Optimistic bets for rate cuts in 2024 led to big falls in global yields (the 10-year US Treasury yield dipped 19.9bps on Tuesday) and helped tighten the iTraxx Crossover index to 388bps, from 471bps on 27 October — with a 16bps daily rally post the inflation numbers. 

Big picture, though, leveraged loan supply remains very limited, with issuance down 17% YTD from 2022, itself a fairly challenged year, according to Barclays. 

“Who knows what next year’s going to bring,” one senior banker remarked to 9fin. “We can't look at more than a month or two forward, there are a lot of risks out there.” 

Another banker said: “Valuation expectations within sponsors, corporates and banks need to reset. The world has changed and will probably stay in a high interest rate environment for longer than expected.” 

A large chunk of next year’s market activity will be driven by the maturities in 2025/26, even if a fair number of borrowers have proactively pushed maturities via refinancing or amend-and-extend requests in 2023, 9fin's Josh Latham and Matthew Hughes wrote this week.

According to 9fin data, over €60bn of bonds are set to mature in 2025, with the figure rising to over €100bn in 2026. The latter likely includes borrowers that issued five-year tenors during the boom year of 2021. Read the full analysis here. 

“2023 as a whole has been a TLB market, as the bond market has not been there to support market turmoil,” said a third sellsider. “If you want to get the best execution in volatile markets you need to minimise volatility and that's what TLBs are for. CLOs have also continued to print and that's 70% of the market.”

Silver Lake does it all

California-based sponsor Silver Lake giant has been driving the European leveraged loan market this week, as it owns Silae and GlobalBlue and part-owns IVC Evidensia. 

French HR software company Silae launched a €400m add-on last week, to fund a dividend recap. On Thursday, this was increased to €650m and recut into a new seven year facility, rather than a five year add-on, with the additional proceeds used to repay the existing €250m loan. Existing lenders were offered a cashless roll into the new facility, and talk was maintained at E+450bp and 98 area OID. 

Before the revision, buysiders speaking with 9fin were split on whether to play the deal. Some were sceptical about the company’s size and lack of diversification, but others saw this as par for the industry’s course.

The deal was marketed on LTM September 2023 SFA EBITDA of €131m, according to buyside sources, including some steep adjustments: €49m of run-rate pricing add-backs, moderated down by €14m from the SFA’s 25% add-back cap. SFA leverage is 4.5x senior secured net and 4.6x net.

UK-headquartered veterinary group IVC Evidensia debuted in the dollar market a few weeks after animal health pharma company Ceva Sante Animal's first dollar TLB. 

The company offered investors a large TLB deal spanning three currencies: $1.25bn, €2.27bn and £900m. The euro and sterling tranches were A&Es of existing TLB debt to 2028 (from 2026), while the dollar trance refinanced the acquisition on VetStrategy — a leading Canadian veterinary care provider it bought back in 2021.

The deal was marketed on an EBITDA of £614m, pro-forma cash of £554m, net senior leverage of 5.3x and gross senior leverage of 6.2x, according to buyside sources.

Final terms on the dollar tranche were at the wide end of initial S+525-550bps guidance and OID of 98. The euros, on the other hand, are now guide at the tight end of the E+500-525bps range, with OID at 98. With those opposite fates, the dollar tranche was scaled down from $1.25bn to $1.1bn and the euros upsized from €2.13bn to €2.27bn.

Sterling guidance remains at S+575bps, with OID now firmed up at the higher end of the previous 97-97.5 range

A third Silver Lake-sponsored company provided this week’s only new loan launch in euros, listed Swiss tax refund company Global Blue, announced Monday via JP Morgan. Midway through syndication, the company announced a fairly major change to its capital structure, with a $100m equity investment from China-headquartered conglomerate Tencent. 

Half of the investment is a secondary sale from existing sponsors Silver Lake and Partners Group, while half will be primary equity used to delever the company. Silver Lake was rumoured to be looking at a sale process over the summer.

The equity investment allowed the company to cut the loan from €650m to €610m, with proceeds to be used to refinance its existing €630m 2025 TLA. The company has a long-term net leverage target of 2.5x, although it has some way to go to hit this target — according to 9fin sources, the deal is marketed on Q2 earnings at 4.75x gross leverage and 4.1x net.

With talk of 500bps and 97 for a B1/B+ facility, the deal is cheap compared to other recent transactions, but according to a senior banker close to the deal, “Guidance is conservative to reflect a business in recovery.”

Weekly loan movers

High Yield 

European high yield bounced back with some vigour this week, with four deals on screen, including a debut issue from Spanish cooperative supermarket chain Eroski, which intends to use the proceeds of its €500m 5.5 year senior secured notes to pay back its existing syndicated facility.

Left lead Deutsche Bank talked the deal at 10.5-10.75%, before pricing in the middle of the range at 10.625% on Thursday evening. The financing package also includes a €112m TLA provided by local Spanish banks. See 9fin’s Credit QuickTake here, Legal QuickTake here, and ESG QuickTake here.

This week also provided some unusual sterling supply, from UK-listed variety retailer B&M. Itcame to market with £250m 20230 SSN, closing the book at 8.125% from PT area of 8.25% (+/- 0.125%) and IPTs of mid-8s. The company benefitted from a concurrent Moody’s upgrade from Ba2 to Ba1, in part thanks to its formal commitment to a 1-1.5x net leverage range (pre-IFRS 16). 9fin’s cap table puts pre-IFRS 16 leverage at 1.1x, and 2.4x post-IFRS 16.

The bond funded a tender offer for the £400m 3.625% 2025 SSNs at 98, around a point of premium to the pre-announcement trading level. Find 9fin’s Credit QuickTake here, Legal QuickTake here, and ESG QuickTake here. HSBC was left lead.

The week’s largest deal came from Austrian sensor and LED manufacturer ams, which priced pricing a €1bn-equivalent dual currency unsecured deal due 2029. The deal was increased from an initial €800m-equivalent target.

9fin predicted in August that the company would soon look to tackle its 2025 maturities, as management grapples with a turnaround strategy that will see it sell off unprofitable portions of the business, construct a new advanced LED manufacturing facility in Malaysia, and find cost savings across the business.

The bond financing comes alongside an €800m rights issue, and a €450m sale-and-leaseback deal, announced alongside results in October. This should allow it to successfully address its €1.27bn 2025s, €226m of bank facilities, and raise €400m of cash on balance sheet.

Find Credit, Legal, ESG and Financial QuickTakes on 9fin.

The euro leg priced at 10.5% vs 11% IPTs, while the dollar tranche came at PT 12.50%, in line with IPTs. HSBC was left lead on the euros and UBS on the dollars.

Finnish consumer packaging company Huhtamaki wrapped up this week’s EHY deals andpriced €300m of 2028 SUNs, announcing a tender offer for the outstanding paper maturing in October 2024.

New notes priced at 99.46 with 5.125% coupon (5.250% yield) from 5.5% at guidance and 5.75% IPTs. 

Weekly bond movers

Hungarian fertiliser company Nitrogenmuvek’s slide came on local press news that it would stop production indefinitely, following changes to taxation on carbon credits. Chief strategy officer Zoltan Bige told9finthat the company had managed to secure liquidity for the coupon payments due this week on its €200m 7% May 2025 senior unsecured notes (read more from9fin here). The company will make an announcement in the coming days “to correct the interpretation of the media news” said Bige.

Apollo-owned wood pellet producer Graanul Invest’s bonds traded up after the companyannouncedit had come to an agreement over a contractual dispute with one of its clients, but gave no further details. Moody’sdowngradedGraanul to B2 the following day. US pellet producer Enviva saw its bonds in freefall last week, with a major earnings miss, going concern warning and the company hiring financial advisors.

Forward pipeline