First up, speciality pharma group Grifols announced €2,000m (equiv.) in Senior Notes due 2028 to fund the acquisition of Biotest. The latest in a string of bolt-ons, Grifols has acquired Alkahest ($146m), GC Pharma facilities ($457m) and Haema (€220m) since 2018. Moody’s and Fitch both note the group has a high tolerance for leverage, spending €.5bn on M&A since the beginning of 2021; “all debt or cash funded, at a time of already high leverage”.

As we outline in our Legal QuickTake, the company holds more than €2.7bn in capacity for further secured debt (senior to the SUNs), as well as headroom under the credit facilities basket (€2.3bn day-one). Given this, and the pandemic’s effect on plasma collection prices and supply, there was little movement on IPTs sent out at 3.75-4.00% (Euros) and 4.75-5.00% (Dollars), as pricing finalized at €1,400m 3.875% and $705m 4.75% (B3/B+).

A vertically integrated European blood plasma company, Biotest has 26 collection centers across Germany, the Czech Republic and Hungary, and as per the transaction valued the company at an EV of around €1.9bn - a punchy EBITDA multiple of 19.8x. Blood plasma derivatives are used in the manufacture of biological medicines, which can then be used to treat a number of rare, chronic and life-threatening diseases.

Shades of Grey

Elsewhere, Consolidated Energy was also out marketing a dual tranche USD-EUR offering, in this case for $750m (equiv.) Senior Notes due 2028 (B3/B+). Tranches settled at €250m at 5.00% and $525m (from $460m) at 5.625%, again not moving far from price talk in the 5.00% area and 5.75% area respectively. Additional proceeds from the dollar upsize will be used to pay down incremental indebtedness.

ESG reporting was fairly sparse on this credit, and we might question the sustainable credentials which suggest methanol is a clean fuel. Methanol products come in a variety of colours - ‘black’ is direct from coal and ‘grey’ from natural gas - both use no carbon capture and at present make up the overwhelming majority of worldwide production. Newer innovations include ‘blue’, which still uses natural gas and solid feedstock, but involves an element of carbon capture, and best of all ‘green’ - from renewable sources. Consolidated Energy produces the grey variety, and while the investor presentation states this offers a 10-15% reduction in CO2 over traditional fuels, the International Council for Clean Transportation (ICCT) estimates this is not the case.

UK-based online supermarket Ocado announced today its successful upsize and pricing of £500m 3.875% (from £400m) Senior Notes due 2026 (B2/BB), refinancing the existing £250m 4.00% Senior Secured Notes due 2024. Remarkably the new notes priced inside the old secured package, despite dropping the security, and the new restricted group excludes the Ocado Retail JV - an entity which generated 93% of the groups revenue for the year ending 30-May-2021. We look further into Ocado’s lofty tech ambitions and high capex spend in the Friday Workout.

Welltec cleaned up Monday’s crop of deals, offering $325m Senior Secured Notes due 2026 (B2/B-) which alongside a $50m equity investment will fund a redemption of the existing 2022s and place $10.8m additional cash on balance sheet. The Danish group manufactures robots for the energy industry and claims a 59% market share in its ‘Intervention Solutions’ segment, which generated 82% of LTM revenues as of June-2021.

Despite tightening from Price Talk of 8.75-9.00% to price at 8.25%, the deal still printed as the seventh highest yielding note of the year. Indeed the energy sector has been a good place to find yield this year, occupying four of the top five spots and all trading well above par.

The bond leg of MasMovil’s acquisition financing for Euskaltel emerged on Thursday, comprising of a €1,750m tap of its existing SSNs due 2027 (B1/B/BB), and €500m in Senior Notes due 2029 (Caa1/CCC+/B-). Euskaltel is currently Spain’s fifth largest Telco, and was purchased by the group for an EV of ~€3.4bn (ex fees). Pro forma for the transaction the combined group will boast revenues of €1,054m and pro-forma adjusted EBITDA of €632.4m as of the six months ending June-2021.

And finally, UK medical products group ConvaTec announced the pricing of $500m 3.875% Senior Notes due 2029 (Ba2/BB+). Proceeds will prepay a portion of borrowings under the facilities agreement.

Trading to Call

At present, the value of deals currently trading to call in Q4 touches on €40bn, perhaps stealing some share from Q1 2022s. However it’s good news for the middle portion of 2022, with Q2 and Q3 both showing combined volumes of around €75bn trading to a call date.

At least, so said speakers at the Association for Financial Markets in Europe’s Leveraged Finance Conference this week, who pegged issuance volumes as flat or falling come 2022. Alongside this, speakers forecasted a long life for dire docs coming hand-in-hand with barrel loads of sponsor supply.

Lev loan LBO bonanza

Turning to the individual loans in the market, a whopping six LBOs were announced this week: good news for buysiders hungry for fresh blood.

First, US-based Modulaire’s €1.120bn 2028 TLB (B2/B/B) launched on Monday, currently guiding at E+450-475 bps and 99.5 OID. The storage and modular space company, formerly Algeco, is being bought up by Brookfield in a $5bn deal. Current owner TDR Capital acquired a majority stake in the business in 2004 for €320m as part of a €478m take-private.

The deal contains a +/- 7.5bps ESG ratchet to be annually tested against two KPIs, lower than other post-summer sustainability-linked ratchets. Speakers at the AFME conference noted that +/- 15 bps had become the new normal for such ratchets, making Modulaire’s a somewhat paler green in comparison. Clients can request a Loan Legal QuickTake by emailing loans@9fin.com.

Next, German medical diagnostics firm Amedes came out this week with a €740m TLB (B2/B) guiding at E+400 bps and 99.50 OID. Funds back its buyout by a consortium of OMERS Infrastructure, Goldman Sachs Asset Management and AXA Investment Managers. Selling the business is French infrastructure investor Antin, who bought the firm in 2015 from General Atlantic at a valuation of about €800m, Reuters reported.

S&P notes in its own diagnosis that the firm is much smaller than its peers despite acquisition-backed growth, though this is balanced by the company’s specialism in endocrinology and gynecology, including 66% of German gynecologists. In something of a 2020 win, Amedes also processes coronavirus PCR tests, helping boost its EBITDA margin to 25.5% in 2020 versus 20.1% the year before.

UK buildings materials firm Huws Gray is also supporting its buyout by Blackstone and its founders with a dual currency offering: a £950m-equivalent 2028 TLB (B2/B) split between £300m-equivalent euros and £650m sterling.

And finally, two smaller LBO deals descend upon buysiders to round off the week:

Belgium-based The Cookware Company served up a €343.5m 2028 TLB which, alongside a $50m RCF, backs Waterland’s investment into the business. The loan guides at E+450-475 bps and 98.5 OID. The company, which Waterland states generates $400m in turnover, produces ceramic coated cookware out of facilities in Germany, South Korea and China.

French office supplies company Bruneau stenciled out with a €305m TLB (B2/B), plus a €60m RCF, primarily to support its purchase by TowerBook Capital Partners. Moody’s put opening leverage low at 4.1x, making ratings instead constrained largely by small scale, with initial cash balance of just €5m. S&P puts adjusted EBITDA of €80m. According to the agency, the TLB has a rare maintenance net leverage covenant with quarterly step-downs from Q1 2022.

Poly-gone, Urbaser comeback

Turning to deals that closed up this week, Swedish building damage restoration firm Polygon hammered out its €420m TLB (B1/B/B) at E+400 bps and par, tightening twice from guidance of 99.5 and then 99.75. Buysiders flooded to the business on the basis of its dominant market position in Europe, however some also confessed unfamiliarity with the US-focused AEA Partners, as well as being limited due to the same size of the deal.

“This is not a particularly glamorous business,” said one buysider, “but it has a reason to exist and the scale seems to help. The model works, but it doesn’t generate much cash.”

Alongside the TLB, the transaction will leave the business a €55m delayed draw term loan, both maturing in 2028. A €90m revolving credit facility with a 6.5-year tenor is pari passu with the first lien term loans. Around €554m in equity and a €120m second-lien (unrated) will support the acquisition of the business, cover fees and provide pre-funding for future earn-outs, according to Moody’s. The company will redeem its existing €250m 2023 SSNs (B1/B) as part of the transaction.

Another taking commitments this week was Spanish waste disposal firm Urbaser, cleaning up on the market return of its €1.25bn 2028 TLB, with final guidance at E+475 bps and 98 OID. An initial run-up fell flat in July after lack of buysider appetite led Urbaser to pull a €1.63bn loan. The company adapted the structure of the deal, reduced the original loan size by €380m and pumped up pricing by 125 bps to drag buysiders in.

For some, however, “fundamental issues” with the business, plus insufficient sponsor equity cheques, kept them away a second time around. Others put part of the blame on pre-summer fatigue, depleted teams and an over-stretched market, and rushed to this new-and-improved clear out.

Monster truck along

Meanwhile, two jumbo deals continue to rumble through the market. US healthcare manufacturer Medline moved $770m from bonds to loans in its “blowout” now-$7.27bn TLB, as a second buysider characterised. Alongside is a $500m-equivalent euro TLB, with notes now at $4.5bn secured and $2.5bn unsecured.

“The books are pretty oversubscribed. It’s a straightforward deal with support from making PPE, so it didn’t need a crazy amount of time to look out,” said the buysider. The firm also brought commitments deadline further forward from Thursday 7 October to 6 October.

Meanwhile, both S&P and Moody’s downgraded Spanish telecom firm MasMovil Ibercom (to B/B2) on the resultant leverage hike from its €800m TLB. The long-awaited deal supports the €1.965bn acquisition of Basque competitor Euskaltel, with commitments due 5 October.

“It shows how much appetite there is out there, not just that there are these mega deals, but that Masmovil can top up its existing loan [a €2bn E+425 bps 2027 TLB issued summer 2020],” said a third buysider. “A lot of CLOs already have exposure to the credit but are still happy to top that up.”

Much smaller, but still indicative of market backdrop, French nursery operator Babilou took the opportunity to reprice its €687m 2027 TLB down to E+400 bps from E+425 bps on the back of strong buysider demand. The company allocated its €105m 2027 add-on this week at E+400 bps and par from original guidance of E+425 bps and 99.5 OID.

“We always prefer new money, but if the repriced margin is something we would take today, then you just have to take it,” a fourth buysider said of Babilou. “Besides, September didn’t really bring the waves of issuances I had expected, even if the pipeline is still looking strong, it’s left me with a bit more room and bandwidth to play with.”

Funds will repay RCF drawings, as well as refinance the debt backing its purchase of German peer Little Giants. This makes Babilou’s third foray into the market since September 2020.

Across European domiciled HY credit fund flows, European focused funds suffered another, but slighter outflow (-$174m, from -$424m last week), while Global (+$341m) and US (+$281m) funds saw inflows. The iTraxx Europe Crossover was seen today at 257 bps.

In single names, Raffinerie Heide’s 2022s have retraced to levels last seen in May - giving up any gains that were made after the announcement of Equinor’s sale of it’s Danish refinery to Heide’s parent company. Trading down -3 pts on the week, the SSNs were today seen around 88.

This week also saw Q3 results announced by comfortable footwear manufacturer Birkenstock. Striking an up-beat tone, and citing strong growth rates, CFO Philipp Tueroff promised to “proudly present with a big smile” as net sales grew +37% in the nine months year-on-year. EBITDA was in turn served with “an even bigger smile” - up 49%.

In an interesting exchange, analysts struggled to reconcile a bumper cash increase from March to June this year (currently at €235m). One analyst asked about the minimum required to run the business, given the group is currently at peak cash. With the additional flexibility under the ABL, Tueroff commented: “I think half of it would be more than enough”.

Management were quizzed on potential dividends given the private equity ownership, but held firm that the dividend policy was unchanged, and cash would be used for investments, working capital and operational business.

The group’s Senior Notes have traded well since issuance in April-2021, currently seen at around 104.

And finally, rumblings surround Patrick Drahi, the founder of Telecom group Altice after it emerged he was in talks to buy French satellite operator Eutelsat. As reported by the FT, Eutelsat rejected the unsolicited bid and “unanimously decided not to engage in discussions” based on the terms. Instruments across the various Altice entities have traded down an average of -1.3 pts across 18 tranches.

The usual suspects dominated both the top and bottom end of movements. Beleaguered Luxembourg-based Arvos was down -5.3 pts to 74.8 pts on its €130m E+450 bps TLB for a total -7.8 pts YTD slide. German jeweller Christ continues its ascent on its €170m E+450 bps TLB ahead of a 1st December 2021 maturity, this week +4.3 pts to 87.8 pts. Another regular, Spanish wedding dress retailer Pronovias’ €215m E+450 bps 2024 TLB clawed up +5.5 pts to 73 pts.

Beyond those familiar faces, lingerie firm Hunkemoller is trading down a (somewhat) racy -1 pts on its €280m E+450 bps 2023 TLB. Reuters reported that Carlyle was stirring up a $1.2bn sale of the company earlier this month.

“That valuation is a bit lofty to my eyes,” said a fifth buysider. “Retail can be a tough one. It’s a reasonable business, with all the same plans of online expansion and so on, but it’s a sector in general that I’m cautious of.”

The Evergrande scenario has also left the market “skittish” on real estate credits in secondary, the second buysider added, admitting to upping their inspections on the likes of Germany’s Adler Real Estate.