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Private Credit 

Ryan Daniel

As we finish the first full week of March, things are starting to look a bit brighter (and not just because the Euros are less than 100 days away!).

If this week’s ECB decision and comments are anything to go by, we could also see further blossoming within European leveraged finance.

The ECB kept rates still for a fourth consecutive meeting, expecting inflation to reach its 2% target in 2025.

As mentioned by Deutsche Bank, its latest inflation projections were revised downwards, with headline inflation seen at 2.3% this year, 2.0% in 2025, and 1.9% in 2026, while core inflation is expected at 2.6% this year, 2.1% in 2025 and 2.0% in 2026. So in a couple of years the ECB is pointing to core being back at target and headline being slightly underneath.

President Lagarde’s comments also suggested June could be a point of importance: “We will know a little more in April, but we will know a lot more in June”.

It’s also the same month that markets are expecting the Fed’s first rate cuts too, with a Fed cut 96% priced by June (92% for ECB).

In the meantime, the story of 2024 so far seems set to continue.

One sellsider said: “I’m expecting it to be pretty busy between now and Easter, even though the repricing wave is mostly done. Private credit to TLB should also continue as a theme.”

Likewise, a second sellsider (from the LMA & LSTA Conference which took place this week) expected “a few more repricings before Easter.”

However the first sellsider was more sanguine over the eagerly anticipated M&A pipeline that was meant to improve in 2024.

“The market is still waiting for M&A but I don’t think it will come as people are expecting, even in the second half — and that’s down to the number of elections we’ve got coming up.”

That said, EQT-owned skin care specialist Galderma’s intention to raise $2.3bn (at a valuation around $20bn) will be closely watched by sponsors, insofar as they can learn how healthy exit opportunities are set to be in 2024.

Some of the large cap LBOs of 2017-2018 are looking a little long in the tooth now, and the equity markets route will help realizations, even if it means a squeeze on bond and loan outstanding volumes, as listed companies tend to run lower leverage levels.

Per Barclays, the seven-day period from Thursday to Wednesday (29 February - 6 March) saw further inflows (68th percentile) into EHY. This marked an eighth consecutive week of inflows — split across ETFs and mutual funds, with a slight tilt towards the latter.

As a corollary of consistent inflows, Darpan Harar, a portfolio manager at Ninety One, has suggested that the full extent of the EHY market’s expensiveness is not being fully appreciated by just looking at headline spread.

“As a weighted average, this headline spread assumes that all index constituents – including very distressed bonds - will be redeemed at par. In reality, some of these distressed issuers will likely default, and thus a portion of that spread is unlikely to ever be realised (this is often referred to as the ‘phantom’ spread).”

The median index spread — a more accurate representation of the typical spread in the market according to Harar — is significantly lower than the headline index spread. 

As of February, the headline index spread for EHY was 343bps which compares to the median spread of 233bps. This makes the percentage difference between the two metrics the largest it has been in 20 years.

We’re still patiently waiting for Aston Martin’s £1.1bn-equivalent issue of 7 year notes which will be used to refinance the 10.50% SSNs due 2025 as well as the 15.00% Second Lien Notes due 2026.

It’s a deal that would certainly teach us about the health of the sterling market, not long after MFG announced a big upsize to its syndicated TLB deal to £1.18bn, with a £750m distributed sterling tranche.

As mentioned here, sources have suggested there’s still not a lot of depth in sterling syndication.

A sellsider said: “The depth of liquidity [in sterling markets] is limited so you’re seeing larger players taking larger quantums, and that’s not necessarily just the private credit players. We’re not quite there yet with sterling.”

We also learned that troubled telco giant Altice France (SFR) will tender up to €215m of its €489.8m January 2025 SSNs and €483.3m February 2025 SSNs, likely funded by its recent data sales.

French power, telecom and fiber optic cable manufacturer Nexans priced €350m of SUNs due 2030 (from €300m) at 4.25% and 100.

Alongside general corporate purposes, proceeds will be used to refinance outstanding €200m 2.75% bonds due in April 2024.

Sticking with the Gallic theme, it was announced that wireless telco Iliad will arrange a series of fixed income investor meetings on 19 March, following the release of the company’s 2023 results on 14 March.

Plastic Ominium, a listed French motor vehicle parts manufacturer, made its HY debut, and priced €500m of five year NCL SUNs this week in a crossover-style execution (it’s rated BB+). The bonds priced at 4.875% and 99.459 (5% yield). Pricing tightened from IPTs in the 5.125% area.

Shearwater GeoServices announced plans to issue $300m 2029 SSNs. The proceeds would be used to refinance existing debt for the Norweigian petroleum and natural gas extraction company.

Among all the deals coming to market, 9fin just released its latest edition of the Earnings Digest so you’re never out the loop during a busy earnings season.

And for those of you needing your Grifols fix, check out our latest roundup on one of the biggest situations in European leveraged finance right now, as short seller Gotham City released another report on the blood plasma firm. Friday brought relief though, in the shape of an unqualified audit opinion which sent the shares soaring 16%.

The latest update from the ongoing fightback from syndicated markets: we are expecting another private credit to syndicated refi, this time from a pharmaceutical name. You can find more details from 9fin here.

While things are looking brighter for syndicated markets currently, Richard Lloyd, a partner at White & Case said issuers may opt for the certainty of execution available in private credit should sentiment sour.

"If syndicated markets soften and deals start to get flexed, borrowers may have forgotten the uncertainty that comes with being bounced back by investors."

Ticket exchange and resale company StubHub launched a dual-tranche TLB A&E across dollars ($1bn) and euros (€452m). You can find our loan preview here.

Price talk for dollars is guiding towards S+500bps and 98-98.5 meanwhile euros is guiding towards E+500bps and 98-98.5.

“They've had a good recovery after Covid shut down the entertainment industry, and it’s a solid single-B name offered with a 5-handle,” an buysider said.

The event ticket marketing company continues to search for a good window to make its debut on the New York Stock Exchange, following reports of a possible listing in early 2022.

If nothing else, perhaps this unlikely Swiftie was a recent happy customer? Surely that’s credit positive.

He’s a better investor than selfie taker…

International elevator and escalator technology provider Thyssenkrupp Elevator (TK Elevator) is marketing a €3.2bn-equivalent TLB dual-tranche due 2030 across euros (€500m) and dollars ($2.9bn). We wrote a loan preview for you here.

The deal will extend the existing $2.8bn TLB due 2027 to 2030, as well as adding a further $100m to the facility, and the funds will also be used to refinance the existing $600m and €45m Private SUNs due 2028. It’s leverage neutral overall, but puts more of the cap stack in secured format.

Arguably TK Elevator is tackling the 2027 loan early, but bankers thought it was a good choice of window. The existing facility had a 350bps margin, while talk is SOFR+350-375bps at 99.5.

“The sponsors [Cinven and Advent] are being opportunistic [with this new transaction]. Why not take advantage if you know you plan to hold the business?” they added.

Price talk for the euro tranche is guiding towards E+400bps and 99.5 while the dollar tranche is guiding towards SOFR+350-375bps and 99.5.

One buysider offered some caution: “You would do that [tight pricing] for something that has a more positive outlook. This we know will be lower growth and lower cash generation for the next two years. This isn’t a slam dunk. That’s not to say we wouldn’t do it, we just are more conscious of the downside.”

Life science ingredients distributor Barentz priced its dual-tranche 2031 TLBs. The €725m TLB (A&E from 2027) priced at E+400bps and 100 (from IPTs of E+400-425bps and 99.5) whilst the $525m TLB priced at S+400bps and 99.5 (from IPTs of S+425bps and 99). You can find our full write-up on the deal here.

Fertility clinic chain IVIRMA Global saw price talk released for its dual-currency 2031 TLB deal — split across €550mand $500m.

Margin and OID is targeted at +450bps and 99 for both legs respectively.

Prosol, the French wholesaler of food, beverages and tobacco, launched a €200m 2028 TLB add-on; IPTs are guiding at E+400bps.

French insurance broker APRIL priced its €1.2bn 2031 TLB at E+400bps and 100 (tightening from IPTs of E+400-425bps). In case you missed it, here’s our loan preview.

Hearing aid manufacturer WS Audiology announced a €2.77bn-equivalent dual-tranche TLB deal (A&E from 2026 to 2029). It is targeting €1bn minimum for euros and $500m minimum for dollars.

This will be done in conjunction with a €500m equity contribution used to reduce the outstanding TLB by €360m and repay RCF drawings, and pay transaction costs. A €525m Holdco PIK transaction (privately placed) will be used to refinance the existing 2L.

Chemicals giant INEOS Quattro priced its €935m dual-tranche 2029 TLBs (from €700m-equivalent minimum).

The $475m tranche landed at S+CSA+425bps and 98 (in line with IPTs). The €500m tranche finalised at E+450bps and 99 (from price talk of E+450bps and 98.5-99).

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