LevFin Wrap — A&E tidal wave lands; Ineos expected in Q1
- David Orbay-Graves
- +Laura Thompson
The market has well and truly reopened, and the tidal wave of A&Es and refinancings – anticipated for some months – has finally landed. 9fin this week launched its new A&E Waiting List publication, a handy tracker for all the deals in the market, be they opportunistic or stressed maturity extensions. (If you are not a client but would like to request a copy, please complete your details here).
Not everyone is enamoured with this new market dynamic. “The problem with A&Es, beside [the fact] they’re just boring, is that preference, of course, always goes to existing lenders,” one buysider complained to 9fin earlier this week. “If you're not already in it, you're going to struggle for allocations. That's the position we keep finding ourselves in.”
Fingers crossed everyone’s allocations improve.
Continuing with the theme, 9fin’s Owen Sanderson took a closer look in Excess Spread this week at what the preponderance of A&E deals mean for CLOs – in particular given some 36% of European CLOs are forecast to be out of their reinvestment period by the end of the year.
A Quick Look Ahead
Before jumping into the roster of deals in the market and priced this week, a quick look ahead. As reported by 9fin’s Kat Hidalgo on Thursday, UK-based chemicals giant Ineos is expected to bring another A&E transaction to the market in Q1, as it seeks to extend some €2bn in debt maturing next year.
The company is tackling its maturities piece by piece, and already refinanced a chunk of its 2024 maturities in November, when it priced its €800m 2027 TLB at E+400 bps and 96.5, with a $1.2bn 2027 TLB at S+CSA+375 bps and 96.5 alongside. One banker said they expected the OID on the new A&E process to come within half a point of November’s pricing.
Meanwhile, Bain Capital-owned Italian plastic and rubber manufacturer Italmatch and acquisitive French equipment rental company Kiloutou Group are also starting to crop up on buyside rumoured issuance lists (though we’ve yet to hear a concrete announcement).
Italmatch’s outstanding €650m 4.75% FRNs, due September 2024, were indicated around 97.9-mid on Friday. As reported, the notes were trading around 90 cents on the dollar not so long ago, but popped nearly six points in early December, after the company announced that Saudi Arabia’s Dussur would inject €100m equity into the business to take 20% of the business.
Onward to our review of this week’s deals…
Kicking off the market for high-yield bond A&Es, French loan servicer iQera launched an exchange offer with some interesting bells and whistles. The company is offering holders of its existing €270m 4.25% SSNs, €200m 6.5% SSNs and €100m E+ 537.5 bps FRNs (all due September 2024) to exchange into new minimum-size €425m E+ 650 bps SSFRNs due February 2027 on a 1:1 ratio.
Alongside the exchange, the issuer is also offering the SSFRNs to new investors. The issue price has been pre-set at par, but – in a move reminiscent of Stada’s A&E last year – investors participating in the new deal will receive five points in cash up-front. By a back-of-the-envelope calculation, the proposed pricing (inclusive of the cash consideration) results in an all-in YTM of around 10.4% at the current 3M Euribor rate.
As discussed in this week’s Excess Spread, the rationale for offering the cash upfront (rather than simply issuing at 95 OID) possibly pertains to technicalities for CLO investors relating to their reinvestment period. The outstanding notes popped on the announcement, with both the SSNs now indicated around 97 cents on the euro.
The exchange offer expiry date and deadline for new orders is on Monday (23 January) with allocations to follow the day after. JPMorgan is lead dealer manager and sole physical bookrunner. BNP Paribas, KKR and Societe Generale are dealer managers and joint bookrunners. Natixis joins as deal manager and co-manager.
But prior to iQera’s exchange offer, French sugar manufacturer Tereos reopened the high-yield bond market on Monday (not counting last week’s issuance from unrated Air France-KLM). The company priced its €350m 7.25% SUNs due April 2028 at par, upsized from an initial €300m size. Proceeds from the BB-/BB- rated notes are set to contribute toward the refinancing of its €600m 4.125% SUNs due June 2023 (but callable in March).
After its June 2023 maturity, Tereos also has €425m 7.5% SUNs due October 2025 and €350m 4.75% SUNs due April 2027. BNP Paribas was sole physical bookrunner on the deal. BNP Paribas alongside Natixis were global coordinators. Commerzbank, Credit Industriel et Commercial, ING Bank and Rabobank were joint bookrunners.
Next up, Italian medical device company LimaCorporate announced a €295m 5NC1 SSFRNs deal, with proceeds for the bond and new RCF earmarked to refinance the company’s existing €275m E+ 375 bps SSFRNs due August 2023, and take out its existing €60m RCF. Alongside the new bond, the B3/B- rated issuer will raise a new 4.75-year €65m RCF, of which €13m will be drawn at issuance.
Initial price thoughts were launched in the E+ 575-600 bps range at a 92-93 OID on Thursday, and were guided at the tight end of this at E+ 575 bps at the same OID by Friday morning, with books closed at 11am UK time. Prior to the new deal being announced, the existing E+ 375 bps 2023 SSFRNs were indicated at a cash price around 97.6-mid. Following the refinancing launch, the SSFRNs jumped close to par.
Alongside the new issuance, LimaCorporate’s shareholders, the largest of which is private equity firm EQT Partners, are set to inject around €48m in new equity. Goldman Sachs is global coordinator and joint bookrunner. Credit Suisse is joint bookrunner. IMI Intesa Sanpaolo, Mizuho and UniCredit are joint bookrunning managers.
Bringing the tally of high yield deals in the market this week to four, Telecom Italia announced a benchmark-size five-year SUNs deal on Thursday (with expected ratings of B+/B1/BB-). The deal priced on Friday at par with a coupon of 6.875% and a size of €850m. Proceeds will refinance short-term maturities, as well as being used for general corporate purposes and to fund cash on balance sheet.
The telecoms company has a large cap stack that encompasses 18 series of SUNs, with maturities all the way out to 2038. This year, it has €1bn 3.25% SUNs due January 2023, £375m 5.875% SUNS due May 2023 and €1bn 2.5% SUNs due July 2023.
Initial price thoughts were released in the low 7s, and subsequent price thoughts honed in on the 7% area. Books closed on Friday at 12.00 UK time. 9fin’s analyst team predicted that the deal would price with a significant new issue premium to the outstanding curve – the closest maturity to the new deal is Telecom Italia’s €1.25bn 2.375% SUNs due October 2027, which was indicated on Thursday at 86.9-mid for a YTW of 5.6%.
Goldman Sachs and JPMorgan are joint global coordinators and physical bookrunners. BNP Paribas, Credit Agricole, UniCredit, SMBC and MUFG are joint bookrunners.
On the LevLoan side, and easily taking the prize for largest transaction in the market, telecoms company Altice France launched a jumbo A&E. The company is targeting €8bn-equivalent worth of euro and dollar TLB maturities coming up in 2025 and 2026 for extension until August 2028.
Facilities targeted in the transaction include Altice’s €1.145bn July 2025, $1.42bn July 2025, €1bn January 2026, $2.15bn January 2026, $2.5bn August 2026 TLBs, alongside its outstanding RCF. Pricing is targeted at E/S+ 550 bps at 98 OID (97 OID for the 2025 TLBs). The A&E will also see documentation tightened.
The lender presentation is available here, commitments are due 25 January.
Admin agent for all tranches is JPMorgan. Euro active bookrunners are BNP Paribas and Goldman Sachs. Euro passive bookrunners are JPMorgan, Barclays, Credit Agricole, Natixis, Societe Generale, Morgan Stanley, BofA, Citi, Deutsche Bank, ING Bank, RBC. US dollar active bookrunner is JPMorgan. US dollar passive bookrunners are BNP Paribas, Goldman Sachs, Barclays, Credit Agricole, Natixis, Societe Generale, Morgan Stanley, BofA, Citi, ING Bank and RBC.
International schools operator Nord Anglia Education remains in the market, having launched its amend and extend (A&E) transaction last week. The company is seeking to extend €1.3bn worth of its 1L debt and $500m of its US dollar-denominated TLB debt, both maturing September 2024, until January 2028.
Price talk for the 1L euro tranche is E+ 475-500 bps (0% floor) at a 97 OID and for the dollar TLB tranche is S+ 475-500 bps (0.5% floor), both at a 97 OID.
Sources told 9fin earlier this week that the deal has been launched from a position of credit strength, rather than being a stressed credit that’s desperate for a longer runway. The A&E has been extensively pre-sounded, suggesting pricing will likely settle close to the price talk levels. Buysiders broadly liked the non-cyclical sector the company operates in, its relatively low leverage and substantial cash pile that can be used for acquisitions if needed.
The chief concern flagged by investors is Nord Anglia’s exposure to China – with more than a third of revenue generated there – and the associated regulatory risks.
Timing on the deal was accelerated, with commitments now due next Tuesday (24 January) (compared to 25 January previously). HSBC, Deutsche Bank and JPMorgan are joint physical bookrunners on the euro-denominated tranche. Deutsche Bank and JPMorgan are also physical books on the dollars with HSBC as passive. The private schools company was bought out in 2017 by Canada Pension Plan Investment Board and Baring Private Equity Asia.
As predicted by 9fin last week, Safety Kleen, a UK-based cleaning chemicals company, is reportedly now in the market for a two-and-a-half year extension of its €495m E+ 325 bps TLB due July 2024. The amended loan will see an upsizing, with the new January 2027 loan split into a cov-lite €490m bullet tranche and a pre-placed €120m-equivalent sterling tranche.
Price talk on the euro-denominated tranche is at E+ 500 bps at an 95.5 area OID (+/- 50 bps). The sterling tranche pays S+ 575 bps with a 0% floor, and will price with an OID in line with the euro tranche’s clearing level. As reported, SafetyKleen attempted to push through an A&E in December 2022, but ran out of time ahead of the holidays.
HSBC and Jefferies are joint global and physical bookrunners, joined by Goldman Sachs, ING, Mizuho, SMBC and Unicredit as joint bookrunners.
Restaurant Brands Iberia
As a refreshing change from all the other A&E or refinancing activity, Spanish fast food operator Restaurant Brands Iberia launched a €260m non-fungible TLB add-on to fund the purchase of additional outlets. Initial price thoughts have been released in the E+ 550 bps at 95.5-96.5 OID. ING Bank, Santander, NatWest and Alter Domus are bookrunners.
The company, which is the operator and franchisee licensor for Burger King, Popeyes and Tim Hortons in Spain, was last in the market in October 2021, when it placed a €538m TLB due October 2028, alongside a €150m RCF, to support an LBO led by sponsor Cinven.
9fin published a Legals QuickTake, which is available to subscribers with access to the draft Term Sheet / SFA, earlier this week.
Spanish amusement park operator PortAventura World has launched a chunky A&E, as it seeks to extend its €620m E+ 375 bps TLB due June 2024 by two-and-a-half years to December 2026. The issuer is seeking to slightly upsize the loan to €625m and has issued price talk for the extension in the E+ 500-525 bps at 96.5-97.5 OID area. KKR Capital Markets is lead bookrunner and HSBC is bookrunner.
French IT consultancy Inetum priced a €343.4m E+ 500 bps TLB add-on due October 2028, at 91.5 OID on Thursday. The deal was upsized from €100-150m at launch. As 9fin reported, the add-on will be used to pay down a €533m TLA tranche that was originally taken by the underwriting banks back in September 2022 (when Inetum also syndicated its €600m TLB). The deal financed Bain Capital’s acquisition of the company in July.
Prior to the add-on pricing, one buysider applauded the approach of launching the deal small and upsizing: “They were quite clever in offering a small amount […] I don’t think the OID will change, they just want to get rid of as much as they can.”
As part of the TLA agreement, underwriting banks agreed not to sell their positions until this month, but January has also brought a positive market backdrop to clear more of the position. BNP Paribas and Credit Suisse were physical bookrunners. Credit Agricole, Goldman Sachs, Macquarie, Societe Generale, UniCredit, BBVA and RBI were bookrunners.
Rounding out the (plentiful!) list is UK-based Kantar Group, which priced a €185m TLB cov-lite add-on at E+ 425 bps at an undisclosed OID. The margin ratchet on the loan sees the margin stand at 425 bps when senior secured net leverage is more than 3.25x, 400 bps at 3.25x and below, and 375 bps at 2.75x or below, and features a six-month ratchet holiday.
The add-on loan will reportedly be used to repay the drawn portion of its $400m RCF. Goldman Sachs and Morgan Stanley were mandated lead managers and active bookrunners. Credit Suisse and Deutsche Bank were mandated lead arrangers and passive bookrunners.