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This is our weekly newsletter on all the latest trends, breaking news, and deep-dive coverage in European leveraged finance. Explore all our market wraps here.
The European leveraged loan market finally picked up in the second half of September, but it’s still not the new money surge investors were hoping for, even as the Federal Reserve’s recent rate cuts promised better conditions for debt-funded buyouts.
A flurry of repricing deals dominated this month, with €4.27bn in European loans and €4.95bn-equivalent in dollar loans repriced in September alone, according to 9fin data. This €9.22bn total marks another wave of repricings this year, echoing events from February and June, driven by a lack of fresh issuance and sponsors looking to cut costs amid pressure to deliver returns to their LPs.
But there’s an abundance of loans in pre-marketing, sources said, including a German packaging firm and UK infrastructure services company.
The repricing malaise was, this week, overshadowed by what is potentially the largest recap deal ever seen by the European market.
It’s a sign of market strength, sellsiders argued — as well as desperate investors.
“It’s honestly quite something, right?” said one senior banker. “The size, the magnitude of the dividend. The market is desperate for new money and this is one of the ways we can bring that.”
BNP Paribas has started the marketing on the €2.05bn euro loan and Bank of America is leading the $4.69bn dollars loans. We’re expecting the bond portion to launch next week.
“They are pushing it, but I think it's doable,” one investor told us. “I have a little question around the edges but they should be able to do it.”
Evri little thing
Some part of the new money demand is being met this week, although still not enough to meet CLO appetite.
Evri, the UK parcel delivery service, launched a €900m-equivalent TLB due 2031, with price talk at E+425bps and 99-99.5, marking one of the few LBO deals this month. As we previously reported, given Evri’s exposure to the UK market, there is an interest in incorporating more sterling bonds into the overall debt structure.
So far, investors speaking with 9fin are fairly positive on the deal (though admit Evri has lost some of their own parcels) pointing to strengths like a volume boom through and post-pandemic, although concerns over labour reform (Evri’s staff are mostly self-employed) and question on declining corporate customers are keeping others undecided.
Another LBO, Innomotics, the German electric motors manufacturer, finalised financing for its buyout by KPS Capital Partners with tightened docs and pricing. The book closed with €700m and $560m of loans priced at E+400bps and S+400bps, both at an OID of 99.50, tightening from initial price talk of E+425bps and S+425bps, and an OID range of 99.00-99.50. The €600m bond priced at 6.25%.
Investors were keen on new supply to the market but there were concerns lingering about its exposure to market cycles, as well as limited historical financials for the carve out. Three investors told 9fin they were putting in underweight orders, but that didn’t stop the deal upsizing its euro portion at the expense of the dollars ahead of closing.
Refi
Refinancings have also been a staple of the market landscape. Industrial salts producer Nobian has amended and extended portions of its €1.5bn debt, amid efforts by sponsors Carlyle and GIC to divest. The €974m TLB due 2029 was priced at E+375bps at par. Despite turbulent times for European chemical companies, improved Q4 guidance and stable Q2 results have helped keep lenders supportive of Nobian’s credit story.
“We are comfortable with it,” a second buysider said. “It’s cash-resilient and has performed better than other chemical companies during turbulent times.”
Similarly, Gerflor, the French vinyl wall and flooring manufacturer, pushed through an A&E on its €900m TLB as well, extending from 2027 to 2030 at E+375bps and par. It’s seen as a strong credit by lenders, thanks to its diversified and defensive qualities within the flooring sector.
Meanwhile, INEOS Quattrois moving forward with a €1bn dual-tranche refinancing, split equally between euros and dollars. The market was expecting this refi to hit next year, but management’s desire to capitalise on market conditions has probably accelerated the timeline, according to 9fin sources.
“They are thinking of taking advantage of the fact that they can do it now, and get some benefit from the fact that 60% or more of the cap structure is going to be floating rate, so you will benefit from rate cuts going into 2025,” said a third investor.
It’s also pretty well priced with talk of E+400-425bps and S+400-425bps as a BB credit.
“People like INEOS because everyone knows it. They are paying 445bps so you’re probably getting paid for where you are in the cycle. They priced it well, it will get away,” said a fourth buysider.
We’re expecting more bonds to come next week — including an Italian paper company in pre-marketing, as well as a logistic/real estate company debut high yield issuer led by Santander and Citi — but there is nothing pending in the market right now.
