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European LevFin Wrap — Loans serve up feast, issuers elect to reprice
Ryan Daniel
•6 min read
Rishi Sunak and Gareth Southgate probably felt pretty similar this week: two leaders making a big announcement in (probably) the last few months of their jobs.
Source: Darren Staples, Reuters
Although Southgate’s announcement might not have any impact on LevFin issuers, Sunak’s does — especially if it leads to a Labour government as we covered here.
We think there’s five areas to watch in particular:
European LevFin markets have been quieter than Westminster this week, but one buysider expects that to change after the long weekend.
“It’s slightly quiet at the moment. I’ll be waiting for earnings, which will come next week — after the bank holiday. Some just wait until the end of the reporting requirements.”
“Primary won’t pick up until June, would be my guess. Then maybe we’ll see some more deals,” they added.
Even if there wasn’t immense bond primary this week, many credit analysts continue to be busy during earnings season; make sure to check our digest for anything you might have missed.
Investors were optimistic about the credit and pricing in our loan preview despite chunky EBITDA adjustments and some recent controversies in the care home sector.
“There's been a spotlight on the sector in recent years, and rightfully so,” said a buysider. “There have been some bad actors — the Orpea scandal really rocked the sector. Private equity ownership is very unpopular with the general public. But it's still got those strong growth underpinnings, aging populations, high barriers to entry and so on.”
We’re also starting to see another wave of issuers opportunistically repricing as sentiment continues to improve: Nouryon(€1.7bn) and Ceva SantéSanté (dual-tranche) are the latest examples in Europe.
All three have single-B ratings, with Monbake rated B2/B compared to B3/B- for QSRP and Panzani.
For QSRP, a debutant, there were concerns over the largely unknown sponsor Kharis Capital: the 9fin database lists no bonds or loans with Kharis Capital as a sponsor, and the firm’s website specifies that it focuses on deals “below the radar of leading leveraged buyout PE funds”.
But analysts admitted that price talk of E+525-550bps with a 97 OID is eye-catching.
Panzani and Monbake were viewed as similar stories: both companies are on the smaller side and are hitting the market after a period of inflationary pressure that has forced them to hike prices in order to maintain EBITDA growth and margins.
Panzani’s use of proceeds is on the more aggressive end, though: CVC is loading the company with extra leverage to fund a dividend (leading Moody’s to downgrade it to B3).
“I’m pretty frustrated to be downgraded for a dividend,” said an existing lender.
Panzani tightened to E+425bps (E+417.5bps post-ESG ratchet) and 99 (from 98).
Monbake specializes in frozen dough, which might seem unexciting to some but ultimately has a pretty solid hold on Europe’s collective palate.
“It’s not the sexiest credit,” said an existing lender. “It’s fairly small and it’s got pretty high product and geographic concentration. But we’re already in it and performance has been strong enough that we’ll get involved in this new deal as well.”
“I think Monbake comes out as the winner here if you’re stacking the deals against each other,” said another buysider. It’s LBO supply, it’s non-cyclical, and it has grown impressively in the last year with the cash to back it, too.”
Monbake priced at E+400bps at 99.5, tightening from price talk in the E+425bps area and 99.
