European LevFin Wrap — Primary persists despite Altice angst

Ryan Daniel

28 March 2024•7 min read

If any investors were hoping to coast through to the long weekend, they had another thing coming.

Forget the Easter eggs; the levfin market is still feeling the cracks from last’s week Altice France (SFR) fallout.

Of course, we’re still in the early phases of this situation (you can find our latest Altice reads here, digging into the flexibility under the company’s debt docs) but that hasn’t stopped the troubled telco from dominating our source conversations this week.

Intensifying those discussions was Moody’s decision to downgrade Altice France’s secured debt from B2 to Caa1, and the sub debt from Caa2 to Ca, both with negative outlook.

Price moves on the Altice complex have provided another unofficial stress test for a so-far resilient levfin market in 2024 — a sellsider noted there hasn’t been any contagion yet.

“Altice could have represented a massive step back for the market whilst it’s trying to recover,” they said.

While overall market impact has been limited so far given the idiosyncratic nature of the situation, a buysider who has exposure via senior secured notes expects severe difficulties should the French telco return to market after it has achieved its capital structure goals.

“I don’t think Drahi will be able to do a sub bond again, even secured will be tough. He’d be looking at 10% plus.”

As noted by Barclays FICC Research in a piece released earlier this week, 85% of active CLOs have more than 1% exposure to the Altice International / Altice France (SFR) debt complex (€35bn-equivalent across both Europe and the US).

“In pure absolute terms, the US HY and loan markets have the largest exposures but relative to the size of their markets, PE HY (European High Yield) has the highest exposure, both in notional and market value terms, at 2.0% and 1.4%,” wrote the Barclays team.

There are three massive capital structures that are giving creditors cause for concern in the shape of Altice, Intrum and Ardagh.

“I’m not surprised issues are coming from corporates [not sponsored] as they are usually a bit more out of touch with market,” the sellsider said. “You don’t always have access to the market in leveraged finance. It’s not like IG.”

“Maybe they don’t understand the magnitude of market impact but Altice should, given how much they've raised in levfin markets over the years,” they added.

High yield

A second sellsider pointed to a strong backdrop for EHY primary, pointing to compressed spreads which should encourage issuers to come to market, as we’ve continued to see this week.

“Companies are pricing with a spread of 250bps, which would be around one handle coupons pre-2021 when rates were at -50bps. That underlines how well the market is doing.”

French satellite operator Eutelsat priced €600m of 5NC2s at 9.75%, tightening from IPTs of 10.25%.

British cable and telecommunications company Virgin Media-O2 came out with $750m of 8NC3s at 7.75% (wide versus price talk of 7.625-7.75%) and €600m of 8NC3s at 5.625% (tighter than IPTs in the 5.75% area). You can find our relative value piece here.

Norwegian provider of offshore accommodation rigs Floatel International priced a $350m five year amortising bond at 9.75% and 96 (11.3% yield) versus price talk of 9.5% at 97-99.

Italian healthcare company Neopharmed Gentili launched, as predicted, €750m of dual-tranche SSFRNs and SSNs due 2030, to take out an existing €700m unitranche.

Price talk is guiding towards E+425-450bps and 99.5 (from E+450bps and 99-99.5) on the SSFRNs and 7-7.25% (from low-mid 7s) on the SSNs, with docs changes including a J-crew blocker added during syndication.

British mortgage lender Together, which the second sellsider described as a “readily digestible sterling name”, launched £450m of 6NC2s at 7.875% (versus price talk in the 8% area), which, combined with a new development finance securitisation, will raise funds to redeem its 2026s.

Italian cardboard packaging manufacturer Reno De Medici priced €600m of SSFRNs at E+500bps and 98 (versus price talk of 98-98.5).

Italian vending machine manufacturer EVOCA also launched SSFRNs, this time €550m in size at 5.25% and 98 (versus price talk of E+525bps at 97.5-98).

In case you missed it, check out our latest Digest for more news on high yield issuers during a busy earnings season. Looking back further, check out this deep dive into EBITDA add-backs over 2023 and Q1 — which deal understated leverage by the largest amount?

Weekly high yield movers

Click here to get the full table

Leveraged loans

It was a relatively quiet week for loan primary launches — 10 day syndications would run into the long weekend, so expect more meaty transactions the other side of Easter.

Belgian digital services provider team.blue provided the only launch, offering a €300m dual-tranche facility due 2028. It is comprised of a €250m TLB (fungible add-on) and €50m delayed draw term loan. Price talk is E+370bps and 97, and the delayed draw term loan is fungible with the TLB once drawn and will be sold as a strip.

Lenders generally dislike the structure, and grumbled about its presence in a deal for Astorg-owned Normec. But they played the deal anyway, and the testing and compliance company saw tightened pricing for its €565m TLB, pricing to E+400bps and 99.75 from IPTs of E+425bps and 99.5.

Other pipeline deals wrapped up this week. Swissport finalised its dual-tranche ($625m and €625m) 2031 TLBs, pricing at +425bps across both dollars and euros. The dollar leg landed at OID of 99.5 and euros at 99. Terms tightened from IPTs of +450bps on both legs, 98-99 for dollars and 98.5-99 for euros.

While there have been some complaints around opportunistic shareholder payouts in recent months (see Univar and EIR), there’s a view that Swissport shareholders are due to be paid after the December 2020 restructuring.

“There’s no restrictions on use of proceeds — the market is open for [credits] that have performed,” said a third sellsider. “It underlines the strength we’re seeing in the market currently.”

You can find our full Swissport write-up here.

German specialty chemicals company Röhm priced its dual-tranche 2029 A&E. The €1.002bn TLB priced at E+500bps and par while the $462m TLB finalised at S+550bps and par. Both tranches have a PIK margin of 25bps.

There is also a 50bps exit fee, stepping up to 100bps in July 2026 and 150bps in July 2027. The deal’s passage was doubtless eased by a chunky equity injection from sponsor Advent, which is putting in €350m in equity support this year, supporting the company’s acquisition of SABIC Functional Forms and the construction of a methacrylates facility dubbed “LiMA” for “Leading In Methacrylates”.

Spanish concession catering company Areas upsized its 2029 TLB A&E to €1.135bn (from €1.130bn), pricing at E+500bps and 98.5 versus price talk of 98-98.5. Additional proceeds will be used to pay transaction fees.

We covered the name in detail within our loan preview.

Boluda Towage priced its €1.1bn 2030 TLB (A&E from July 2026) at E+375bps and 99.75, tightening from price talk of 99.5.

Finally, Irish building machinery manufacturer BME priced a private €142m 2029 TLB add-on. The margin was E+475bps (in line with existing €1.35bn facility) but the OID wasn’t disclosed. The add-on will be used to partly pay down the remaining stub from last year’s chunky A&E.