Market Wrap

LevFin Wrap - eLBOws out in crowded marketplace

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  1. Huw Simpson
  2. +Kat Hidalgo
15 min read

High Yield Primary

If you wanted an M&A wave, you got one this week. A grand total of seven LBOs placed more than €7.2bn of new money into the market, with total issuance of almost €7.7bn. Given the abundance of supply and worrisome macro murmurings many deals failed to tighten meaningfully on IPTs, and Iliad even extended its roadshow -  giving investors more time to digest a tricky HoldCo-OpCo structure.

Housing Block

It was a poor week to market a new deal in the housebuilding sector, as a new Viceroy short-selling report on the Adler complex sent prices tumbling. Keepmoat did exactly this, offering £275m of Senior Secured Notes due 2027 to fund the £731m acquisition by Aermont Capital. Sellers TDR & Sun Capital Partners acquired the business from Lloyds in 2014, who had assumed control following a debt-for-equity swap in 2012.

The UK-based affordable house building company was purchased for a 8.9x ‘normalized EBITDA’ multiple, which swaps out the less favourable Oct-2020 EBITDA contribution for Oct-2019. Unable to gain momentum, pricing settled at the wide end of 5.75-6.00% talk for par.

Elsewhere, global ‘modular space and infrastructure’ provider Modulaire Group (formerly Algeco Scotsman) hit go on the bond leg of its €4,300m takeover by Brookfield partners - offering up €1,183m (equiv.) SSNs due 2028, and €435m SUNs due 2029. Tranches and pricing on the sustainability linked notes finalized at £250m 6.125% SSNs (IPTs 5.75% area), €750m 4.75% SSNs and even offered a decent 200 bps pickup on the €435m 6.75% unsecured portion - by some way the widest EUR triple CCC LBO this year.

There was also a new skirmish in the battle for dreadful docs. Original covenants were “easily among the worst” we’d tracked in EHY, and although investor pushback led to material changes, the revised docs still contain several novel features - including leverage ratio calculations which exclude debt outstanding under almost all debt baskets (meaning the notes are still portable, even if the companies actual net leverage significantly exceeds the 6.1x test). The Senior Notes also include a 10% at 103 provision, another rarity in unsecured deals.

This format is nothing new. To generalize, sponsors capitalize on a favourable market, insert increasingly loose terms, and row back slightly - if required - in response to any pushback. This usually leaves a still fairly aggressive set of terms, and often with new precedent for future deals.


The second sustainability linked deal of the week, European manufacturer Graanul was offering €600m (equiv.) of SSNs due 2026 across fixed and floating tranches. The company produces wood pellets for ‘renewable’ power generation, and incorporates a 75 bps step-up from Oct-2025 if the sustainability target is not met. In our ESG QuickTake we explore some points of contention surrounding the biomass debate, and whether public support and subsidies should remain for production using ‘whole trees’ as feedstock.  Final tranches settled at €380m 4.625% on the fixed, and €250m E+475 (99.75) on the floating. Some PMs took to twitter in order to vent frustration at zero allocations, as the deal traded up on the break (101.1 / 100.5 mid prices on the fixed and floating).

Dial 3 for Pet Consulting

We also tracked three new Italian buyouts, each managing at least some tightening during the bookbuild. This positive momentum perhaps follows on from the success of ItelyumPasubioCeradcri and Lutech in the last six months.

First up, pet food retailer Arcaplanet priced it's debut €550m 4.50% Senior Secured Notes due 2028 on Thursday. Moving on to new stewardship under Civen, the group is valued at around €1,200m (11.1x EBITDA), and will combine with Fressnapf-owned Maxi Zoo - who will own a 33% stake in the resulting group. Rolling up multiple acquisitions in previous years, the group benefits from two interesting phenomena; (i) a high proportion of mom & pop stores in Italy, and (ii) the worryingly termed “humanization” of pets - a tendency of owners to think of pets as family members. The first point allows for consolidation (a private equity play common in vet practices and dental clinics like IVC and IDH, or Pets at Home in the UK). The second allows for greater pricing power, and benefits from ‘premiumization’ of the products sold - to give you a hint, the group categorizes brands as ‘specialist’ or ‘super premium’, ‘premium’ and finally, ‘mainstream’. In other pet-related news, late yesterday (7-Oct) it was reported Hellman & Friedman had increased their bid for online pet retailer Zooplus to €3.36bn, matching EQTs current offer.

The remaining two deals came from consulting group BIP, and broadband provider EOLO

Financed via €275m SS FRNs due 2028 and a €405m equity contribution, CVC are purchasing BIP for ~€700m (11.1x EBITDA) - although €37.5m of the equity will be downstreamed as contribution from a HoldCo PIK. The notes, issued out of the mellifluous ‘Bach BidCo’, priced at E+425 (par) on Thursday. 

Meanwhile, Partners Group is acquiring a 75% stake in Italian Telco group EOLO from founder and CEO Luca Spada for an EV of ~€1,286m (11.2x EBITDA). Offering €375m SSNs due 2028, the deal priced at 4.875%, moving inside IPTs in the 5.250% area. The company focuses on what they see as an underserved rural and suburban Italian market of around 11.5m households, where they believe they have first-mover advantage.

And finally, Xavier Niel’s take-private of fellow Telecoms group Iliad hit the wires on Monday, promising a chunky €3,600m in EUR and USD SSNs across four tranches of HoldCo debt. Leads have however pushed the roadshow back to Wednesday (13th), giving buysiders more time to digest the complicated credit. Nonetheless, price talk of High 4s and Low 5s is out on the EUR five and seven year notes, and 6% area and Mid 6s on the respective USDs.

To cover off briefly, down at the OpCo, Iliad is acquiring UPC Poland for PLN 7bn (PLN 5,500 debt financed, and expected to close in H1 2022), while the group plans to sell its 30% and 40% stakes in Tower France and Tower Poland to redeem a HoldCo bridge taken out to fund the refinancing. Iliad estimates ‘minimum’ cash proceeds from the tower disposals to be €1,256m, and we assume any funds in excess of the €1,200m bridge will sit as cash at the HoldCo level. For full details see our capitalization table here.

Issued from the HoldCo, the notes don’t have any OpCo guarantees or security, so will actually rank subordinate to the unsecured Play and existing Iliad OpCo debt. Add to this the €4,066m of IFRS 16 lease liabilities, and €14,305m of debt sits structurally senior to the notes. What’s more, covenants allow the OpCo to incur up to ~2.5x EBITDA (by our estimate) of additional indebtedness.

To end the week’s theme of big numbers, you can see (below) just how punchy new volumes have become, in this only the first week of October:

Primary Leveraged Loans

Buysiders are paying for the late Autumn start this year. With 12 issuers currently in the market, common refrains such as - “You can’t look at all of the deals, so you have to find ways to eliminate some early on” - are now once again being sung by buysiders.

Another 2021 trend that has characterised this week as much as any other is the variety of issuance. As Benjamin Thompson of JP Morgan said on a panel at the AFME conference last week: “We’ve seen good-sized transactions covering the entire credit spectrum, across different sizes and almost all sectors. We’re feeling pretty confident this calendar is getting absorbed.”

Reflective of this seemingly bottomless appetite are the week’s allocated deals, MasMovil and Modulaire, which both priced tight of guidance, even despite, in Modulaire’s case “egregious” documentation. MasMovil tightened from price talk of E+425 bps to E+375 bps and was considered somewhat of a slam dunk by buysiders. 

On this deal, buysiders were keen on the business’ growth story, driven in part by acquisitions, and were buoyed by strong fundamentals and pandemic-resilience. The first buysider also said: “We’re invested in the company already. Pricing last year was quite attractive given the sector it operates in, but we’ve barely looked at it in the last 12 months. This time around it’s a question of whether we stay in the loan or exit the loans and play the bonds, but it’s a very stable business. MasMovil doesn’t require a lot of work.” 

Contrarian or concerned?

But while deals are pricing tight, buysiders anecdotally have complaints about most deals passing through the market. There seems to be less consensus on many deals than earlier in the year also, with some perhaps becoming more empowered to pick and choose as floods of options spoil investors.

For example, Modulaire was less straightforward than MasMovil. A second buysider, who killed the deal because he could not get comfortable, said: “If this is in your portfolio, your investors are gonna ask about it, they pick out the names with high margin, high risk, low ratings and pick-up troubled names. Going into it, you need to have strong conviction that if they turn a corner, the current capital structure is appropriate.”

However, 9fin did also speak to two buysiders that liked the business. The third buysider said: “I went in with the thesis that this is a different business today. The perimeter of the business is a lot different, they have divested in the US, there’s a new management team and I like the sponsor. Brookfield is a good influence here. Now management isn’t focused on M&A or divestitures, they’re just focused on the business.”

The docs came out strong, which is typical of Brookfield, with some of the most aggressive terms yet. There was investor pushback on both the bonds and loan sides, which were tweaked to fit market standards more closely. See the loans changes here and the bond changes here.

Continuing on the building materials boom, Huws Gray is in the market this week. The third buysider liked the company, but wasn’t going to invest because the TLB is in sterling. “It doesn’t work unless you swap and that’s all very tedious and time-consuming, but the business outperforms peers on most metrics.”

A fourth buysider also likes the business, but was already heavy in the sector, potentially a warning to upcoming buildings materials issuers of potential congestion.

Buysiders could also see the pros and cons of Aggreko. As a Double-B credit marketed with a 4-handle the business should be catnip for CLO buyers. However, a fifth buysider was concerned about the business’ reliance on diesel, although they also noted that remote power generation was still vital to customers and shifts away from traditional power sources would not affect the business’ economics until after the maturity of the loan. 

The financing includes a £1bn-equivalent term loan split between dollars and euros, with additional secured bond debt of £700m across euros and dollars, a £350m-equivalent senior bond in dollars, a £300m revolver, of which £70m will be drawn at closing, and a £150m bonding facility. 

Showing bad vital signs

Another contentious one in the market was Median Kliniken, a relatively unknown healthcare issuer out of Germany, backed by Waterland. Its combination with UK private hospital group Priory pushed a sixth buysider to say: “Neither Median or Priory are compelling standalones. Two businesses that don’t overlap are aiming for pure scale. I don't know what alchemy they want to achieve. Management was like - maybe we can take out accounting. Seriously? Good luck,” said a sixth buysider. See our loan preview here

Waterland is out with another deal this week, the Cookware Company, which also has attractive pricing E+450-475 bps and an OID of 98.5.

Even the second healthcare of the week, Amedes, was not without complaints, though investors were generally satisfied with the padding, the traditional comforts of the sector provide. The German diagnostics firm is out this week with a €740m TLB (B2). Analysts describe this as “an easy deal with a familiar name”, brushing aside concerns around the company’s relatively small size, limited geographical spread and a reliance on consolidation that means growth risks flatlining. 

“It’s the kind of deal you can just simply do and sleep easy at night,” summarised a seventh buysider, though accounts also raised issues with the deal’s margin ratchet that requires just over 0.7x deleveraging in total to hit all three 25 bps stepdowns.


Another trend that has been made clear this week is the amount of M&A-based issuance. Nine out of the 12 issuers are coming to market because of an LBO or an acquisition, while only the remaining three are looking to refi or dividend recap.

The eighth buysider said: “Sponsors are flush with cash and are heavily pushing companies to expand into new regions or consolidate their positioning through M&A - there’s a taste of opportunism with many deals this year, you get the sense it's really the sponsor behind them, though I expect that to taper off,” said one buysider. 

As Mark Walsh of Credit Suisse said on a panel at the AFME conference last week, this is certainly a positive thing for the banking industry: “We love this trend. It’s an opportunity for investors to diversify and for new names to be established in the market and for them to grow their businesses and to refinance down the road.”

The LBO- and acquisition-related transactions also reflect Thompson’s observation pertaining to the variety of loans in the market. Buysiders have their choice of currency, sector and tranche size.

The week’s largest M&A-related deal (and incidentally the largest deal of the week at large), is MKS Instruments. The environmental monitoring business is financing the acquisition of competitor Atotech with a $5.2bn-equivalent TLB. The US business has the tightest pricing, and is also the highest rated of the deals in the market, one of just two double B-rated names. This reflects the skew towards single Bs, especially amongst loans, as touched on in our European M&A report.

On the opposite end of the size spectrum, the smallest deal in the market is office supplies business Bruneau, raising a €305m TLB. Towerbrook, one of the PE giants behind the AA acquisition, is buying this fast-growing business from Equistone, and expects continued tail winds from remote working trends. 

Also on the smaller end, is TenCate Grass, an artificial turf manufacturer, raising a €315m loan, to support its LBO by Crestview. The sector has seen some activity this year, with the likes of Sport Group coming to market with a €370m sustainability-linked refinancing, as well as Tarkett, the French flooring manufacturer, which had a specially dedicated division in the space. The former priced tight of its E+425-450 bps guidance, while the latter priced wide, after struggling to make it through the market.

Continuing the chemicals boom that has already seen Solenis price tight this Autumn, Seqens, to be acquired by SK Capital, is issuing an €830m TLB.

But it really wouldn’t feel like a 2021 wrap without at least one dividend recap, and CVC has not failed to disappoint. Luxury watchmaker Breitling is bringing a €880m TLB to the market to refinance, and make a shareholder distribution.

The fifth buysider was positive on the group, impressed by Breitling’s dominant market position in major watch-buying geographies like Asia, Latin America, and Europe. They said: “They also sell parts to other watchmakers, which is a testament to their capabilities.” Though the buysider was concerned about the sector due to the pandemic. “I can’t imagine it has done very well through all this, especially with the business’ exposure to the travel sector,” they said.

The final refinancing in the market has been brought by Informatica, a US-listed technology company. 

High Yield Secondary

Across HY, instruments were unsurprisingly down again this week, an average of -0.40 pts (9% +0.38 pts | 87% -0.50 pts). By Industry, Utilities was the best performing down just -0.25 pts, followed by Energy (-0.30 pts). At the lower end Consumer Staples lost an average of -0.51 pts, and Real Estate an impressive -0.96 pts. In this week’s Friday Workout we report in detail the happenings at Adler Group and associated companies Adler Real EstateAggregate HoldingsCorestateVivion, and SIGNA.

As reported yesterday by Bloomberg, Iceland MD Richard Walker issued a candid warning to listeners of BBC today over potential price rises: “We’re not an endless sponge that can absorb all of these different cost increases”. As with many UK retailers, food supplies have been hit by CO2 and delivery shortages amid a supply-chain ‘crisis’. The 2028 SSNs dropped a further -2.1 pts this week, marking one of the worst trading deals this year.

Similarly, Boparan plucked a further two points off their 2025 SSNs, trading down to 86 - you can read our recent deep dive here.

Leveraged Loans Secondary

It’s not just primary keeping firms busy these days. It’s been a busy period for BWICs, with another one out this week, following more than €500m’s worth in the last month.

This week’s BWIC’s largest positions include €6.2m TLB from telephone operator Altice France or €5.4m slices of UK automotive fuel retailer Motor Fuel Group and US healthcare data service provider IQVIA and €5.2m tranches from Dutch margarine manufacturer Flora Foods and German paint provider Flint

On offer are also more troubled names with €1.6m from US telecommunications provider GTT Communications, €5m from Spanish bedbank company Hotelbeds and €3.5m from theme and amusement park business PortAventura.

See the full BWIC here

The wider market, was flat to down, with only financials, communications services and industrials up by less than one point. 

Our biggest riser this week, Arvos’ €130m TLB, has taken a break from meteorically dropping, to rise by 2.8 pts. Arvos, which inked an amend-and-extend in February 2021, provides industrial equipment and services, primarily to thermal power plants and chemicals companies; it was downgraded to Caa2 by Moody’s earlier this year.  

The slight movement is likely to bring lenders only a small amount of respite; Existing lenders are “stuck” with this company, a ninth buysider has previously told 9fin.

Cineworld’s €607.7m TLB paying E+263 bps also rose this week, by 2.3 pts, after months of bouncing around the secondary market.

Kloeckner Pentaplast is a new face in our biggest losers list. Its €600m TLB paying E+475 bps fell 2.3 pts this week to 97.25. 

Ben Hoskin, a 9fin credit analyst, listened in on the company’s 9 September earnings call: 

“Management at global packaging manufacturer Kloeckner Pentaplast faced difficult questions on their inflation expectations and full-year guidance on their Q221 earnings call yesterday (08/09). EBITDA addbacks were again in the spotlight - as they were when marketing February’s full-stack refinancing - which will help offset margin pressures from higher raw material expenses moving into the second half of the year with respect to Adjusted EBITDA. With management expecting a relatively flat Q3 due to a H1 hangover, the company is pinning its hopes on maintaining higher prices and falling input costs in the last quarter for it to meet its reduced guidance for 2021.”

The business may have also suffered this week from rising energy prices and raw materials volatility, as well as recent concerns around inflation, which the third buysider had been making secondary markets soft this week, in general.

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