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And just like that, another year is coming to an end…

While we wouldn’t let you leave for the holidays without a little levfin update, we also wanted to share some festive cheer.

Scroll down to the end for a quiz inspired by the year that was in leveraged finance!

But for those of you who really need your wrappy fix, we’ll round up what we saw from a quiet, but not completely barren, week. 

In case you missed them, check out our 9fin’s suite of 2023 recaps (high yield/loans/private credit/distressed) and 2024 outlooks (levfin/CLO).

At a time where we’re already starting to see a flurry of “Out of Office” automatic replies amongst sources, Altice France (SFR) surprised many by issuing €350m of privately placed SSNs. 

The announcement details that the bonds due 2027 are issued with a coupon of 11.5% and OID of 97, a level described as “extraordinarily wide” by Mick Vasilache, partner at Chenavari Investment Managers.

We note the privately placed notes are priced a lot wider than Altice’s existing February 2027 maturities, with a spread-to-worst of over 200bps more. 

Some were surprised by an announcement five days before Christmas, but the second buysider said the window was understandable. And Vasilache pointed to solid sentiment allowing for a deal like this to be completed in the first place.

"When I look at the timing, I think why not? The market is pretty healthy,” said the second buysider.

“[It’s had] all sorts of troubles on and off the field throughout the year — it’s pretty idiosyncratic,” said Vasilache. “That said, it shows that there’s appetite out there even for those going through troubled times.”

At the time of writing, futures are pricing a 92% chance of a Fed cut by March, as well as 152bps total by December 2024 — even more aggressive than what we saw from the FOMC dot plot which only signalled three cuts next year.

As per Deutsche Bank’s Macro Strategy team: “[152bps] that’s equivalent to more than six 25bp rate cuts next year, which is normally the sort of pace of you see around a recession…so there’s a clear divergence between the Fed’s own signals and market pricing.”

While the market seems more optimistic about the prospect of lower rates, it’s worth considering why the market thinks that many cuts are needed. Is it foreseeing a less sanguine outcome than the much-discussed “soft-landing”?

It’s a macro narrative that will certainly dominate the first of 2024, if not longer.

1. Sports financing was a fixture of the year as FC Barcelona and Olympique Lyonnais turned to innovative structures to fund big stadium renovations. But teams haven’t always been so good with money. What financial blunder did Leeds make in 2001 to coin the term ‘Doing a Leeds’?

A. Overdrawing its RCF to buy the entire city a round

B. Commissioning a gold plated statue of hometown hero Mel B

C. Securing its financing against winning the league (they did not)

D. Went on a player-buying bender that led to bankruptcy

2. French fine foods brand Labeyrie faced a difficult year with negative EBITDA, dropping cash levels and an inventory crunch — particularly with low volumes of duck (owing to avian flu), crucial for its foie gras. How many grams of foie gras do French people eat per capita each year?

3. The end of Credit Suisse left its mark on the industry this year, particularly as bankers were picked up by rivals across the industry (as we found in tracking the Credit Suisse diaspora, see here and here). As history shows, there is some cachet in being a part of a collapse. How much did the Lehman Brothers sign roughly sell for in an auction at Christie’s in 2010?

4. Barbiemania took over this summer. Which leverage finance credit saw an unexpected upside from the release of this summer’s blockbuster movie?

A. Coty (due to those seeking to mimic her perfect smile)

B. Crocs (due to selling out its Barbie-pink rubber shoes)

C. Weener Plastics (due to obvious reasons)

D. Hertz (due to an uptick in people renting convertibles and blasting the Indigo Girls)

5. Stonegate Pubs, Britain’s largest pub chain, recently raised around £638m to pay down debt ahead of £2bn of high yield bonds maturing in 2025. (which is roughly 145,995,423 pints at the current average price of £4.47). What is the most popular pint in the UK? 

6. Mohsin and Zuber Issa, brothers and co-owners of Asda, purchased the UK business of a company they also own, EG Group, earlier this year and refinanced the business with some expensive privately placed bonds. But it’s not the first time their transactions have raised questions: What did the brothers buy with a £39m loan from EG Group in 2018?

7. Frozen food retailer Iceland completed a dual-currency bond deal this year, after energy costs related to freezer use hit its earnings. It also used to sponsor ITV reality show “I’m A Celebrity…Get Me Out of Here!” How much was politician Nigel Farage paid to appear on the most recent season?

8. Dutch margarine maker Upfield landed an A&E this year as it aimed to extend maturities out to January 2028 ahead of a potential IPO in H2 2024. Which 19th century state leader, facing high costs for feeding soldiers and workers during a war, offered a prize to whoever could come up with a cheaper alternative to butter, leading to the invention of margarine?

D. Sultan Mahmud II of the Ottoman Empire

9. Payment processor Worldpay enjoyed massive demand for the financing on its carveout from FIS earlier this year, raising some $8.4bn across loans and bonds. But credit cards had some humble beginnings. In the 19th century, which industry used an early version of credit cards, originally issued as coins?

10. Though Pure Gym faced a difficult period during COVID lockdowns, its revenue increases and ambitious expansion plan led to tightening the pricing on both legs of its dual-currency bond deal earlier this year. According to research by the gym chain, what percent of people reduce or stop their exercise in the run up to the festive season?

SPEED ROUND: Can you answer these Christmas-themed questions?

A. Which levfin credit makes mince pies? 

B. Which levfin company bought a Christmas pudding manufacturer in 2020? 

C. Which leveraged food and drink group owns a pub called the Pear Tree Inn?

European LevFun Wrap — Big Fat Quiz of the Year 2023

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European LevFun Wrap — Big Fat Quiz of the Year 2023

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European LevFin Wrap — September’s slow and steady start

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“You need to be curious and have the appetite to dig into situations to get to the heart of the story” — The Espresso with Sayed Kadiri

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