European LevFin Wrap – Private credit refi and new money fuels year-end rush

Nicolle Liu
+Laura Thompson
+ 1 more

22 November 2024•5 min read

This is our weekly newsletter on all things leveraged finance, from the latest trends to in-depth coverage, to people moves. Explore all our market wraps here.

After a quieter spell leading up to the US elections, leveraged finance markets are picking up pace for what looks to be a lively year-end push.

"We expect up to €5bn of floating rate paper, and up to €2bn of fixed rate paper, in the coming weeks. It’s shaping up to be one of the busiest year-ends we have seen in a while,” said Preveen Samarasinghe, managing director on Bank of America’s European leveraged finance capital markets desk.

Sources expect near-term loan deals from issuers including French packagers and industrial companies, as well as a Luxembourg-based healthcare provider and a Spanish pharma business. Telco deals should come from the Netherlands, the UK and Germany, 9fin sources added.

Early 2025 is also shaping up: VDK Groep, the installation and maintenance firm owned by EMK Capital, has opted for a syndicated refinancing in January instead of a private credit deal. The banks were pitching a €690m TLB with room for an additional €160m of the undrawn RCF to be refinanced, as 9fin reported last month.

Leveraged loans

So far, market activity has been driven by a steady stream of private credit refinancings transitioning into syndicated markets, alongside several new-money deals.

CD&R-backed facilities management firm OCS’s £860m refinancing just priced at E+475bps for the euro tranche and S+575bps for the sterling tranche on Friday (22 November). Both were at an OID of 99. While the company benefits from a strong sponsor and a defensive profile, investors were wary of its high customer and geographic concentration, weak cash flow, and links to the recently restructured Atalian.

Syclef, the French refrigeration systems provider owned by Ardian, is also testing lender appetite. The company is marketing a €300m TLB, drawing investor interest with its growth potential despite concerns about its smaller scale and concentration in the French market.

“I like it a lot more than I thought I would. There’s a massive tailwind from the EU mandate against the old hydrofluororcarbon (HFC) systems,” said an investor. “Retailers have to upgrade and that’s driving a lot of Syclef’s business.”

Meanwhile, fellow French healthcare provider Santé Cie is marketing a €735m TLB, including a €175m dividend recap.

Dechra Pharmaceuticals is pursuing a £1.3bn-equivalent refinancing as it transitions from private credit to the syndicated market. The TLB would be split between dollars and euros. A buysider acknowledged the substantial equity contribution from sponsor EQT but noted: “The valuation EQT paid was quite high, and they’ve acquired some innovative products that are not yet EBITDA-positive and aren’t expected to be until 2030.”

Similarly, Exclusive Networks is raising €1.285bn in dual-currency loans as part of the €2.2bn take-private transaction led by CD&R and Permira. The financing includes €905m in euros, $400m in dollars, and a €97.5 delayed-draw term loan, with €480m earmarked for a dividend to existing shareholders, according to Fitch.

Another closely watched deal is Stepstone, the German online job platform, which is marketing €1.925bn-equivalent loans to facilitate its spin-out from Axel Springer by KKR and CPPIB.

Elsewhere, UK warranty provider Domestic & General is launching £450m in euro TLBs, with lender calls kicking off next week.

And in a smaller but notable development, Lipton Teas and Infusions has raised a €135m incremental facility to reduce its RCF exposure amid a potential liquidity squeeze.

The biggest loan mover this week, French chemical manufacturer Seqens has dropped to Caa1 today (22 November), days after informing lenders that it had missed its Q3 2024 budget. Seqens posted Q3 24 EBITDA of €12.5m, a significant miss from its estimation of €27m, lenders told 9fin.

Here’s a look at what’s in market:

Here’s a look at what priced this week:

Weekly leveraged loan movers

High yield

Meanwhile, the high yield bond market has been quieter, but investors have been kept busy with earnings.

Versuni, the domestic appliance maker, reported €107m in free cash flow for Q3, supported by a €78m working capital inflow, although freight costs and marketing spend continued to pressure margins.

France-based catering and facilities manager Elior is well-positioned to refinance its 2026 maturities with a transaction planned for H1 2025, backed by a sharp financial turnaround. During its FY24 earnings call, the group highlighted progress in reducing net leverage from 11x in FY22 to 3.8x in FY24, with further declines projected to below 3.5x by FY25.

Here’s a look at what priced: