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The post-Easter week in Europe did not bring the full market reopening some had hoped for, but then again we’re not yet in a stable debt market either. Three new loan deals have revived the primary loan offering, but the prize catch slipped from the net of the wider investor base once again, with private credit taking the largest bite, first.
The big surprise of last week was the complete private placement of the €2.42bn debt package for Envalior, backing the merger of Royal DSM’s engineering business and Lanxess’s materials.
Pre-market is the new market
What was originally intended to be one of the first and largest syndication deals to hit buysiders’ desks in 2023 slipped away at the last minute from the wider lender base.
As reported by 9fin, two direct lending funds took a chunk of the €2.42bn privately placed debt. The rest was placed with more than 30 traditional accounts including credit opportunities funds, CLOs, mark-to-market funds, SMAs and couple of bank orders.
However, some buysiders felt left out.
“This Advent DSM/Lanxess deal has been a mystery for me. We aren’t involved, or invited in the first place,” complained one buysider.
Although Envalior initially intended to syndicate at least part of the loans, strong premarketing winds allowed the deal to be privately priced in full. Most notably, the big private credit ticket helped to clean up the terms for the remaining investors.
“The orders from private credit had a lot of appetite and, to our benefit, changed a lot of the documents that were not initially kind,” said buysider involved in the deal.
The participation of private credit in a traditionally syndicated LBO could be the new normal, according to a private credit source. “It’s yet again evidence that we’re at the bottom end of the high yield and syndicated market, and syndication will be less than it was.”
The source pointed to the lack of bank appetite to underwrite large syndications could evolve into two different tranches in future syndicated deals: one for the anchor investors and one for the rest.
As reported, the €1.15bn euro tranche and the $1.41bn dollar piece both priced on 6 April with a 90 OID and at 550bps margin over Euribor and SOFR, respectively. Sponsor Advent has retained the $488m TLB2 tranche, with the option of paying the interest on their portion as PIK. The transaction was marketed off 4.3x senior secured leverage.
But all is not lost for traditional lenders. The Dutch-headquartered business services firm TMF (B2/B) is pre-marketing an A&E of its 2024 TLB, alongside a refi of its 2L, as reported this week.
The company priced its €950m 2024 TLB back in 2017 at E+325 bps and par. Funds backed CVC’s acquisition of the company, having agreed to buy the firm for €1.75bn. Its €200m 2024 2L, meanwhile, came at E+ 687.5 bps and a 99.5 OID.
TMF recently reported FY 22 EBITDA of €235m (+18% YoY), with revenues at €744m (+14%) on both organic growth, the company said, and four acquisitions during the year covering Latin America, Europe, the Middle East and Asia.
Already scheduled to price for next week are deals from the French provider of cleaning products Group Services France (GFS) and Dutch non-food discount retailer Action.
GFS is also coming with a new €446m first-lien term loan B that it wants to use to fund acquisitions and pay transaction-related costs.
Price talk for the July 2029 TLB opened at E+ 500 bps with an OID in the 94 area and an ESG-linked margin ratchet that either adds or reduces 10bps. Corporate ratings are B1/B.
“On high level it is enticing, but if they are into ESG we need to check how potentially dangerous are their chemicals to the environment,” said one buysider. “But overall credit strength will decide.”
The legal team has completed legal analysis of GFS’ term sheet. To receive our Legal QuickTake analysis please only contact loans@9fin.com, attaching your copy of the draft Term Sheet / SFA so that we can validate you have access to the documentation.
Dutch non-food discount retailer Action owned by buyout house 3i is guiding its €1.5bn-minimum A&E much tighter, based on one notch higher BB-/Ba3 rating. The price talk for a loan to extend the original March 2025 maturity to September 2028 started at E+ 375 bps–400 bps and a 98.5 OID.
9fin’s ESG QuickTake is available as well as covenant analysis by the legal team through Term Sheet / SFA verification at loans@9fin.com
Spanish outsourcing provider KronosNet is also in the market with a fungible first-lien term loan B add-on that will be place €75m of paper to repay TLA originally placed in September.
No OID was disclosed on the new loan, which pays E+ 575bps in line with the existing loans, but since previous TLBs have MFN protection it won't be able to be lower than the initial 92 price. The TLB will mature in October 2029 and carries call protection until October 2023, as with the company's existing debt.
Movers&Shakers
Secondary activity was muted in a shorter week and no BWICs have been offered, said a trader.
Yet it was good week for gamblers, as the biggest riser in European high yield this week was Italian gaming operator Lotomatica.
The company has seen its €400m senior secured PIK toggle notes paying 8.125% due November 2026 pick up 6.3 points to 103.5-mid quote on the news of an IPO by the end of April, with proceeds to be used to reduce its debt pile.
The €575m July 2025 SSNs paying 3.375% went up almost 2.1 points to 100.75 and the €350m SSNs paying 9.75%, also due in September 2027, rose 1.4 points to 107.39-mid quote.
The Gibraltar-headquartered gaming company 888 has also had a good week, with its bonds recovering after showing earnings in line with expectations — even though still strained by the costs from William Hill acquisitions and recent compliance mishaps.
The €182m and €400m SSNs both due July 2027 and paying 7.558% picked up 4.5 points to an 89.9-mid quote, the highest level since the end of January.
The Group reported today sales down 4.9% but EBITDA up 7.5% Y-on-Y in the second half of 2022, with leverage ticking up 1.2x to 5.6x due to a debt-fuelled William Hill acquisition from last July.
In March, William Hill almost lost its gambling license after it was fined £19.2m for insufficient money laundering controls by the UK's gambling watchdog, the highest penalty on record for any gambling business.
The company has also faced legal charges since January for its weak consumer protection for its loyalty program for Middle East customers, where it expects to take a £25-30m hit due to the failings.
On Friday (14 April) 888 announced after an internal probe that it will reinstate customers from the Middle East “with robust policies and procedures implemented to reopen accounts and onboard new customers in the region”. This way it plans to recover £56m of sales.
Lenders to the troubled German real estate company AdlerRE also felt some solace as its €300m senior note paying 2.125% due in February 2024 lift up 5.4 points to 93.8-mid quote and the €300m April 2026 senior notes paying 3% went up almost 2.7-points to 75.8-mid quote.
On Wednesday, Justice Leech agreed to sanction the UK restructuring plan (RP) for AGPS BondCo Plc, the substitute issuer for Adler Group. Leech didn’t give verbal reasoning on Wednesday, saying that he would hand down his judgment ASAP, but added he wouldn’t give a clear indication of when that will be. Read more in Chris Haffenden’s extensive coverage from the turbulent trial.
The biggest losers in euro-denominated bonds were the €825m March 2028 senior notes from US pharma business Catalent. The bonds slipped 2.9-points to 87.3-mid quote as the only issuer decreasing more than two points this week.
On the loan side, moves between sectors have been minimal with healthcare picking up the most but just over 0.12 points while utilities was the worst performing industry, decreasing less than 0.06 points.
The best performer in loans was the Luxembourg-based corporate and investor firm IQ EQ. Its £125m July 2025 TLB picked up 4.6 points to a 98.6-mid quote this week after a potential trade aligned the paper on which its euro-denominated loans are quoted, speculated a trader.
Companies of the ION conglomerate are still recovering from the cyber attack at the end of January. Both ION Markets and ION Group were the worst performers this week in European loans. Both the €125m April 2028 TLB from ION Markets and the €1.75bn March 2028 TLB from ION Group have fallen 2.5-points to 96.3-mid quote.
