European LevFin Wrap — Pockets of resistance, patchy signal for Vodafone Spain?

Ryan Daniel

5 July 2024•5 min read

It’s felt like a week of pushback.

Although not to the same extent as Rishi Sunak and co, some European LevFin deals also felt opposition.

We saw TMF and Odido Netherlands shelve their euro repricings in a sign that sentiment is softening as issuers test the limits of what’s palatable in a tight market (especially in the context of maintaining CLO arbitrage at roughly 200bps) — a theme we spoke about in a previous European LevFin Wrap.

Meanwhile, Vodafone Spain remains the biggest talking point, not least because of its size (just over €3.4bn split across bonds and loans) but also diverse views on the credit, which is yet to release price talk on the bonds despite launching the SSNs Monday.

Sources speaking with 9fin have flagged loan pricing as wide, relative to its double-B rating, which we explored further here.

“Initially excited with size and scale, but it’s not as straightforward as we’d be hoping,” one buysider said.

A second buysider echoed that: “We are looking at the deal because of the strong rating and the size, but we are not very fond of the business.”

Others flagged the credit as a turnaround story with considerable execution risk — a point that made investors nervous, considering the seemingly underwhelming equity injection of just 25% in Vodafone Spain (most of which comes from €900m in preference shares supplied by Vodafone, rather than equity from Zegona).

We’ve been covering the deal from different angles over the past week and will continue to do so as it progresses: here's our Financial QuickTake and deal previews (here and here).

Leveraged loans

Spanish testing company Applus followed Vodafone Spain’s example, tapping both the loan and high yield bond market for its 2029 deals.

The company priced a €800m TLB (from €900m) and €895m of SSNs (from €795m), which combine with a €1.2bn equity cheque from sponsors TDR Capital and I Squared Capital to fund the take-private.

Loan pricing finalised at E+400bps and 99.75 (from E+400-425bps and 99.5 price talk) while the bonds landed at 6.625% (from 6.75-7% price talk).

Buysiders speaking with 9fin were split on the name, with one saying, “So far, we like it and it’s worth spending more time on.” But others decided to pass (”Pretty easy pass in the end,” said one) due to the flurry of competing deals in market.

Uncertainty around the IDIADA transaction concerned some, given the potential for a lower transaction size. Part of the TLB is conditional on the success of the IDIADA tender, creating comparisons to a delayed draw term loan (DDTL), typically used to fund acquisitions. This portion of the new TLB will be cancelled if Applus does not successfully bid to renew the tender.

“You’d get partly allocated and then it could just get cancelled [if Applus’ bid is rejected] and you're getting less than you expected,” the second buysider said. “It’s a sector we’re comfortable with, but we’re trying to get comfortable with this strange structure they’ve got.”

You can find our full write-up here.

Speaking of TDR Capital and I Squared Capital, the duo recently wrapped up execution for Aggreko’s dual-tranche A&E. The transaction extends maturities from 2026 to 2029. The €1.155bn TLB priced at E+425bps and 100 (from E+450-475bps and 99.5) while the $1.192bn tranche landed at S+CSA+425ps and 100 (from S+450-475bps and 99.5).

We recently mentioned Aggreko in our equipment rental deep-dive.

Finnish private healthcare provider Mehilainen priced its dual-tranche 2031 facility. The €1.75bn TLB landed at E+400bps and 99.5 (from E+400-425bps). The €110m DDTL will be syndicated as a pro-rata strip with new money TLB commitments.

Portability came up as a focus amongst investors, covered in our pieces here and here.

German pharmaceutical company Stada (deal preview here) priced its €2.165bn (from €500m minimum) 2030 A&E, from 2026 and 2028, at E+400bps and par.

Pharmaceutical manufacturer Aenova (not to be confused with similarly named Aernnova, which tapped markets just a few weeks ago!) is also in market — targeting a €400m 2031 TLB, with price talk at E+400bps and 99.5 OID.

French business management software company Cegid launched a €500m minimum TLB due 2028. Price talk is at E+350bps and 99.75-100.

Here’s our previous preview on the company.

Check out the list of leveraged loans that priced recently below:

Here is a list of leveraged loan transactions in the market:

Weekly leveraged loan movers

High yield

Before we head into the bond deals, you can find our Q2 recap of the European High Yield market here.

Italian beauty brand Kiko Milano priced €500m of 2031 SSFRNs at E+412.5bps, tightening from talk of E+mid-400s.

German heat exchange manufacturer Kelvion upsized its €475m (from €425m) 2029 SSFRN deal. Revised price talk is at E+500-525bps and 99 (from E+525bps and 98.5-99).

Phoenix Group, the German pharmaceutical retailer, priced €500m of 2029 SUNs with a 5% yield (4.875% coupon at 99.459) — shortly after its tender offer of €400m 2025 SUNs (2.375% coupon) at a repurchase price of 98.35.

For more on the theme of discounted tender offers, check out our recent write up here.

Check out the list of high yield bonds that priced recently below: