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European LevFin Wrap — Bonds have Mas fun, but no interest in OQ
Alessandro Albano
+Laura Thompson
•7 min read
High yield issuance picked up this week, even as leverage finance desks in Europe still grappled with Altice France’s repercussions and debt servicer Intrum caused further headaches in the background.
European lev loan issuance had been quieter since the Altice outbreak — and quieter post-Easter than many on the buyside expected — but LBO financings are resurgent, a signal that credit technicals remain solid with new M&A activity slowly opening up.
“Financing is not the issue, valuations are,” a senior banker told 9fin. “We've had strong volumes year-to-date — double the numbers we had in high yield and loans last year.”
According to this banker, the first quarter brought €32bn of loans — excluding repricings — up from €16bn in the same period last year, with more than €8bn of underwritten M&A in 2024.
“The pipeline had already built up at the start of the year, and the supply into our market will probably be in the summer at the earliest or more likely in September,” they added.
European high yield issuers have also made a strong comeback this week, with four bonds launched on Monday. This happened before a spike in rate volatility triggered by a higher than expected US inflation print on Wednesday, with the MOVE index — a barometer of bond market volatility — rising to its highest level since early March.
One sellside source told 9fin they were involved in at least four HY deals set for next week, mostly refinancings but some new money component, with three more bond launches set to follow the week after.
“Next month will be lighter in terms of bond issuance as numbers go stale and the bank holidays disrupt the calendar,” they said.
Still, credit spreads remained tight, showing demand remained robust this week, Barclays wrote in a report, with the HY market continuing to benefit from all-in yields of 6.1%.
Source: Barclays Research
Macro developments have diverged either side of the Atlantic, as the ECB on Thursday left policy rates unchanged but kept the door open for a first cut in June, in line with market consensus before the meeting.
In the US, central bankers are thought to be becoming more cautious, as the CPI print this week showed how sticky inflationary pressures can be. Fed funds futures have shifted from expecting a rate cut in June to positing September as a maybe, with participants doubting whether the US central bank is in the position to respect previous dot plot projections of three rate cuts in 2024.
“We no longer think the Federal Open Market Committee will be comfortable initiating every-other-meeting cuts in June,” said Barclays. “Instead, we expect only one 25bps cut this year, in September.”
Leveraged loans
The long-awaited Spanish joint-venture MasOrange (Ba3/BB/BB) and LBO of the UK-based TV production All3Media (B/B2) have both brought back what was sorely missed in the last two years — M&A financing. It may be a preview of what can come through in the rest of 2024 as the valuations impasse begins to thaw.
The JV between Spanish telecom MasMovil and French telecom Orange’s Spain unit is marketing a €1.5bn-equivalent dual currency TLB split between euros and dollars, and includes a pre-placed €191.5m TLB — see the full debt stack in 9fin’s coverage here.
Price talk for the euro 2031 TLB is at E+350-375bps and 99.5, while the dollar 2031 TLB is at S+350bps and 99.5. The deal is being marketed off a whopping €3.037bn EBITDA, according to 9fin sources.
The strong lender participation in one of the first and most long-awaited LBOs of the year made All3Mediaaccelerate the deadline on its €500m seven-year TLB. Funds back RedBird IMI’s takeover from Warner Bros Discovery and Liberty Global.
All3Media pushed commitments forward from Monday 15 April to today (12 April), with price talk for the transaction originally at E+425-450bps and 99 OID.
“I was disappointed to see it tighten at E+400bps,” admitted one buysider. “But I wasn’t surprised."
Buysiders also didn't expect the timing to accelerate, but acknowledged it was earnt given credit quality. The deal was marketed on total/net leverage of 4.3x/3.5x respectively and a FY 2023 adjusted EBITDA of £110m, according to sources.
And it's not just M&A. The primary market welcomed some sterling issuance this week, an uncommon event for CLO analysts.
Catering and hospitality group WSH Investments launcheda £598m 2031 TLB to A&E and refi its £370 2026 TLB, as well as an £84m second lien loan. Price talk for the transaction is S+550bps and 98-98.5 OID to reflect the less-common currency, which doesn’t have the liquid markets of the euro and dollar loans. Read here 9fin educational report on relative value analysis.
German open-source software company SUSE also repriced its 2030 euro/dollar maturities, and closed the deal at E/S+400bps each, from E/S+450bps. The group fully repriced the €550m TLB and the $675m TLB.
German provider of waste disposal solutions firm Sulo is yet another name that is turning its back to private credit in favour of the broadly syndicated market to refinance unitranche debt.
Also in Germany, ophthalmology platform Veonet priced €190m-equivalent of TLB add-ons — €130m of euros at the current margin of E+450bps and par, plus £56m of sterling at S+525bps and 99.5. The £56m topped up Veonet’s £256m 2029 TLB, which it concurrently repriced down to S+525bps.
Lastly, Belgian hosting services provider team.blue (B3/B) priced its €250m 2028 add-on at E+370bps and 97.5 OID from 97.25-97.5 revised range — initial guidance was 97. The borrower will use the loan to repay its PIK facility and put cash on balance for M&A. The company also raised a €50m 2028 delayed draw term loan at E+370bps and 97.5.
OQ skips payments
Traders closely watched Omani-backed OQ Chemicals (formerly Oxea) this week as its loans slumped into the 70s before repairing back to the upper 80s area following the shock withdrawal of support from its shareholders at the end of March. The group requested docs changes from its lender base after it skipped interest payments on its TLB and RCF last Friday, 9fin sources said at the time.
Moody’s downgraded OQ Chemicals’ CFR and senior debt to Caa2 last week, followed by S&P notching the company down to CCC- from B earlier this week.
Distressed funds are looking for positions in the business, 9fin sources said, with questions around future ownership now that the sponsor is looking to sell its stake.
Read 9fin's coverage on OQ's developing situation here.
Amid this week's bond rush, Italian company IMA Group turned to the syndicated market with €450m of FRNs due 2029 to address €240m of its outstanding HoldCo PIK facility provided by direct lenders — part of the 2021 BC Partners’ take-private deal — and pay a €140m dividend.
The floating notes were priced tight at E+375bps and 100 OID from E+375/400bps. Initial guidance was set at E+400/425bps and 99.5 OID.
The Italian company billed this as a refinancing at the holding company level, but buyside sources speaking with 9fin said they saw this deal as a partial recap. Read more on the contradiction here.
German cruise line operator TUI Cruises placed €350m of 2029 fixed SSNs at 6.25% and 100 from around 6.5% price talk, while the compatriot Techem, an energy services provider, priced at 5.375% and 100 OID coupon its€500m 2029 fixed notes — initial guidance was mid-to-high 5s and price talk was in the 5.5% area.
Techem is also a known name in TLBs — it pushed its €1.8bn 2025 TLB maturities to 2029 via A&E in February. Partner's Group is on the verge of selling the company, with latest press rumours being that TPG is one of the last bidders after KKR dropped out. Both private and syndicated debt packages have been considered to back such a transaction.
Swiss travel retailer Avolta, a group born from the merger between the Italian Aurogrill and Dufry, placed €500m 2031 SSNs at 4.75% and 100, from final price talk of 4.75%-4.875%.
To wrap up the week, British-based chemicals business Synthomer priced its €350m 2029 SSNs quite high at 7.375% from initial guidance of 7.5%-7.75% and price talk of 7.5% area.
