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Private Credit 

Michal Skypala

Another week, another bank down. This time it’s not an unhedged institution funding the tech bubble across the pond, but a big old-school European bank. Understandably, the fears of contagion and concerns about a full blown banking crisis were higher this time, and the price for Credit Suisse’s downfall was steeper, with $16bn of AT1 bonds burned to sweeten the deal for UBS. 

How did the leveraged finance market react?

At the peak of the turmoil after markets opened on Monday, INEOS Enterprises became the first postponed transaction of 2023. But the market now seems back in business, with new bond and loan launches, and even a divi recap. Albea Beauty, which held firm through the turmoil and proceeded with its A&E, had to pay up, dropping the OID to 94 from the original 95-96 talk, but the deal got done.

“Primary won't have to pause too much, and now the market is decent,” said a sellside banker. “Margins went up a bit, but it’s not like you can’t place deals.”

The high-yield bond market isn’t taking a breather, with one deal live, announced on Thursday. The PIK toggle structure is generally considered risky, but in this case it’s necessary to match the character of the issuer, which is the holding company of German automotive supplier Schaeffler. The deal is dependent on dividends from Schaeffler, in which it has a controlling stake, plus Continental AG and Vitesco, in which it has a minority, so being able to PIK the coupon is a sensible way to manage the risk that dividends can’t be upstreamed.

IHO Verwaltungs launched a €500m five-year sustainability-linked senior secured PIK toggle note to partly refinance existing debt. The bond has a Ba2/ BB-/BB rating. The group plans to use the proceeds to redeem part of an existing €800m 3.625% May 2025 PIK toggle note, with unchanged PIK toggle feature and covenant structure. 

The HoldCo issuer, IHO Holdings is made up of three portfolio companies – a 75.1% stake in Schaeffler, a 36% stake in Continental AG and a 39.9% stake in Vitesco (which was spun-off from Continental in September 2021). All three businesses are global manufacturers operating in the automotive and industrial supplier industry and listed on the Frankfurt Stock Exchange. 

The bond maturing in 2028 was priced at 8.75% and 98.96 on Friday afternoon, for a yield of 9%, in line with the 9% area talk. Credit QuickTake, ESG QuickTake and Legal QuickTake are available to 9fin clients.

Outside of deals in the public domain there is at least one additional loan in premarketing this week and a new bond issue is expected to launch next week. 

“Pricing will be wider, this is a wobble and a repricing, not a crisis. If anything it’s warranted, the market felt too hot last month, there was little supply and people being overly bullish,” said a buysider.

The Ineos Enterprises postponement therefore looks like more of an incidental outlier than a sign of the LevFin market falling off a cliff. 

“The primary market is still open. INEOS’s [management] are more price sensitive, they’re in no rush and they are a high quality business, so they know that they can come back and get it done,” said a buysider.

The iTraxx Crossover continues its rollercoaster ride, with some intraday moves of 30-40 bps making risk pricing a complex exercise.

The volatile market could encourage arranging banks to pursue a more discreet execution strategy, turning to private placement and quiet premarketing, rather than trying to nail levels in public syndication. 

“Not sure if it will be the case, but if you get the book covered in premarketing you don’t launch. Allocations are not crazy at the moment, so if you have a deal covered then you price it,” said the banker. 

Swiss watchmaker Breitling privately placed a €205m term loan B add-on to support a dividend this week, a transaction which was heavily premarketed. However, as reported by 9fin’s Laura Thompson, some investors were reluctant to support another dividend, as the deal came less than six months after the company paid a divi to previous sponsor CVC.

“I think it’s pretty outrageous to come again so soon,” said one lender looking into the deal. “Not to mention so soon after Partners acquired the business. We won’t be supportive.”

The facility matures in October 2028, in line with the existing loans and printed at E+ 475bps and 97 OID. The decision to go for a private placement approach was the result of Credit Suisse-related jitters in the background, according to a source close. 

“The company performed really well, while the new valuation justifies the dividend, and I think the buyside put aside the emotion about the divi and looked at the firm credit results,” said the source.

French insurance brokerage and consulting group Diot-Siaci also had little trouble printing a €200m TLB. The OID only slightly softened to 96 from original price talk at 96.5.

The loan is fungible with the company's existing €850m TLB and matures in November 2028. The facility pays E+375bps over Euribor with 0% floor. 

French beauty packaging company Albea also successfully allocated a €566m A&E of its TLBs. The deal originally planned to extend both the €444m TLB and its $129m from April 2024 to December 2027, but scrapped the planned dollar tranche in the process. In our preview of the credit one lender complained of illiquidity in the dollar portion. As previously reported, smaller European credits typically suffer in the US market.

The euro loan will pay E+ 500bps over and OID was widened to 94 from the original 95-96 guidance. The loan includes a margin ratchet which cuts pricing by 25bp if leverage is below 3.5x and another 25bps if it falls below 3x. There is a 12 month ratchet holiday.

One lender contacted by 9fin said they were hoping for E+550 bps, while a second lender said they would reconsider at an OID of 92-93.

UK specialty chemical business INEOS Enterprises had planned an €820m-equivalent TLB, split into euro and dollar tranches, to fund the acquisition of MBCC Admixture. But the timing was unfortunate, and the deal was postponed.

The euro piece was talked at E+ 425 bps-450 bps over Euribor, while the dollar tranche is guided at S+ 400 bps-425 bps plus a 10 bps credit spread adjustment. Both had initial OID set at 98.5. Before the decision to postpone, buysiders already hinted to 9fin that the deal would struggle to get through at the proposed price talk. 

As suggested above, the Ineos group of companies tend to be price sensitive borrower at the top end of the leveraged credit spectrum — it’s not so much that the deal couldn’t get done, but perhaps it gets done better by waiting. 

But could volatile conditions could stop some pre-prepared A&E transactions coming to market, if the elevated credit spreads would make the new capital structure less sustainable? 

The sellside banker said: “I don’t think so. Performing credits are doing well in primary now considering the current market. If you were already in trouble then nothing changed, you remain in trouble, so our A&E pipeline is not changing drastically and we will see what new earnings season will bring.”

SLV Lighting’s A&E is expecting to continue at the terms proposed with early bird deadline in the middle of April, according to two lenders. 

The Danish building materials company Stark Group has launched a €400m non-fungible term loan B add-on to to take out its TLA bank club debt and repay RCF drawings. 

The facility pays E+ 500bps with OID guided in the 95 area. 

As reported by 9fin before the launch, buysiders were heavily presounded on the deal in the midst of Credit Suisse’s woes. 

The commitments have been accelerated to Monday midday UKT, from the original Tuesday deadline. The deal would likely already priced if it would not be for the volatile weekend. Adding to the stress this week was Deutsche Bank’s stock dive, putting some buysiders even further on the defensive.

“It’s a question of where the OID is — I mean, a week ago it was 95, and I thought that was very fair, but it might have to go a little bit deeper than that, especially on Monday,” said one buysider. “With all the noise in the news, they’ve taken some weekend risk by accelerating only to Monday; I think they should have just tried to wrap it up today.”

Some lenders were surprised to see the deal come to general syndication at all, expecting the company to following in Breitling’s footsteps with an already done-and-dusted deal.

Others were unsure why the company launched in such a choppy backdrop. 

“There isn’t a pressing need to do this deal right now, this isn’t a flailing business like Keter, this isn’t an immediate refinancing need, so there is a question of — why now?” asked a second buysider. CVC had originally promised the banks it would refi by next year, lenders said. Read more in 9fin’s preview of the credit. 

The company hammered out a €375m three-year bank club loan at the end of the last year to support its acquisition of UK building supplier Jewson  in the midst of wider market strain, LPC reported. 

The Loan Legal QuickTake is available through loans@9fin.com. Please attach your copy of the draft Term Sheet / SFA so that we can validate you have access to the documentation. 

Also in the market is a $1.66bn-equivalent term loan B across dollars and euros to support the merger of BPEA EQT’s two Asia-focused business services firms, Tricor and Vistra.

The announcement of the deal at the height of the chaos in mid-March may have come as a surprise, but with other borrowers mostly holding off on new issues, Tricor-Vistra has a clear run at the primary market.

To many buysiders, the rationale behind the merger is solid — combining the two units gives the business bigger scale that should lead to cost savings and more revenue boosting cross-selling opportunities.

“My initial thoughts are that the merger makes sense,” said one buysider. “It will be a top two global full-service platform, scale is a real advantage in this sector, and integration risk is cut by BPEA control over both entities.” 

Read more in 9fin’s preview of the credit while ESG QuickTake is available here and Loan Legal QT through loans@9fin.com.

The secondary market has been muted with no BWICs announced and low trading volumes, according to a trader. With extensive volatility and lenders focused on earnings season it’s understandable that rather less paper is being passed around in secondary. 

On the euro-denominated bond side, the best performer was Schaeffler’s holdco IHO Verwaltungs, which saw its €800m senior secured PIK toggle note maturing in 2025 and paying 3.625% up 5.25 points to 98.63-mid quote following announcement of the new transaction on Thursday. 

The second best riser was UK’s frozen food company Nomad Foods, which saw both of its €50m and €750m SSNs maturing in 2028 and paying 2.5% up 2.33 points to 84.76-mid quote in a week.

The company reported Q4 numbers at the end of February, with sales up +6.6% YoY and EBITDA up 0.1% in the same period while total net leverage came down 0.7x to 3.4x. 

The biggest loser in bonds was the Spanish biopharma business Grifols. The €1bn May 2025 senior notes paying 3.2% dropped 3.86 points to 89.31-mid quote and the €1.4bn October 2028 senior notes paying 3.875% lost 3.83 points to 78.41-mid quote. Moody’s downgraded the corporate rating of the company to B2 on Friday with negative outlook. The bonds are at the lowest level since November. 

From the sterling issuers, UK poultry producer Boparan suffered the most on the back of the lousy earnings. The £475m SSNs maturing in 2025 and paying 7.625% start sliding over seven points on Thursday from 73.97-mid quote to 67.67 as of Friday morning. Boparan reported its Q2 numbers with sales up 23.8% YoY, EBITDA up 2.6% YoY, but total net leverage coming up 0.3x to 4.8x.

“I looked at the results and they were pretty awful. Cashflows are woeful, so there is a risk they run out of cash at some point,” said a bondholder. 

The secondary loan market has seen all industries down for second week in a row. Industrials issuers almost stayed flat while the biggest decrease was recorded by the utilities sector.

The French technology, engineering and consulting provider Expleo was the best performer between in European loans. Its €494.4m September 2024 TLB rose 3.13 points to 88.88-mid quote in a week and it is at the highest level since last July. 

Loan from the Dutch flower and vegetable supplier Flamingo Afriflora suffered the most pain, as it saw its €280m February 2025 TLB slide 5.5 points in a week to 87.5-mid level quote, to its lowest level since August 2020.

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