“Scattered deals that stayed away when market was more uncertain with SVB and Credit Suisse downfall were pushed and April seems like it will see a slightly busy market,” said a sellside banker. 

The sign of busier times is also that the long awaited truly first LBO of 2023 in Europe is finally coming to buysider’s screens. 

A €2.9bn debt package for Advent’s buyout of DSM Engineering Materials is in pre-marketing, according to two market sources and as reported by LPC News. 9fin reported in January that the debt package had been slated for syndication in the first quarter. The financing is supporting the carve-out of Royal DSM’s engineering materials business and its merger with LANXESS’ materials business, worth €3.7bn.

This jumbo deal is an outlier in a very thin visible new money LBO pipeline. 

“Outside of DSM I am not aware of any other LBOs that are in the market. The deals that will come will have some new money but it is mostly A&Es that repay portions of RCFs, or financing bolt-on acquisitions with add-ons,” said the sellside banker. 

The market uncertainty and bank worries has had a limited direct impact on leveraged finance, but any other wobbles could mean the already thin LBO pipeline getting thinner. 

“I don’t think banks are under massive pressure to stop underwriting, because the recent bank headlines are not connected to leveraged finance. They are more disciplined for sure and can’t underwrite everything, but they are at least open for underwriting,” said the sellside banker. 

ULBO

In an unusual move in leveraged markets, the buyout of the German chemical firm MBCC Group, which is being sold by Swiss parent Sika will be funded with equity, at least for now, according to reports.

This could mean that the sponsor will look to recap the company later when rates are more favourable, given disruption in debt market conditions over the last month. 

Ineos Enterprises had initially agreed to buy MBCC, and had planned to fund the purchase with an €820m-equivalent TLB, launched on March 8. However the deal was postponed on March 20 in the wake of the collapse of Credit Suisse. Two days later after that, the UK’s Competition and Markets Authority (CMA) gave Sika provisional negative feedback on INEOS Enterprises as a prospective buyer for the MBCC divestment, and Ineos and Sika terminated the deal, with Sika instead selling to Cinven. 

A source close to the INEOS Enterprises deal said that they have not received any negative feedback concerning a deal that buysiders spent time on but will now won’t come back to the market, as potential lenders understand the risks of deals getting postponed indefinitely in the current market. 

However, the new sponsor using equity only for now raises the question of whether syndicated markets are losing deals from the 2023 pipeline.

“Banks are not missing out deals to private credit or others, the pipeline is simply not there,” said the banker.

KKR’s purchase of insurance broker April in November last year was initially equity-funded, but subsequently levered in the private credit market, with a club of lenders including Apollo, CVC Credit, PSP Investment, Crescent Capital and Park Square providing an €850m unitranche and €100m acquisition line.

M&A activity is muted overall, and there are few transactions sizeable enough to deliver syndicated supply, added the banker. 

Even amid uncertainty over future rate hikes, the European bond market remains open, and new issue supply is trickling through. 

Swift comebacks

After successful print of a €500m senior PIK toggle last week, IHO Verwaltungs came back for a top up on Thursday to add another €300m to that recently issued sustainability-linked bond, and allow the company to fully refi its €800m 3.625% 2025s. The chunky tap shaved 25 bps off last week’s yield. The bond paying 8.75% priced at 101 to yield 8.5% and was increased from an initial targeted €200m offering.

French cable manufacturer Nexans also came with a sustainability-linked bond. The five year €400m senior unsecured notes priced at par and 5.5%, with proceeds used to refinance debt maturing this year.

This deal was increased from the €325m initial size, and the final print was tightened from the price talk in the 5.75% area.

On the loan side, Clayton, Dubilier & Rice-owned Motor Fuel Group also did a quick turnaround with an upsize of its already printed TLBs from mid-March. The sterling TLB tranche was increased by £129.3m to a final £732.3m size and a €20m of paper was added to the euro tranche, making it a €1.17bn TLB. 

Both loans came in line with the previous prints in March. The sterling TLB pays S+600bps and was issued with an 96.5 OID while euro tranche carries E+475 bps margin with an 97.5 OID.

Danish building materials business Stark Group also managed to upsize its term loan B add-on by €50m to €450m on Monday. The deal had been pre-marketed as a €450m transaction, but launched on March 22 as a €400m deal, before pricing this week as a €450m deal again.

The non-fungible facility matures in May 2028, in line with Stark’s existing €1.345bn loan. The pricing landed at E+ 500 bps and 96 OID, tightening from initial talk of 95. A margin ratchet was added at pricing that cuts the margin 25 bps if leverage comes under 3.25x times.

BPEA EQT also successfully placed a $1.66bn-equivalent term loan B across dollars and euros to support the merger of two business services firms Tricor and Vistra.

The loan, maturing in June 2029 in line with Tricor’s existing debt, was split between $600m and €816m dollar and euro tranches alongside an additional HK$1.36bn TLB.

Both the US and euro loans priced at S/E+ 475bps and a 97.5 OID, tightening from 96–97 original talk. The dollar loan has a 10bp/15bp/25bp credit spread adjustment. 

German real estate services business Apleona closed its a small non-fungible add-on on Friday. The company increased its term loan B add-on by €10m to a €210m final size, and priced at 98.5, at at the tight end of final talk that has already tightened from the initial guidance in the 96.5-97.5 range. The loan matures in April 2028, in line with the €765m existing loan and pays E+ 475bps.

Buysiders saw little to object to in the credit, with the latest acquisition of facility manager Gegenbauer only likely to improve its market position. The company’s proposed business plan is underpinned by synergies that have helped convince the buyside of the clear rationale for the acquisition. 

The only contentious points were the price talk, which was off-putting to some lenders (though clearly not too many, as it’s since been tightened) and the potentially limited liquidity of the €200m non-fungible tranche. Some also flagged high exposure to the banking sector, with the biggest client being Deutsche Bank.

Next week’s business is the €895m-equivalent dual-currency A&E from the French entertainment business Banijay,responsible for birthing some of the most famous reality TV show formats. 

The transaction will amend the €453m and $449.65m tranches paying E/L+ 375 bps and maturing in March 2025, with the deal aiming to push maturities out three years. The euro portion is guided at E+475bps and S+425bps with a 10bps credit adjustment spread, at OIDs of 97-97.5 

Buysiders will be asking if the A&E is Deal or No Deal? to decide if Banijay will be another Survivor of somewhat volatile markets. Facility ratings are expected to be at B1/B /BB-.

Movers & Shakers

The secondary markets are still missing any BWICs with muted activity across the board, as investors are deep in the earnings season, said two buysiders.

UK car sale company Constellation Automotive Group (B3/B-/B-) reported miserable quarterly results for Q3 22 (ending December 2022) this week — though there could be a strong Q4 around the corner.

The potential for improvement meant the debt stack stayed fairly stable. The £695m sterling July 2027 SSNs are indicated at 73.67-mid as of Friday (31 March), with its £400m sterling and €400m euro TLBs maturing in July 2028 at 81.42-mid and 82.25-mid respectively and its £325m second lien maturing in July 2029 down one point in a week to 52.2-mid on Thursday.

“The results were very disappointing,” said one bondholder. “I’m unsure if they’ll be able to shave off the CCC downgrade risk.” Moody’s and Fitch rates the company at B3 and B-, respectively, both with negative outlook. 

The company (previously BCA Marketplace) reported adjusted EBITDA down -47% YoY to £32.7m for Q3 22, with YTD numbers down -55% YoY to £61.7m. Group revenues, meanwhile, fell around -16% YoY to £1,587.8m for the quarter. Read more in Laura Thompson’s write up of the earnings.

The French Industrial machinery business Novafives was the best performer in high yield seeing its €325m June 2025 SSNs paying 5% picked 8.5 points in a week to 87.61-mid quote after reporting end of year results this week. 9fin has hinted at the end of February at strong guidance for 2022 and 2023 EBITDA and three creditors at the time had high hopes that refinancing of its 2024 and 2025 maturities may now be within reach.

“They were pretty constructive numbers, they did say better than expected receivables collection helped working capital and lower debt in Q4,” commented one buysider on the earnings.

The management stayed vague on the timeline of expected refinancing of the bonds, although interest rates on €275m June 2025 FRNs are not hedged, added the buysider.

Swiss-based telecoms provider Salt also had a good week after its recent earnings update. The €440m November 2027 SSNs picked up 3.85 points to 92.66-mid quote in a week. Salt reported for the last quarter of 2022 a 2% uptick in sales and 4.2% increase in, EBITDA, both YoY, while decreasing total net leverage by 0.1x from previous quarter to 3.4x.

Management expressed salty feelings about mistreatment by rating agencies. The B2/B+ rated (Moody’s/S&P) business hasn’t received a ratings change in the past five years. To support the argument, Salt provided an industry breakdown, highlighting where it’s in a financially stronger position than its BB peers. Read more in 9fin’s analysis for the case for an upgrade by Yusuf Sule.

Dutch margarine producer Upfield (Flora Food) was a third issuer this week that satisfied investors with tasty new numbers as it reported in line with expectations and started the deleveraging process. The €685m May 2026 senior notes paying 5.75% picked up 3.41-points to 76.64-mid quote in a week.

Leverage came down 0.8x to 7.2x from the previous quarter, to a level below 9fin estimates. The Q4 22 liquidity reached levels that allowed the company to repurchase a combined €250m-equivalent of PLN-denominated and sterling-denominated TLBs in February. Emmet McNally and David Orbay-Graves digest the company earnings here.

The biggest loser was the Italian operator of vending machines IVS, which saw its €300m October 2026 senior notespaying 3% down 1.61 points to 92.44-mid quote.

Across the industries the loan market was all green this week, reversing losses from the past week. The IT sector increased the most with an almost 0.35 points uplift. Healthcare issuers performed the worst picking up less than 0.05 points.

News of planned acquisition by US peer Concentrix made WebHelp the best performer in European loans. The French customer experience and business outsourcer has seen its €1.02bn August 2026 TLB up 3.75 points to 99.29-mid quote. Concentrix announced on Wednesday it has entered into an agreement to combine with WebHelp in a transaction valued at approximately $4.8bn, including net debt.

The loans from the troubled French bakery manufacturer Biscuit International suffered the most this week, when both €205m and €490m TLBs maturing in February 2027 slid 3.12 points to 74.03-mid quote, erasing gains recorded in February and earlier in March.