High Yield Primary

As expected, HY primary is busy even by this year's standards. We tracked ~€5.6bn worth of issuance this week, with a mix including almost every possible type of transaction. Refinancings, Acquisitions and LBOs, Dividend recapitalisations, exchange refinancings and even the humble General Corporate Purposes hit the screens.

With a rush expected this week, several deals straddled last weekend. Nobian, Paprec, and BUT were announced on Friday, and a trio of deals were posted as save-the-date’s.

Formerly Nouryon’s base chemical unit, the Nobian spin out will reduce debt at the former parent (by €1,506m), with ownership retained by Carlyle and GIC. The group benefits from solid market positioning, with 43% and 40% of all industrial salts and chloromethanes in Europe, and long-term contracts - albeit slightly hampered by some high customer concentration. However, performance has declined in recent years, as the European industrial chemical market suffered prior to Covid. Buysiders speculate the spin out is a precursor to Carlyle’s exit (something Bloomberg reported on in late 2020), and leaves open several questions:

Initially offering €425m sustainability linked Senior Secured Notes due 2026 (B2/B/BB-) and a €1.19bn TLB. The Notes upsized by €100m (with a comparative decrease on the TLB), and Price Talk emerged at 3.50-3.75%, final pricing settled in the middle at 3.625%. Subscribers can read our Credit, ESG, and Legals quicktakes for more information. If you would like a trial, please email team@9fin.com.

French recycling business Paprec announced €450m Green Senior Secured Notes due 2028 (B2/B+). Pricing at 3.50%, the new notes will fund the €147m Dalkia and €57m CNIM acquisitions, redeem €225m of FRNs and partially repay the PGE Facility, as well as fund general corporate purposes. In our ESG QuickTake, we highlight the group was assessed in 2018 to have an advanced environmental strategy due to certification and risk prevention procedures - however, the sustainability report relies on anecdotal evidence, rather than quantifiable progress or targets.

Speaking of ESG, La Depeche reported ten tons of paper were ‘devastated by flames’ at a company warehouse in Mercuès, France, on Saturday. According to the (google-translated) report, “A person slightly inconvenienced by the thick black smoke which escaped from the blaze was transported to the Cahors hospital center.”

Completing the trio, home equipment retailer BUT announced €500m Senior Secured Notes due 2028 (B2/B/B). Offering a 4.25% coupon (par), and alongside €203m cash on balance sheet, proceeds will refinance the 2024s, repay an €85m shareholder loan, and distribute a €215m dividend. Here at 9fin, we’ve been talking about excess liquidity at the French firm since late 2019. If you would like more information about our deal predictions, please get in touch for some samples team@9fin.com.

The story of BUT shareholder Andreas Seifert’s bad blood with Steinhoff - who formerly owned Conforama before BUT’s purchase in September 2020 - has an interesting history, and although the groups now have the same ownership, they currently operate as two distinct and standalone companies. In our Legals QuickTake we issued an update on Monday which shines a light on a potential combination of the two companies. Although on first read it appears that new language in the OM points to a combination, we believe the covenants instead intend to provide structuring flexibility as part of a multi-step transaction. The OM states there are no “short-term plans for further integration”, however a merger of this nature could result in a group with a lower credit quality and the assumption of Conforama assets and debt - one to keep an eye on.

Jeffy-Bag in the post?

Elsewhere, Polish e-commerce and logistics group InPost, who mainly operate parcel lockers (APMs), announced €390m Senior Notes due 2027 in a debut offering on Monday (Ba2/BB). The financing upsized to €490m and priced at an incredible 2.25%, after sending out IPTs in the High 2s. The new Notes, and PLN 500m issued under the PLN Programme will together fund the €513.4m acquisition of Mondial Relay (formerly of Hermes Holdings France) helping expand the group’s international presence. Previous expansion attempts into Hungary, Czechia, Slovakia, France and Canada failed on low revenue generation and an inability to establish APM delivery networks. In the UK, operators like Jeff Bezos’ Amazon are already well entrenched.

There are a few things to write home about on the Legals side. Leveraged based PI and RP are available day-one, and EBITDA synergy adjustments are uncapped with no time limit. Most interestingly, there’s significant additional dividend capacity under the RP post-IPO distributions basket (note the current €7.3bn market cap - or 25.8x). Couple this with the fact that the deal is portable - a rarity for listed businesses - and perhaps there’s credence to some twitterer’s belief that the group will be scooped up by Amazon in the near future. For comparison, TalkTalk inserted portability into its Feb-2020 SUNs. We noted this was unusual at the time - and in December the truth emerged, as ToscaFund’s £1.1bn take-private bid was accepted.

More Primary

Other deals in market this week include Kantar, WPP’s data analytics division, owned by Bain Capital (the group has guided $400m Senior Secured Notes due 2026 at 5.5-5.75%). UK cruise and insurance group Saga priced £250m Senior Notes (B1/B) at 5.50% on Friday. Proceeds will repay a TLB, tender £100m of the existing notes and fund £76m of cash to the balance sheet. Renk AG, German manufacturer of automotive components tapped its existing 2025s for a further €200m to fund acquisition of the combat propulsion systems business of L3Harris Technologies, Inc, pricing at 103. You can read about some interesting ESG elements in our Credit QuickTake. Lastly, VMED-O2 debuted a pair of long dated Green SSN tranches to refinance existing debt, finalizing at £675m 4.50% and $850m 4.75% due 2031 (Ba3/BB-/BB+).

Of a more EM flavour, Luxembourg-based metal trader and recycler MetalCorp priced €250m Senior Secured Notes due 2026 (B) at a weighty 8.50%. Around €68m were rolled over in an exchange process, with the remainder subscribed under the public offering and private placement. Chinese conglomerate Fosun International priced €500m 4.00% Senior Notes due 2026 (Ba3/BB, 99.77 OID) which will be used to refinance existing debt.

Other deals included a small Bite€75m tap to recap of the 4.625% SSNs due 2026. Proceeds will be used together with cash on hand to pay a €105m shareholder distribution. Air France KLM priced a €300m three year offering at 3.00% (99.65 OID), and a longer five year €500m tranche at 3.875% (99.44 OID). Proceeds will repay existing debt, including state-aid.

Leverage Loans Primary

Primary was as heavy as the rain in London this week, and analysts were spoiled for choice with a number of more highly rated credits coming to the market. More than €7.5bn worth of TLBs are currently in syndication, across 13 tranches.

The chemicals sector spilled all over credit desks this week. Base chemicals producer Nobian is out with an ESG-linked €1.09bn (B2/B/BB-) to support its spin out from previous parent Nouryon. Buysiders admit a somewhat caustic reaction to Nobian’s recent run of declining revenues, as well as questions around the spin out itself. The loan was reduced by €100m, with the HY instruments picking up the slack.

The loan priced in line with guidance of E+375 bps, with buysiders finding the firm worth its salt because of its dominance in its European market, its long-term customer relationships, comparatively strong ESG play (the loans boasts two ESG ratchets) and healthy interest coverage, all backed by an end-to-end integrated cost-saving business model.

Also in the sector, chemical supplier Element Solutions has completed a $400m fungible add-on (BBB-/Ba1) that will back its €420m acquisition of peer Coventya from Silverfleet Capital. The TLB priced in line with guidance at a draconian L+200 bps with a 99.5 OID that fits the rating. The company expects €13m of annual synergies to be realised over the two years following completion, according to Chemmanager. Coventya is forecast to generate revenues of approximately €160m this year. Element is on a spending spree, having just acquired UK electro-chemical producer H.K. Wentworth for $60m.

Food for thought

The food sector continues to feed the buysider masses this week, as Prosol, the parent of French retailer Grand Frais brings a €1.3823bn TLB (B/B2) to the farmers market. The loan is currently guided at E+375-400 bps with OID of 99.5 and includes an ESG ratchet. The term loan is complemented by a €250m RCF which comes with a springing covenant if drawings exceed 40%, set at 40% headroom. The company’s belly is full from swift earnings growth, driven in part by the pandemic, though enthusiasm for the credit is likely to be tempered by its weak position in the B2 category due to obese leverage.

Bain Capital is pushing financing along for two aggressive deals this week, the first of which is for its acquisition of Valeo Foods for €1.8bn. The business is being marketed of 6.75x leverage and pushy growth plans without a convincingly clear strategy behind them could leave buysiders without supper. Docs are as spicy as the current market standard, but healthy cash flow and reasonable pricing is chicken soup to the investors’ soul. A €600m tranche (B2/B) is currently guided to pay E+400 bps, while the €410m-equivalent sterling-denominated tranche is guided at S+500-525 bps. Supper (commitments) is served on June 29.

The Bain of buysiders’ existence

Another aggressive Bain deal, Kantar galloped to the finish line this week, accelerating the deadline for its $500m TLB (B2/B-) by four days. One of the highest paying TLB of the week, the Bain-backed business is offering L+500 bps in a bid to gather financing for the acquisition of US market research panel specialist Numerator. The loan has a 0.75% floor and an original issue discount of 99. Buysiders were buoyed by a bullish trading update from Kantar, but the business still has a long way to trot, facing increased planned savings of $320m in the medium term. Secondary traders will likely be watching this credit closely, as thick leverage could leave the business to walk home.

Also in IT, Claranet is raising a dual-tranche €300m and £70m senior secured term loan B (B/B2/B+) alongside a €75m RCF. Proceeds will refinance existing bank debt. High leverage and low margins compared to its peers are countered by solid sectoral tail winds and good geographic diversification.

French software company Cegid Group also launched a €955m TL in part to fund an acquisition of payroll and human resources management firm Talentsoft. The acquirer, which is backed by Silver Lake, had made the acquisition to expand into the European HR software sector. VC-backed Talentsoft marks Cegid’s third acquisition in three years. The financing comprises an €880m seven-year covenant-lite term loan B guided to pay E+325 bps with a 0% floor at 99.5 OID, and a €75m 6.5-year revolving credit facility. There is a springing covenant on the RCF when 40% is drawn.

Metal cans manufacturer Titan is currently in the market with a €1.175m TLB (B/B2/B+). Price talk is currently in the range of E+375-400 bps, a common refrain now. The business has a leading position in the European market of around 40% market share, but it lags behind its peers in terms of EBITDA and leverage.

Also in industrials, commercial and residential flooring business Tarkett is raising a €950m-equivalent loan to back its take-private by its founding family and investor Wendel. The $150m tranche is guided to pay L+375 bps, while the remaining euro tranche is guided to pay E+325 bps. Both tranches are offered with a 0% floor, at 99.0-99.5 OID and 101 soft call for six months. Buysiders like the low leverage and leading position of the company, but are worried about the commodity price volatility inherent in the business’ oil-based supply chain.

ESG where it shouldn't be?

Liberty Global's Virgin Media Ireland has revised terms on its €900m ESG-compliant term loan that will be used in part to pay a dividend to shareholder Liberty Global following its spin out from Virgin Media amid its combination with O2.

Price talk on the 2029 term loan is now E+350 bps, the wider end of E+325-350 bps guidance, with a 0% floor and a 99.50-99.75 OID. The loan is offered with a 101 soft call for six-months. Buysiders were likely cautious of the business’ loss-making history and aggressive competition in the telco market, as well as the potential for the orphaned division to be overlooked by its preoccupied shareholder.

Covenants were also adjusted. Total senior secured net leverage has been reduced to a maximum of 5.0x down from 5.5x. Total net leverage is a maximum of 5.5x.

Finnish construction company YIT Corp also worked in some ESG angles into its €300m revolving credit facility, with a margin tied to the company's performance on two sustainability targets.

Slash of the titans

In oversized leveraged deals, Natwest has joined the bank group involved in Arrow Global’s €1.78bn-equivalent loan backing TDR Capital's LBO. NatWest joins Barclays, JP Morgan, Goldman Sachs, Bank of America, DNB Bank, HSBC, Citigroup and Lloyds on the financing. The loans comprise €725m, €250m and £400m of one-year senior secured bridge loans; and a £285m super senior multicurrency revolving credit facility. The euro bridge loans pay E+400 bps, while the Sterling tranches benefit from a healthy margin of S+500 bps.

ThyssenKrupp Elevators has launched a repricing of a dual-currency buyout loan to improve its capital structure after 101 soft-call protection wears off a year after the loan was raised to back its buyout. It is simultaneously seeking a €200m-equivalent fungible add-on to partially repay existing senior notes. The business was acquired by Advent International, Cinven and RAG last year for €16.14bn. The European levfin market backed €1.015bn of the mammoth financing, which sat alongside a variety of debt instruments and a €2bn offering of senior pay-in-kind notes that included euro and dollar elements priced at 11% and 12%, respectively, among a variety of other instruments.

In other news, a variety of smaller loans have shuffled through the market..

High Yield Secondary

It was another non-mover across HY this week, with an average decline of just -0.01 pts (63% -0.19 pts | 33% +0.34 pts). By Industry, Financials (+0.13 pts), Energy (+0.10 pts) tracked the greatest gains while Real Estate slipped -0.44 pts.

Within Real Estate, Adler group saw big moves on Thursday, reportedly due to rumours on a short seller report on the German firm. We traced (mid) prices on the 2027s down to 94 at around 10am after opening near par. Prices have since recovered to around 98, with several high profile short sellers denying involvement.

The iTraxx European Crossover held steady on the week, tightening marginally to be quoted at 227 bps today.

Secondary Leveraged Loans

This week, loans activity was the most dramatic the 9fin team had ever seen... Just joking! It remained flat once again.

All sectors tilted downwards by far less than 1pt, except for energy, which increased by a sliver of a point.

Buysiders told 9fin that secondary had taken something of a back seat amid the primary deluge and the normalisation of pricing in Covid-19 stricken sectors such as travel and leisure.

Barentz’s $259.9m TLB paying L+450 bps and Comdata’s €355m TLB paying E+500 bps tied for first place as the biggest risers, though they find themselves in completely different parts of the market. Barentz’s loan is now quoted at par, while Comdata, which remains mired in restructuring, languishes at the 64 mark.

Traders continue to lose faith in Pronovias, as the wedding dress business is once again crowned the biggest faller of the week. The €215m 2024 TLB, which pays E+450 bps, fell by 2.8 pts to 70.

The company last took the wedding cake over the Easter bank holiday weekend, following S&P raising its rating to CCC from selective default. In a noteworthy show of support, the business received unanimous approval from its RCF lenders for a soft restructuring that saw sponsor BC Partners inject €18m with lenders waiving leverage covenants until June 2022. On a recent Zoom call, the company’s CEO said that while 60% of weddings did not go ahead in 2020, only 3-5% of Pronovias’s orders were cancelled, with the vast majority of couples rescheduling for 2021. The company has recently announced a collaboration with Marchesa and since then has struck a partnership deal with Vera Wang.

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