Market Wrap

LevFin Wrap - Teva grande, Tunnel Tap, that’s ASDA priced

Huw Simpson's avatar
Kat Hidalgo's avatar
  1. Huw Simpson
  2. +Kat Hidalgo
10 min read

High Yield Primary

Primary markets shrugged off the minor tremors seen last week, with nearly €6.4bn (equiv.) of issuance in HY. Higher-grade deals dominated, with the long-awaited financing for Arrow and a refuel from Asda marking the only LBO activity. Elsewhere, green and sustainability linked deals continued to pour in as Séché Environnement, Getlink, and a monster $4bn equiv. four-parter offering from Teva followed.

Robin Hood or Prince of thieves

First agreed back in March, TDR Capital put in five separate offers for debt purchaser Arrow Global before the £565m purchase price was agreed on the public to private transaction. This week's offering will take out bridge financing via an all-secured trio of £350m SSNs€400m SSNs, and €640m SS FRNs (B1/B+/BB-) - issued out of the dubiously named “Sherwood Financing” entity. After a small £50m shuffle out of the Sterling tranche, pricing moved in slightly on IPTs with the EUR and GBP fixed notes landing at 4.50% and 6.00%, and the floaters at E+462.5 (par).

Like me, you might see Arrow as representing something closer to the Sheriff of Nottingham than Robin Hood. But, if this worryingly named “Collections as a Service” article doesn’t put you off entirely, we took a deeper look at ESG considerations for the company. Although Arrow shows some good engagement with ESG, a new Diversity & Inclusion strategy, and 7.7/9 for internal customer satisfaction scores, broader concerns around the debt collection industry, and the tactics used to secure payments will likely have been the key concern for investors. As you can see - the customer experiences on Trustpilot make uncomfortable reading.

Covenants on the deal looked fairly tame compared to some recent sponsor transactions, and appear close to Aggreko - another TDR take-private. EBITDA add backs for synergies were uncapped (24-month time limit), although Covid revenue declines are capped at 10% EBITDA. Portability is set well below opening leverage (3.5x vs. 4.2x opening).

TDR Capital also oversaw theAsdabuyout, continuing with their partnership after EG Group’s remarkable rise. The supermarket was forced to raise an additional£500m in Senior Secured Notes due 2026(Ba3/BB+) and spend £262m of cash on hand to cover the failed forecourt sale to EG Group. The failed sale means a more levered supermarket structure, but Asda’s double BB rating gives it plenty of headroom, while it provides an interesting primary comp for the giantMorrison’sfinancing lurking in the background.

As well as the smaller tranche size, pricing reflected the less-than-perfect performance seen since September, and IPTs on the new notes went out at 4.75-5.00%, before finally settling at 4.50% today - 125 bps over the existing SSNs issued in February this year.

Crossing to France, channel tunnel operator Getlink printed a €150m tap of its secured green bonds due 2025 (BB-/BB). Pricing at 102, the 3.50% notes represent a yield to maturity of 2.965% and are fully fungible with the existing €700m offered back in Oct-2020. An amount equal to the net proceeds from the bonds will be earmarked to finance one of Getlink’s eligible categories; (i) Clean transportation, (ii) Energy Efficiency, and (iii) Pollution prevention & Control - details can be found in the ESG framework here.

Fitch downgraded the existing bonds from BB+ to BB on heightened refinancing risk, citing the tap underpins management strategy to “pursue a sustained policy of proggressive debt increase at Getlink”.

Fellow French group Séché Environnement priced some €300m in sustainability-linked Senior Notes due 2028 (BB/BB) at an impressive 2.25% - highlighting the strength of demand for ESG issuers. Controlled by the Séché family - who own 62% of outstanding shares - the listed group is smaller, but less levered than Spanish competitor Urbaser (4.2x net debt) who priced their €1,250m TLB at E+475 (98.0 OID) in last month’s acquisition by Platinum Equity.

As expected for a publicly listed company, Séché uses a generally straightforward covenant package, with sustainability linked interest step-ups related to GHG reductions and avoidance - applicable from 2026. Given the long wait until these KPIs are tested, you might suspect the bond will be refinanced prior to this date, and the NC3 deal becomes callable at par in Nov-2026.

Elsewhere, Infopro Digital privately placed an additional €115m of its E+550 Senior Secured FRNs due 2025 at par, with proceeds to fund the acquisition of Barbour ABI, as well as for general corporate purposes and cash on balance sheet. Italian IT services management group Almaviva also priced their €350m Senior Secured Notes due 2026 (B+/BB) at 4.875% on Wednesday, moving slightly inside IPTs of 5.25% area and PT in the 5.00% area.

And finally, also on Wednesday Israel-based pharmaceuticals company Teva announced a monster $4.0bn (equiv.) Senior Notes offering to fund a $3.5bn tender and other outstanding debt. Split across four tranches the sustainability linked bonds will come as 5.5Y and 8.5Y Euros, and 5.5Y and 7.5Y dollars (Ba2/BB-). Moody’s notes that while both business performance and credit metrics are improving, uncertainty tied to exposure to opioid related litigation lies heavy on the company. S&P believes Teva has capacity for an incremental $4.0-$6.0bn litigation liability - on top of their already weighty current estimate of $2.5-$3.0bn.

Looking forward

Primary activity may still be ticking along nicely despite the shaky sentiment of recent weeks, but as 9fin’s Owen Sanderson suggested - a decent amount of supply comes from age-old LBOs, and it’s not clear how much of the forward pipeline will land inside 2021, with bankers and investors frazzled after a hectic year and execution no longer the slam-dunk it seemed in September.

This is shown in part by the reduced volumes now trading to yield-to-worst dates in the near future. As you can see below, outstanding GBP and EUR SUNs and SSNs expected in 2021 have dropped from over €20bn to the low teens area. 

High Yield Secondary

Across Secondary, the market was almost flat on the week, as instruments traded down just -0.05 pts (39% +0.29 pts | 57% -0.29 pts). The greatest losses came from Healthcare (-0.20 pts) and Financials (-0.13 pts), while Real Estate marked the only real gain (+0.26 pts).

In single name moves Swiss beauty firm Oriflame saw its 5.125% SSNs drop a further -2 pts to below par for the first time, having peaked at over 103 in early August. Q3 earnings released last week show sales dropped more than 20% YoY, reportedly due to lower recruitment activity and productivity - however cost reductions and an improved price/mix did mean EBITDA increased +4.1%. Raffinerie Heide’s Dec-2022 Notes retraced to the low 90s, making up for losses in October, and Adler Group saw some positive movement, with their SSNs due 2022 gaining +3.4 pts - you can read our ongoing coverage on the situation here.

Widening slightly, the iTraxx crossover was quoted today at 262 bps, up from the 255 bps area seen over the last two weeks.

Leveraged Loans Primary

The primary loan market also shrugged off last week’s wobbles, with around €5bn of issuance currently in syndication; nevertheless, the quality of dealflow feels a touch anemic this week. 

This week, a variety of deals priced wide, scandal hit the market by way of an ITV documentary and there was a spate of small add-ons.

On the more scandalous side of the levfin market, Waterland-backed Median Kliniken came under the public spotlight this week, with the release of an ITV documentary on 27 October. The documentary depicts convicted sex offenders housed at the Priory’s Kneesworth House Hospital, showing some patients being able to access the internet, including dating and explicit websites. However, the claims related only to one facility and did not represent a wider ESG risk, the buysiders said, believing that the deal will soon wrap up on a slight premium to previous pricing guidance. See our update here.

The price is right

Pricing is also markedly wider than it was earlier in the year, with 10 of the 13 tranches currently in syndication guiding at least E/L/S+400 bps. Two sterling tranches in the market bring up the average even further, asking for at least S+550 bps: Equiniti, for its merger with AST under the watchful eyes of Siris Capital, and Median Kliniken.

Equiniti will be tapping the HY and loans market and offering chunky pricing across the board, in addition to a 99 OID for its two TLB tranches.

Marlink is also in syndication, offering hefty margins of E/L+450-475 bps across its two tranches. The business is an experienced issuer, though it has something of a chequered past in the LevFin sphere. The business had a €622m divi recap pulled from the market in 2018, according to LPC.

S&P lists concerns, including that the satellite communications services industry is small and fragmented with high competition, but notes that it has favourable growth drivers and that Marlink is likely to experience margin expansion.  

The outlier on pricing this week is levfin veteran Ineos, which launched €1.08bn of TLBs to refinance senior notes due 2024. The loans are guided at E/L+275 bps and boast a 50 bps floor, a rarity in today’s market. The company’s senior secured debt was downgraded to BB from BB+ by S&P upon the announced refinancing, reflecting the higher portion of secured. 

One buysider told 9fin they expected the deal to close yesterday (October 28th), though allocations have not yet been confirmed.

Scarily small syndications

This week, buysiders will get a little less bang for their time spent, with a variety of loans on the smaller side of being attention-worthy.

PharmaZell is marketing a small add-on to support the acquisition of peer Novasep, sweetened with the week’s lowest guidance on OID at 98.5. One buysider is anything but spooked by the acquisition, saying: “PharmaZell can get more specialised with this new acquisition. It is a vertically integrated company and Novasep has early clinical trial-stage compounds, so there’s potential upside if they develop new drugs. The acquisition also offers credentials in America where PharmaZell is not well established, so I believe the transaction makes sense and makes the deal attractive.”

Another small pharma deal in the market filling up healthcare analysts’ time, is Synthon. The business has a leading position in its B2B segment of developing and producing generics, though it has high customer concentration, according to Moody’s

Solina, the french food ingredients manufacturer also priced a €100m add-on to fund acquisitions. The company was last in the market with a €585m ESG-linked TLB backing its LBO by Astorg in June 2021. The loan priced at E+375 bps at par. The company’s acquisition strategy has been a defining feature of its growth during its PE-owned history. More bolt-ons are planned, though larger acquisitions will not be fully funded with debt, according to S&P. See our previous loan preview here.

The final mop-up issue is a loan add-on for specialist paper products group Ahlstrom Munksjöbought out by Bain earlier this year,  with the €282m fungible add-on earmarked to pay for the final squeeze out of minority shareholders.

Secondary leveraged loans

The loans market stayed flat, if not slightly downwards by far less than 1 pt. IT was the biggest mover, sliding downwards by, on average 0.2 pts.

This was largely due to PlusServer’s meteoric fall of 7.25 pts for both its €70m and €190m tranches, each paying E+375 bps. The cloud services provider is a very distressed name, now with both tranches indicated at 49.5.

In less than a year, between July 2018 and April 2019, the business saw its indicated price drop from around par to just above 50 and has not experienced much success in the secondary market since then. The company changed management in August of this year, seeing previous CEO Oliver Mauss resign and hand over the mantle to Alexander Wallner of NetApp, according to Cloud Computing Insider. No news accompanies the business’ most recent drop in pricing.

The biggest riser this week was Webhelp, also an IT business. It’s €283m TLB paying E+400 bps rose by just 1.375 pts to sit at just below par.


The LevFin Wrap is published weekly on Friday summarising key developments across the High Yield Bond and Leveraged Loan primary and secondary markets. In addition to this market wrap, subscribers get access to our regularly updated Forward Pipeline. If you would like to try full access to 9fin, please complete your details here for a free, no obligation trial.


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