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While we’ve yet to see any real supply hit the market, a steady dribble of peripheral deals have limbered-up analysts for next week's action.

Announced last Friday, Euronav priced its $200m Senior Notes due 2026 at 6.25%, moving inside IPTs at the 6.50% area. Meanwhile European Energy landed its green €300m Senior FRNs due 2025 at E+375 bps, also well inside IPTs of E+400-425 bps.

Another unrated issuer, residential property manager Heimstaden, offered up further supply. Focused in the Nordics, the group issued €400m Senior Notes due 2027, upsized from an initial €300m. While the coupon was trimmed in the bookbuild, yields set at 4.50% led to a slight OID of 99.4 on the 4.375% deal.

Fellow Swede Axactor also priced their offering, with the €300m Senior FRNs set to redeem existing debt, local Italian facilities, and the remainder for general corporate purposes. Final terms settled at E+535 bps on the €300m deal, the tight end of revised guidance.

Our August edition of Sustainable Junk is now available. With ESG related issuance already ~7.5x up on 2020, we look into the underlying trends - are companies really aligned with a sustainable future, or simply hunting for that green premium? Clients can log in here to read it. If you are not a client but would like a copy, please email team@9fin.com

Along with around €35bn of EUR or GBP High Yield paper trading to call, we make four further new deal predictions - IDG, eDreams ODIGEO, Diversey and CABB.

Spanish discount supermarket chain DIA completed its debt restructuring. Key terms include a substantial debt for equity swap, a new €50m super senior facility, loan extensions and margin increases.

Triton (fund IV) has begun exploring exit options for Assemblin - including a potential IPO.

There’s plenty of supply to come this year as you can see, with current market chatter focused on Modulaire, Arrow, Aggreko, Polygon, IDH and the ongoing Morrisons bid (the full pipeline can be seen at the bottom). MásMóvil is reportedly preparing to launch its €3.7bn buyout financing for its Euskaltel bid, with the TLB launching ‘in the coming weeks’.

The loans machine has begun to wurr, with the sounds of the first deals chugging towards buysiders. Roompot vroomed on to the market with punchy price talk of E+450 bps for its €1.050bn TLB to kick off September. The TLB will have a rating of B/B2.

The KKR-owned business will be purchasing Landal GreenParks to acquire around 100 holiday parks in nine countries in central and northern Europe. Landal is being sold by Platinum Equity’s Awaze.

One buysider lacked confidence and interest in Roompot, casting doubt on the company, and the sector’s, success. They said: “I suspect they will market off 2019 numbers, because I doubt they will have done very well out of Covid-19. It’s pretty obvious it’s going to be a reopening trade, and for that I prefer the liquidity of a bond rather than a loan here, as the loans won’t trade as well if performance drops after one or two quarters. Wherever pricing will end up, this will not be a benchmark deal for pricing in the market.”

Optically the deal looks attractive at 450bps at price talk with a 99.5 OID given issue ratings of B2/B. We expect an ESG slant to this financing, as Rabobank is appointed as sustainability coordinator.

Another early entry to tease buysiders, DomusVi (B2/B) has launched a €350m add-on to its existing €400m E+375 bps TLB due 2026. The add-on is marketed at E+400 bps. Proceeds from the offering, along with €200m of new equity and €83m in cash will fund two new acquisitions in France and Germany, according to Moody’s.

Beyond Roompot and DomusVi, with plenty of LBOs and large deals in the pipeline, several sectors, many of them usual suspects in the Covid-19 era, jump out as likely to be active over the remainder of 2021.

In building materials and industrial businesses, analysts in the sector are bracing themselves for another busy period, with several mega-deals in the pipeline in a mish mash of subsectors.

The construction industry has boomed this year, with IHS Markit finding the fastest rise in business activity across the sector in 24-years. The highest performing sub sectors, in order, were housebuilding, commercial work and civil engineering.

But raw materials volatility and labour shortages will be the nail in the side of continued growth. Delivery times have dropped to an all-time low, while average prices paid for products and materials increased by an all-time high amount, according to the report. While all building materials are thought to be in short supply, cement, concrete, plaster, steel, timber and roof tiles are currently particularly sought after.

The industrials and building materials industries are likely to increasingly come under ESG fire in 2021. For example, the manufacture of cement is responsible for 8% of global CO2 emissions, and the UK government has also recently produced guidelines for the construction industry to modernise the execution of public projects, according to Safety & Health Practitioner.

Thus, the building materials industry offers a compelling growth proposition, albeit rife with raw materials and ESG risk.

Likely sidestepping ESG concerns associated with new build development is Polygon (B1/B+), a damage and restoration services provider. Triton has sold the business to AEA Investors and it will redeem its existing €250m senior secured notes at 101, according to Fitch.

Flying on the coattails of construction sentiment is Modulaire, a provider of modular services and infrastructure. Brookfield will be spending $5bn on the TDR-backed business, according to Bloomberg.

Also in industrials and coming to market soon is Dexco, the recreational vehicle components manufacturer. One analyst was excited to see this deal in the pipeline, appreciating its significant size. “It’s doing super well through Covid-19 and is very cash generative,” said the second buysider.

The first buysider was a bit more cautious, saying: “We’re not a fan. It’s a very cyclical business and leverage has historically been aggressive.”

The company will be issuing loans to support its $3.4bn acquisition by Brookfield Business Partners, which will also be funded with a $1.1bn equity cheque, of which $400m will come from the sponsor, with the remainder coming from institutional partners. The deal was agreed in July.

One we can expect to come to market a bit later on this year is Faurecia (BB/Ba2/BB+), the automotive supplier, which is supporting the €6.7bn acquisition of Hella with a €5.5bn bridge facility, to be refinanced mostly through bonds and loans. There will also be a bridge to equity of €800m to be refinanced through a rights issue. Expected credit ratings are BB/Ba2/BB+ for the business, which, after completion, will generate more than €20bn in revenues.

Raw materials pricing is a concern for this sector as well, as many materials rely on oil. Prices for the commodity rose by more than a $1 a barrel yesterday on optimism surrounding economic growth and that Hurricane Ida has halted around 80% of the Gulf of Mexico’s oil and gas output, according to Reuters. The requisite  associated ESG concerns should apply here.

Oil-based PVC is the third most-widely used chemical and according to IHS Markit, global demand reached 43.5m tonnes in 2020 - an average growth rate of 2.5% since 2011. This segment relies mainly on the construction industry, which accounts for the majority of global demand.

Prices for Styrene monomer, polystyrene and ABS are historically volatile and margins are subject to long-term cycles, while specialty chemicals tend to be less cyclical.

Black Diamond Capital Management is also buying Polynt Reichold (B+/B1) for an estimated €2.6bn, according to Reuters, which will be financed with €1.3bn in senior secured and unsecured debt. The business generates around €2bn in revenue annually and serves the transportation and construction industries, among others. Black Diamond will be providing an equity cheque and JP Morgan and Apollo have committed to the financing. The company has around €550m in existing term loans issued in March 2020.

Another chemicals giant that could come to the leveraged finance universe is AOC. Lone Star will be buying the company from CVC for $2.4bn, according to Bloomberg. It creates chemicals such as DCPD, Maleic and Vinyl Ester for the infrastructure, building and marine industries, among others.

Another company that could barrel on to the scene is Clariant, going for a smaller sum than its counterparts. The Swiss business will be acquired for CHF805-855m by trade buyer Huebach and SK Capital Partners, according to Unquote. It makes chemicals for the construction and automotive markets.

Also in the sector and potentially looking to raise debt is Solenis, which was bought out by Platinum Equity in July. The business was sold by CD&R for $5.25bn and creates chemicals mainly for water processing, thus likely sidestepping ESG concerns due to the importance of its end markets. The business was most recently in the market with a €783m TLB (B-/B3), which pays E+400 bps, and was issued in February 2021.

The sponsor has suffered this year in the leveraged finance market, with Urbaser, a spanish waste treatment company pulling a €1.63bn TLB from the market. Even after increasing margins by 100 bps from E+350 bps to E+450 bps, a third buysider took a dislike to the deal, criticising the sponsor for providing a too-small equity cheque.

With many companies in the sector still benefiting from a Covid-19 upswing, and shaky investors finding a safer, non-cyclical alternative, healthcare will still be active for the rest of 2021.

Leading the way, testing labs businesses will feature heavily in the market this Autumn. Cerba (B/B2), a perennial LevFin participant now owned by EQT, is returning to the market for the second time in 2021 to support the €1.2bn acquisition of Italian competitor LifeBrain. The deal will be supported by debt and equity.

A fourth buysider was enthusiastic about the business, mentioning the continued need for Covid-19 testing and lauding the management on its approach, as well as EQT as a “top sponsor.”

However, the first buysider wasn’t converted: “It’s a pass for us. We have less appetite for labs deals as quite a few have the tailwind from Covid-19 and that will be fading this year. So we’re exposed to the ones we want to be exposed to and the others have nothing much to add. It’s not going to be disastrous from a technical standpoint but you don’t want to be in a credit that's going downwards.”

The testing labs wave that has mostly swept France to date, will also wash through Germany, as Amedes (B/B2) possibly comes to market. Goldman Sachs AM and Omers Infra are touted to be purchasing the business for €1.5bn, according to Reuters. Its current owner, Antin, acquired the business in 2015 from General Atlantic for €800m, said the report.

In addition, one of the biggest deals likely to come to market in 2021 is Medline, a clinical and supply chain resources business. Potentially reaching a valuation of more than $30bn, the US business will bring at least €1bn of loans to the European market and buysiders are excited. Said the first buysider: “It’s a pretty defensive business, and it's a pretty large business too. These large deals set the tone for the market.”

Secondary was on the up this week, gaining +0.12 pts (62% +0.27 pts | 34% -0.15 pts). Energy (+0.39 pts) and Real Estate (+0.31 pts) led the charge, while Healthcare (-0.07 pts) tracked the only downwards move on the week.

UK independent oil producer EnQuest saw its 2022s (extended to Oct-2023) trade up almost two pts on the week, despite warnings that output will be at the lower end of expectations this year, after it emerged that production at the Magnus field suffered from power outages and slower execution.

And no spilt milk for EVOCA, the coffee and vending machine producer who announced Q2 results on Monday. Management highlighted a strong liquidity position of more than €57m cash on balance sheet and €80m available under the undrawn RCF - net leverage improved to 9.2x from 12.1x in Q1. The 2026 SS FRNs traded up over +3 pts on the news.

The iTraxx Europe Crossover broke through 230 bps, seen at 227 bps today - around 5 bps inside last week. In European domiciled HY credit fund flows, there were inflows across Global High Yield (+$341m) and US High Yield (+$102m), while Euro focused funds saw a small outflow (-$103m).

Despite a respite in primary, the secondary market wasn’t particularly active this week. The first buysider said of the secondary market: “When supply in primary slowed down in late July and early August, there was a spike in prices. CEOs were doing earnings calls and things got very expensive so we didn’t find anything of interest.”

Telco fever has leached into the secondary market this week. Buysiders couldn’t get enough of GTT Communications. The company’s €750m TLB paying E+375 bps, has been favoured by buysiders more heavily than its dollar-denominated counterpart, to increase by 5 pts. The loans are now indicated at 87.8, above the $1.770bn TLB paying L+175 bps, which is currently indicated at 81. Both tranches are rated B/B2.

The news comes off the back of the announcement that the company has agreed to enter a restructuring support agreement. GTT is also expecting the sale of its infrastructure division to I Square Capital imminently, and will then take measures to reduce its debt by $2.8bn.

And after Cineworld’s bouncing around on the secondary market, investors have turned their eye to another cinema chain, perhaps a bit less favourably. In the wake of a consolidated EBITDA loss for Vue of £7.3m in the first half of the year, the company’s loans have dropped this week, by 1.7-pts. Vue has two TLBs, each paying E+475 bps, and second lien PIK notes paying E+1000 bps, maturing in 2024, 2026 and 2027, respectively. It also has a £65m Revolving Credit Facility, maturing in 2025.

No major news events have occurred this week that are specifically likely to be responsible for the fall, except for the announcement of the showing of Shrek on its 20th anniversary, though 9fin doubts that’s a factor.

The market overall, however, remained flat, with utilities, energy and communication services slightly in the red, and all other sectors increasing by less than 1 pt.

LevFin Wrap - Holiday Parks Primary another week

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