LevFin Wrap

WeBuyAnyBond

By Ben Hoskin | ben@9fin.com, Laura Thompson | laura@9fin.com

High Yield Primary

European HY remains in strong spirits with seven new issues hitting the printers this week, many of those that have priced trading up on the break.

Dude, where’s my collateral?

First up on a typically busy Monday was Italian debt purchaser doValue, offering €300m of Senior Secured paper due 2026 (BB/BB) to refinance a Senior Term Facility. The security may not last the tenor, however. An unusual sight for HY (usually an IG feature), the deal came with a new “Release Event”, that allows all guarantees and collateral to be released provided (1) no other Secured Debt is outstanding, (2) no EoD, and (3) net leverage is below 3x or the issuer has a least two BB ratings (read our full Legals QuickTake here).

With BB ratings from S&P and Fitch already, and net leverage slightly above the threshold at 3.2x, a refinancing of the €265m 5% SSNs due 2025 (the only other secured debt in the cap stack provided the revolved remains undrawn) with unsecured debt could see the Release Event triggered. The 25s are trading strongly at ~105, with first call at 102.5 next August.

The new Notes priced at par, with the coupon a punchy 162.5bps inside the existing at 3.375%.

Announced last Friday, APCOA Parking officially launched a dual-tranche EUR offering on Monday, consisting of €320m SSNs due 2027 (B3/B) and €365m SSFRNs due 2027(B3/B).

The business has grown through a number of bolt-on acquisitions since a financial restructuring in 2015 saw Centerbridge (81% stake) and SVP Global (17%) take the keys, with ~€764m of debt reduced to €275m via a UK Scheme. The bolt-ons have since been funded through additional Term Loans, all of which come out of the cap stack in yet another loan-to-bond refi.

Our ESG analysis flagged a number of social and governance issues: the company has a history of poor labour practices - in particular around its lack of clear commitment to pay staff a living wage - and some controversial Parking Charge Notices policies that included the company going after hospital staff during the COVID-19 pandemic. Instances of large scale theft related to parking meters also imply a failure in internal governance controls.

Neither proved problematic though, with the Fixed and Floating issues parking nicely within IPTs (Fixed: 5-5.25%, Floating: E+500-525@99.5) at 4.625% and E+500@100, respectively. They were subsequently well received by secondary, trading up to 101-101.5 on the break.

Buy-and-beach

Luxury Mediterranean resort operator Ikos came next with a debut HY issue, bringing €300m SSNs due 2027 (B-) to market. The debt is largely to increase the company’s capitalisation with €214m being used for general corporate purposes, pricing on Thursday at 5.625%.

Post-transaction the group will have €258m of cash on the balance sheet, necessary to negate a capital intensive business model and an ambitious growth plan, according to Fitch. Growth is to be fuelled by debt, supported by the legals on this deal which allow the company to incur substantial additional priority debt. Additionally, the Notes are structurally subordinated to ~€587m of existing priority/opco debt (ex lease liabilities), and allow for day one portability and uncapped Restricted Payments. 

Occupancy fell to 72.6% in 2020 from 94.5% prior year, as the pandemic took a hold over international travel. However, this still highlights a clear resilience within the luxury travel space, with European hotel peers NH Hotels and Travelodge posting 2020 occupancy rates of 25% (from 72% prior year) and 41.3% (from 80.4%), respectively.

Public Power Corporation and Constellation Automotive (formerly BCA Marketplace) made up the remainder of Monday’s action.

The proposed refi for Constellation Automotive includes a hefty £400m dividend to owners TDR, who bought the business in 2019 for £2.2bn (12.1x EBITDA). The LBO financing included a ~£980 equity contribution (45%), meaning the £695m Senior Secured Notes due 2027 (B2/B-) offering will reduce exposure by around a half. The Notes priced this morning at 4.875%, with £45m shuffled out of the 1L TLB and into the bond.

The docs mismatch IFRS 16 treatment for debt and EBITDA, with the former excluding leases and the latter including right-of-use asset D&A, which could have the effect of significantly lowering covenant leverage ratios.

Greek utilities firm Public Power Corporation priced a Sustainability-Linked €500m SUNs due 2028 (B+/BB-) refinancing 50bps inside a 5 year issue from March 2021 at 3.375%, upsizing heavily from €350m at launch and breaking at 101 in secondary trading.

Tuesday saw two unsecured issues hit the screens with SIGNA Development offering €300m SUNs due 2026 (B/B-), and Belden’s €300m Senior Subordinated Notes due 2031 (Ba3/BB-).

No such thing as nonexistence

For fans of irony, European HY debutant SIGNA - an Austrian real estate developer - presented a slew of ESG issues with their inaugural Green bond, as outlined in our QuickTake. Among them were major governance concerns related to corruption investigations, macro level worries for the real estate sector and uncertainty around the company’s net-zero approach, as well as heightened cyber risk exposure.

Predominantly present in Germany and Austria, the company is one of Europe’s largest residential and commercial developers, boasting around €8.45bn gross development value. Like Ikos, the docs have significant capacity for additional Senior Project Debt (up to 70% of LTV), which is structurally senior to the Notes.

Cable and network infrastructure manufacturer Belden wrapped up this week’s primary, managing a high-speed pricing of €300m Subordinated Notes, settling the refinancing same-day at 3.375%.

Leveraged Loans Primary

Loans continue to jostle for investor attention amid heavy dealflow. The sheer volume sweeping the market remains the key stress point for buysiders, who have their eyes on the upcoming summer break as deal fatigue creeps in.

9fin records an eye-watering €14.3bn-equivalent of loans still in market as the week closes, with just one B3 credit (Busy Bees) in sight. Instead, improving credit quality across the market sees three B1 deals and three BB deals to tantalise. In further rosy news, nine of the loans in the market are backing LBOs, with another seven supporting acquisitions of their own.

Boomerang baby

Two rapid returners to the market this week: UK nursery group Busy Bees and equally British market researcher Kantar. Busy Bees, now nursing a €275m add-on to back acquisitions, follows up from a dual-currency TLB in March this year – a £365.9m L+475 bps TLB and a €257m E+375 bps – capitalising both on hot market conditions and a big Covid boost for this essential business as parents outsourced their toddlers to work from home.

Kantar, on the other hand, is a now rare repricing among LBOs after the deluge buysiders endured earlier in the year. It is now out to reprice a €950m TLB originally put in place in late 2019 as part of a €3bn loan and bond package to support its purchase by Bain Capital. The deal guides at E+425-450 bps and 99.75 OID. Kantar was last in the market in June this year with a €500m TLB that priced at E+450 bps.

Another repricing in the market week comes from Irish betting and gaming group Flutter Entertainment, previously known as Paddy Power Betfair. The company finalised terms of its dual-currency TLB – a $2.938bn TLB and a €507m TLB – to amend, extend and reprice existing loans and redeem unsecured notes. This roll of the dice lopped over 100 bps off the existing L/E+375 bps, coming in at L+225 bps/99.75 OID and E+250 bps/99.5 OID respectively.

Summer lovin’ (mergers amassed)

Elsewhere, the sound of wedding bells fills lev loan land. First up, a €1bn package financing the marriage of French insurance brokers Siaci and Burrus is out. A €850m TLB and €150m RCF. The Siaci-Burrus merger hinges on a cost saving strategy that offers €35m of potential EBITDA benefits, according to Fitch. Siaci, the Charterhouse-backed insurance broker and Burrus, a France-focused competitor, will be acquired by OTPP and the companies' management teams.

The merged business will have a higher combined equity cushion, but higher combined leverage too and will have to cope with historic liquidity issues on Siaci's part, in the years following the merger. The transaction is, however, expected to expand margins and scale and the company can draw comfort from strong sectoral fundamentals.

In other merger news, Spanish telecoms firm MasMovil is out with €2bn of debt financing to back its bid for Euskaltel, topping up a preview ESG-linked €2.2bn TLB and €500m RCF with this fresh €800m TLB, as well as a €250m RCF. Business services and call centre company Sitel also joined in, launching a dual-currency £2.6bn-equivalent TLB to back its take-over rival Sykes for $2.2bn, alongside refinancing. The deal includes €1bn of euros and $1.4bn of dollars, with both currencies guiding at L/E+350-375 bps and 99 OID.

And finally, Compass Partners is turning the page on Infinitas, an educational publisher, selling the asset on to Dutch NPM Capital. The €498m TLB will support its acquisition and the merger with existing NPM portfolio company FutureWhiz. Infinitas suffered revenue decline YoY in 2018 and in 2019, though EBITDA remained stable enough, sitting around the €70m to 80m mark throughout the period. Buysiders are likely to be brought in by the hefty E+450-475 bps price talk, and a source close to the situation told 9fin the early tone for the credit is positive, from both existing and potential new lenders.

Junk in dispute

Junk, but not rubbish: Spanish company Urbaser, which provides waste collection and recycling services, drew division from rating agencies, winning a BB+ from Fitch at the same time as a B1 stamp from Moody’s. Fitch highlights the firm’s stable, predictable cash flows from long-term bin collection contracts, where Moody’s finds contract renewal risk. Its €1.63bn TLB guides at E+350 bps and 99.0-99.5 OID, more in line with B1 credits than the 200s other BB credits in the market are winning this week.

Rounding out an unusually high amount of deals from the waste sector (two), Irish waste management company Beauparc is also hoping its €525m TLB (B1/B) won’t go to landfill as it looks to support its buyout by Macquarie Asset Management.

Pump it (chowder)

French food producer Labeyrie Fine Foods served up a €455m TLB (B2) guiding at E+425-450 bps and 99.5 OID. The company produces foodstuff on the fancier end of the spectrum: smoked salmon, prawns, trout. More controversially, it makes the morally dubious foie gras, the production of which is banned in several European countries due to its cruelty. Made through force-feeding geese, this is a potential twig for ESG-minded investors considering stuffing themselves on this offering, though unlikely to be a major one.

For a kind of pumping on the opposite end of the ESG spectrum, Drax, a UK renewable and low-carbon energy firm, refinanced its Canadian dollar facilities with an ESG-linked loan this week. The CAD loans originally supported Drax’s acquisition of biomass producer Pinnacle Renewable Energy, wrapped up in April. Some of Drax’s environmental shine was tarnished this month when its dubiously-named head of climate change stepped down from the UK’s climate advisory committee due to a conflict of interest.

High Yield Secondary

In another non-event for secondary, the market was softer by just -0.03pts on average. The biggest move came in Energy (-0.12pts), driven by a 1pt drop in both tranches of CGG’s recent stressed refi following FY21 revenue forecasts being trimmed from low single digit growth to flat yoy. Both still sit at least a point over par, however.

McLaren’s SSNs edged closer to par following the announcement the company has secured £400m of new equity, alongside £150m of additional support from existing shareholders in the form of preference shares, presumably to refinance a 12 month loan from the National Bank of Bahrain for the equivalent amount. New SSNs will be issued upon the closing of the transaction to refinance the current Notes.

The iTraxx European Crossover was flat on the week, quoted at 235bps today. EUR HY funds saw the biggest inflows for the second week running in European domiciled credit funds (+$339m), with outflows in US (-$290m) and Global (-$305m).

In other news:

  • Datasite finalised its $663m-equivalent TLB at E/L+375 bps and 99.75 OID. The Capvest-backed M&A data platform upped its €220m euro offering to €250m and its $300m to $375m. If this market is anything to go by, there’s data abounding for the company to mop up.

  • Sports betting and gaming group Entain dropped its euro offering: the originally dual currency $1.125bn TLB now guides tight at just L+250 bps and 99.75, with credit analysts backing the now deceased €300m euro tranche ultimately backing the wrong horse.

  • Pest control firm Anticimex is no anticlimax, wrangling in three different currencies in its SEK16bn-equivalent TLB financing. Backing its acquisition by EQT Future from another EQT fund, the company is offering up a $815m tranche at L+375-400 bps and 99.5; €685m at E+375-400 bps and 99.5 OID; and AUD315m and 99.0 OID.

  • WeBuyAnyCar owner Constellation’s £740m-equivalent refi was reduced by £45m (in favour of the bond component) ahead of closing. Its €400m tranches came in at E+400 bps/99.5 OID; its £400m tranche at S+475 bps/99.0 OID; and finally a £325m second lien rounded off at S+750 bps/99.0 OID down from S+775 bps.

  • No escape from French healthcare. This time, it’s healthcare packaging firm SGD Pharma hoping to woo buysiders with its €500m TLB (B2/B) and €90m RCF as it looks to support its acquisition by PAI Partners.