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Private Credit 

Josie Shillito

Synne Johnsson

This article is part of our new service, 9fin Private Credit. If you're interested in a free trial, contact subscriptions@9fin.com

A clear bifurcation has split the European private credit market for some time, with the jumbo club deals that snap at the bottom of the syndicated market differentiating considerably from those €5-50m EBITDA deals that more comfortably occupy the territory of ‘direct lending’. 

However, these distinctions are no longer manifesting just in deal size, pricing relative to leverage and terms, but notably in the dynamic between the sponsor and lender and in the behind-the-scenes negotiations as the debt is pulled together.

Essentially, “[at the upper end of the private credit market] it’s never a straight bilateral negotiation anymore, it’s more like a bookbuild,” explained a source close to this month’s jumbo debt financing on online advertiser Adevinta. 

And this chasm has never been deeper than in the process of building the €4.5bn debt package backing sponsors Permira and Blackstone’s take private of Adevinta. Thanks to the deal’s sheer size and some canny manoeuvring by the sponsors, no single lender has been able to take the majority stake so crucial to maintaining control over the sponsor and the other lenders. 

These majority or anchor stakes are critical when it comes to securing the terms that reflect the ‘take-and-hold’ nature of private credit: pricing that reflects an illiquidity premium and tighter language in the documents, governing non-call periods, EBITDA and reporting. In the debt backing the merger that became chemicals manufacturer Envalior, in April 2023, for example, the two direct lenders that anchored the deal were credited with driving lender-friendly terms for everyone else.

This dynamic repeated itself in other €500m-plus private credit deals, like EQT’s take private of pharmaceutical products manufacturer, Dechra, in which Blackstone held £342m-equivalent across its funds, according to the sum of the figures available in the commitment letter, equating to over a quarter of the £1.25bn TLB, and in Apollo’s stake in Asda’s M&A financing, where the lender was able to take a significant enough stake to have some negotiating heft.

At €4.5bn, the size of Adevinta’s debt helps to prohibit such anchor stakes. But size is not the sole factor. Partners Group succeeded this summer in its £1bn covenant-lite portable refinancing of software publishing business Civicato restrict the private credit club to similar-sized stakes — even though the relatively smaller £1bn size would have allowed it. It did this, according to a source close to the deal, by getting groups of lenders onside with pricing, then using this to drive down pricing among other lenders, a process not dissimilar to a syndication bookbuild.

This, according to 9fin reporting this week, has replicated itself with Adevinta, where ticket sizes are running as slim as €200m, pricing is cut to E+ 575bps and leverage (depending on how the EBITDA is calculated) is as high as 6.9x. 

The ongoing threat of the syndicated option also keeps prospective private credit lenders in line. Adevinta’s process, according to the source close to the deal, remains dual track. 

So are sponsors becoming more confident? It would appear yes. The hung deals of 2022 are far behind us, and they appear to believe that there is greater certainty of execution whether via syndication or private credit, and that they can flex their muscles for the first time in a while.

Whether the European market remains deep enough to absorb a €4.5bn piece of private credit debt remains to be seen. 

Meanwhile, if you’re a direct lender in a good credit, you’ll fight tooth and nail to stay in - even at punchy leverage. At least, this seems to be the case with digitalisation solutions provider Sogelink’s prospective sale, where incumbent lender Hayfin has wasted no time putting together upwards of a €350m staple based off €60m EBITDA. 

“Hayfin is super keen to stay involved,” said a source who looked at the deal. “The leverage is very punchy. People think it's a software company, but it's not. It has some similar attributes, but it's not software. We were keen, but 6x-6.5x is very punchy.”

KKR, Providence Equity Partners, Francisco Partners, Bridgepoint and Ardian are some of the sponsors looking at the deal, according to two sources familiar with the matter.

Barings is the incumbent lender in the sale of Inflexion-owned UK business, Chambers, marketed off an EBITDA of £20m. The deal is at first round bids stage, according to two sources familiar with the process. 

Barings did not respond to a request for comment. 

There’s a great deal of lender education processes taking place across the UK, the Nordics and the rest of Europe — many of them next week. We’re looking forward to taking the temperature of these education processes (where are advisers marketing pricing and leverage?).

For now, these are the deals where we can confirm at least two sources looking:

Dutch private equity house Bencis is selling Kooi Camera Surveillance in the Netherlands, Lincoln is advising, EBITDA is €20m;

Montefiore Investment is selling French telecom firm Ensio marked off a €50m EBITDA, with Rothschild as the sell-side advisor for the deal;

Capza has mandated Alantra to sell French auto-parts firm Ital Express, marked off a €10-15m EBITDA;

Bencis Capital is buying German bike leasing firm Eurorad, marketing off €20m EBITDA;

German business consultancy firm H&Z is on the market, with €15m EBITDA; 

Nordic manager-owned marketing firm Generaxion is up for sale with DKK77m (€10.32m) EBITDA, with PwC as sell-side adviser; 

Eurazeo's sale of the Dutch Ophthalmic Research Center (DORC) has now kicked off through Rothschild at €50m EBITDA;

Inflexion-owned UK business, Chambers, marketed off an EBITDA of £20m, as above.

Dutch solar panel firm SolarNRG is about to hit the market with an expected value of €100m;

There is the possibility of entering into £506m debt or more when Apollo refinances its take-private debt backing its delisting of The Restaurant Group. At present, RBC and ACMP holdings are providing bridge financing.

And, of course, Adevinta and IRIS Software.

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