lien loan will extend maturity out to January 2026 from January 2024 for the identity-related security services firm previously known as Oberthur. The deal has not yet shown itself to appear too safe, however, as the company adjusted its dollar tranche down from an original offering of $731.5m today in a show of pushback from investors. 

Ion Trading has priced its €3.1bn equivalent dual-currency first-lien loans comprising a $1.65bn TLB and a €1.75bn TLB, at L+475 bps and E+425 bps, respectively. OID sits at 99.75, up from 99.5 at launch, following changes to the loan mix from $1.8bn and €1.5bn.

French supermarket chain Groupe Casino priced and allocated its €1bn TLB at E+400 bps, down from original guidance at E+450-475 bps this week. Guidance moved to E+425 bps, until finally dropping to E+400-425 bps, after the company upsized the TLB by €200m showing the company’s gamble has paid off. The financing also consists of a new unsecured bond of €525m, with maturity April 2027 and a coupon of 5.25%. Proceeds will refinance its 2024 loans, extend maturities and increase the subordinated debt component. 

Dividend recaps

Dividend recaps continue in earnest this week, with some questioning shareholder payouts. Xella’s €1.945bn TLB priced in line with original guidance, despite the cyclicality of the building materials business and “crazy” oversubscription on “every deal” in today’s market, as some buysiders told 9fin. The 7-year, cov-lite TLB, which is to fund a €510m pay-out to shareholder Lone Star, will pay E+425 bps.

The glass has not yet shattered on Belron’s dividend recap loan. Previously coming to market with a request for extension on its $994m TLB, it has since adjusted the structure of its financing, which is to pay €1.45bn to shareholders, according to market sources. The new €735m-equivalent dollar-denominated term loan B, will be combined with the vehicle glass repair and replacement group’s existing TLB. The resulting $1.855bn tranche is guided to pay a 250 bps margin at a 99.0-99.5 OID. This is the fourth dividend recap since 2017. 

Healthcare hurrah

Investors showed themselves keen for Recipharm, with the pharmaceuticals manufacturer’s €1.115bn 2029 TLB priced at E+350 bps. The financing will back the company’s acquisition by EQT, which was valued at $2.8bn in December 2020. The term loan, which has a 0% floor, and, a la mode, an ESG-linked pricing adjustment worth +/-5 bps, accompanies a £228m pre-placed second lien and a multi-currency $353m-equivalent RCF.

As discussed last week, the healthcare sector has set hearts racing, with many a pharmaceutical firm and healthcare provider in the market. Women’s healthcare company Organon and France’s largest private healthcare provider, Ramsay Generale de Santé, are among those currently on the waiting list.

But despite the healthcare hullabaloo, LGC’s dividend recap loan flexed wider today. Pricing for the UK-based life sciences firm is now guided at E+375-400 bps and L+375-400 bps from E+325-350 bps and L+325-350 bps for the euro and dollar tranches of the £496m equivalent dual-currency TLB. Commitments are due on 6 April. 


Activity in ESG-related financing continues at pace. Fluidra, a Spanish pool equipment company has taken a dive into sustainable financing. The company converted its existing €130m RCF into a facility linked to its ESG performance, to be assessed annually by S&P. The original RCF paid a margin of E+150-200 bps, depending on leverage. 

FrieslandCampina has also signed a €300m sustainability-linked loan with ING to refinance short-term debt. Margins are linked to KPIs such as the reduction of greenhouse gas emissions and increasing the traceability of certain supplies.

Elsewhere in the market…

  • Gerflor’s€850m 2027 TLB, bolstered by a new €50m add-on to fund potential acquisitions,  priced at E+375 bps, unchanged from guidance, with its OID pricing at the tighter end at 99.75.

  • Ethypharm set final terms on its refinancing. The €270m TLB remains unchanged at E+350 bps (OID 99.5), while the £245m TLB landed at the tight end of guidance for S+450 bps (OID 99).

  • In North America, multi-protein producer Sofina Foods’ is bulking up with its acquisition of Eight Fifty Food Group, which will be backed with C$2.6bn worth of senior secured loans, consisting of an RCF and  TLB in equal parts. Automotive seating supplier Adient has also launched a $1bn TLB guided at L+350-375 bps, with a 25 bps step down triggered on December 31, 2021, where net leverage falls below 1.5x.

High Yield - Secondary

Secondary traded up again on the week, marking an average gain of +0.24 pts (65% +0.48 pts | 31% -0.24 pts). All industries were up, with Consumer Staples (+0.36 pts) and Industrials (+0.34 pts) at the top, and Energy (+0.10 pts) and Communication Services (+0.12 pts) trailing behind.

The iTraxx Crossover was quoted at 249 bps, cutting well inside the 268bps seen last week. The index was redetermined last week, which saw a 30 bps jump on its previous close Friday, largely due to upgrades out of the index, which were replaced by illiquid bonds.

Leveraged Loans - Secondary

In secondary, loans were flat on the week, down just -0.04 pts on average. IT (+0.06 pts) rose moderately, reflecting appetite in the new issuance market. Almost every other industry saw slight falls, with consumer secondary dropping the farthest (-0.14 pts).

It appears true love does not conquer all. Against recent news from the company, bridal fashion house Pronovias was this week’s biggest faller. The €215m 2024 TLB, which pays E+450 bps fell to 71.33 cents on the euro. On a recent Zoom call, the company’s CEO said that while 60% of weddings did not go ahead in 2020, only 3-5% of Pronovias’s orders were cancelled, with the vast majority of couples rescheduling for 2021. The business recently announced a collaboration with Georgina Chapman, previously married to Harvey Weinstein. Her brand, Marchesa received high-profile support following her ex-husband’s scandal from the likes of Scarlett Johansen. At the start of March, S&P raised the rating to CCC from selective default. In a noteworthy show of support, the business received unanimous approval from its RCF lenders for a soft restructuring that saw sponsor BC Partners inject €18m with lenders waiving leverage covenants until June 2022.

One major climber is flower and vegetable supplier Flamingo Afriflora’s 5.750% €280m 2025 TLB rose 2.3 pts to 98.75. Traders were clearly enticed by the Flamingo’s parent company’s revised outlook from negative to stable. S&P also affirmed its B long-term issuer credit and issue ratings on 23 March.