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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.

While most of the market is cracking a cold one for the onset of summer holidays, one British pub chain is waiting until last call to settle its tab.

Stonegate Pubs is getting a £200m injection from sponsor TDR Capital to help address its fully drawn RCF due in 2024 and £2.2bn equiv. of outstanding bonds set to mature 31 July 2025, according to a report from Bloomberg.

Currently leverage stands at 10.6x gross and 9.2x net (including PIK), and an equity injection of this size could bring it down, but still: “It would bring leverage down from nose bleed levels to very high levels,” said one buysider.

See the full cap table and read more about the potential structure in our full Credit Research piece here.

It’s a chunky bit of capital to leave until the last minute, but Stonegate has faced its fair share of challenges since it last refinanced. While its portfolio of pubs is larger and more profitable than peers such as Punch, according to ratings agencies, its high street bars have been more vulnerable to the cost of living crisis impacting young people.

And while there have been some encouraging one-off moments (Stonegate likely owes Gareth Southgate some thanks), bad weather hasn’t helped pub sales leading up to this deadline.

So what’s next? It’s likely that higher coupons and a longer maturity will accompany the first lien piece, while the second lien piece (due 2028) will be refi’d and a HoldCo PIK, estimated at £511m and held by AlbaCore, will be converted into an “equity-like” instrument.

Sterling bonds already demand a higher coupon, and with challenges ahead for Stonegate, it’s likely to need more of a premium.

“They still have work to do to improve the business,” said the buysider. “People are going to want to be compensated.”

Deals kept ticking well into July, indicating a comeback first half of the year for the high yield bond and loan markets.

While bonds haven’t yet reached 2021 levels, the market had a busy month with 20 bonds priced and a €500m average bond size, roughly in line with Q2.

Particularly high volumes in June, as well as a decent July, also pushed loan issuance ahead of 2021.

See full breakdown of the month and year-to-date below.

Beyond the Stonegate deal likely ahead, primary has cooled after the bond boost last week.

French manufacturer Constellium priced $350m of SUNs due 2023 at 6.375%, with €300m in euros priced at 5.375%.

However, there were some notable movers in secondary.

Gaming company 888 recently saw a drop off in its bonds off the back of its H1 trading update revealing it is revising its FY24 expectations – some investors are worried there is a potential downgrade ahead.

"I've taken this as my opportunity to step in, but it does keep drifting a little bit lower over the week," said a second buysider.

Pfleiderer continues to fall after news that sponsor SVP will provide a €75m equity injection as part of an A&E transaction that will see maturities on its SSNs pushed back by three years. The wood products manufacturer has struggled due to a “cyclical downturn in the German construction and renovation markets,” according to the company. More from our distressed colleagues here.

And carpet and flooring specialist Victoria PLC also saw another dip this week as advisors continue to circle the business. More here.

Here’s a look at what priced this week:

As we reported last week, a number of refinancings came across the desk of investors (much to the annoyance of those ready for a summer holiday after an exceptionally busy H1).

French funeral homes provider OGF is in the market with a €716m A&E, a deal we previously predicted.

While an aging population in France is a boon to the credit going forward, the drop in mortality post-COVID combined with a loss in market share during the pandemic years has bumped OGF’s leverage up – ratings agencies expect it to hit 8.5x by the end of this year.

Investors are being paid for the risk, however – price talk is currently at E+500bps and 97.5.

Swedish software provider IFS is also in the market seeking to refinance a €400m TLB. The transaction will go alongside a €300m privately-placed PIK to finance its acquisition of Copperleaf Technologies. Ratings agencies said that this will increase leverage and hurt FOCF.

Price talk is currently at E+400-425bps and 99.5.

In the secondary market, both KronosNet and Sitel/Foundever are down on news that another large company, this time Salesforce, is now using AI for its customer services, according to 9fin sources. It’s a theme we explored in our recent analysis on the impact of AI on customer service and call centre firms — which you can read in full here.

Also this week, Dutch e-bike producer Accell’s debt continued its race to the bottom. The business recently kicked off talks with a group of creditors, which has restricted them from trading as of last week. More here.

Here’s a look at what’s in the market:

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