Behemoth deals paw the way to top-notch end of Q1 - Primary Loan Review

23 February 2018

Following a quiet half-term week, the market remained in a relaxed mood this week with just 13 deals in syndication totalling EUR 6.7bn of institutional debt.

 

However, market players expect March to set things on fire. Two chunky deals turned up the wick already with buysiders getting ready to jump into these benchmark names. Moreover, EUR 42.6n of large cap financing is sitting in the M&A pipeline, according to Debtwire Data.

 

“We expect March to be very busy,” said one buysider.

 

As Flora Foods, former Unilever Spreads, launched a whopping EUR 5.65bn loan and bond financing package backing its takeover by sponsor KKR on Tuesday (20 February), the market awaits a second behemoth deal. Thomson Reuters F&R is set to hit the European market with a USD 13.5bn-equivalent financing package comprising a dual-currency USD 8bn-equivalent loan package and USD 5.5bn-equivalent high yield offering.

 

“It is always a matter of ups and downs, but we see the market expanding to new heights this year and the next month will be very busy for European investors, with some names which everyone will need to look at,” according to a bookrunner.

 

February delivered a small week-on-week uptick of 11% to EUR 15.8bn in volume across the levloan pipeline this week. With a peak of EUR 20.7bn of debt in syndication in late January, February volumes are falling short of those dizzying heights.

 

Early stage

 

TDR Capital’s exit process of its UK chain of tennis clubs and gyms David Lloyd is underway. Sell-side adviser Rothschild held a lender education a fortnight ago but interest from bidders and financiers was lukewarm amid wariness over the sector.

 

First-round bids were due on Tuesday (20 February).

 

The asset is marketed off more than GBP 130m EBITDA, however the figure fluctuates depending on adjustments.

 

UK peer Pure Gym, which was acquired by Leonard Green at the end of last year, financed its buyout with a GBP 360m high yield bond from Barclays, Jefferies and RBC. Leverage on the deal came to 4.75x based on roughly GBP 75m EBITDA.

 

Pure Gym’s GBP 360m senior secured 2025s are quoted at 101.25/102 for a 6.1% yield.

 

If David Lloyd goes down the loan route it is likely to attract 4.25x through all senior structure or 3.25x via first and 1.75x second lien debt pitches.

 

In addition to operating in the consumer sector and being a discretionary spending business, David Lloyd’s 2015 dividend recap, part of which was the sell and leaseback deal with M&G, and a few difficult gym deals such as Fitness Fist – also add complexity to its credit story.

 

In 2015, David Lloyd completed a dividend recap via a GBP 260m term loan B, which allocated at 96. The recap included a GBP 100m carve-out denominated in euros, and was accompanied by a GBP 75m RCF and a GBP 120m second lien, which was pre-placed with Ares Capital Management.

 

Pricing on the debt was set at Libor+ 550bps on the sterling component and Euribor+ 500bps on the euro, with a 1% floor on both tranches. During syndication, arrangers widened OID guidance from 99 to 96, and added a 12-month soft-call protection. The senior debt came to 3.25x and featured a leverage covenant, while the GBP 120m second lien took total leverage to 4.75x. Goldman Sachs, Lloyds and JPMorgan led on the recap.

 

A year later, as part of the recap, David Lloyd agreed a GBP 350m deal with M&G Investments, to sell and lease back 44 health and racquet clubs on a ground lease basis for 125 years.

 

TDR acquired David Lloyd in 2013 for GBP 750m, when the business was generating GBP 85m EBITDA. At the time Advent International, Apax Partners, Blackstone and KSL Capital Partners were also reportedly bidding for the asset.

 

Apax, Onex and Brookfield, are expected to look at David Lloyd this time round.

 

TDR’s buyout was initially funded by Children’s Investment Fund Management (TCI), a London-based hedge fund, providing a circa GBP 500m loan financing package with margins between Libor+ 800bps and L+ 900bps. Leverage through the entire structure was around 4.5x. A year later, TDR reorganised the financing into a senior and a junior debt component.

 

TDR Capital mandated Rothschild a year ago or so to sell David Lloyd.

 


UK services provider to regulated infrastructure market M Group Services is proving to be popular with financiers following lender education and IMs distributed early this month.

 

First round bids are due 27 February.

 

Banks are working off GBP 56m LTM EBITDA and looking at a 5x leverage through all-senior structures, and 4.5x via first lien with another turn or so through second lien packages with total leverage in the 5.5x-6x range.

 

Although generating modest 6% profit margins, M Group is a resilient business with long-term contracts making it a good credit story. Despite the positive feedback from lender education, banks were restricted from speaking to bidders in the first round.

 

Brookfield and PAI are interested in bidding for M Group.

 

M Group, formerly known as Morrison Utility Services, has been put up for sale just one year after it was acquired by First Reserve Corporation. The sponsor has hired Rothschild and was targeting private equity firms and funds with a long-term interest such as infrastructure funds as potential buyers, as reported.

 

M Group generates around 60m EBITDA on GBP 1bn turnover. The company could fetch a 10x EBITDA valuation multiple given recent acquisitions made by the company as well as market comps such as the sale of Enserve, a UK outsourcing company acquired by Rubicon Partners and Grovepoint Capital from Cinven for about GBP 60m in January 2016, as reported.

 

M Group made four acquisitions during the past year, including Meter-U, a UK provider of meter reading and data management; G4S Utility & Outsourcing, a global integrated security company for GBP 52m; Dyer & Butler, a UK regional civil engineering and building contractor and Magdalene Ltd., a UK telecommunications infrastructure services provider.

 

M Group Services was last in the market in July 2017 with a GBP 54m add-on to its GBP 200m TLB that allocated at 99.875. The TLB pays Libor+ 500bps with a 0% floor. The add-on funded a dividend to First Reserve and repaid RCF drawings.

 

The deal took M Group Services total debt facilities to GBP 365m and leverage to 4.75x.

 

M Group is a holding company created to house Morrison Utility Services, which was acquired by First Reserve in September 2016 from Motion Equity Partners, a France-based private equity firm and Bregal Capital, the UK-based private equity firm, for an undisclosed consideration. HSBC and SocGen acted as coordinators and bookrunners on the transaction. BOI was an MLA.

 


The sale of UK-based fittings and plumbing equipment maker John Guest is back on. Private equity bidders and lenders are getting ready to tap a rare large-cap primary opportunity as sell-side adviser Rothschild is launching an auction for the second time.

 

The family-owned asset is marketed off GBP 50m EBITDA and could fetch a 10x–11x valuation multiple.

 

The process comes two years after John Guest was in exclusivity with US PE firm AEA Investors. However, those sale talks lasted too long and eventually ended due to uncertainty around the impact from Brexit.

 

At the time, John Guest was marketed off GBP 40m EBITDA with financing touted around 4x on an all-senior basis, as reported.

 

While some banks liked the group’s strong brand and quality products in a market where builders value the quality of materials, others were put off by its retail exposure and low barriers of entry in the market.

 

The group’s chunky EBITDA was expected to attract sponsors such as Advent International, Apax, Cinven, and PAI Partners, as reported.3i [LON: III] was reportedly bidding for John Guest in the previous auction and is expected to become involved again.

 

According to company filings brothers Tim (58), Barry (58) and Robert Guest (67), whose father founded the company, are John Guest’s largest shareholders. Grandsons, Tom, James and Tristan Guest (39) also own company stakes, according to the most recent filed accounts from December 2016. The same accounts show the company posted GBP 140m of sales that year.

 

John Guest mostly manufactures plumbing and heating parts sold through retailers, but it also makes materials for industrial use such as for beer and water pipes.

 


In syndication

 

Sponsor Triton has kicked off the refinancing of Leadec, its German industrial services provider, with a cEUR 105m add-on to its TLB, that increases the size of the loan to EUR 215m and the group’s term debt to around EUR 250m.

 

Following the refinancing, the group’s circa EUR 35m 4.5 year TLA will pay 350bps and mature in August 2022, while the 5.5 year TLB matures in August 2023 and will pay 400bps.

 

Leadec’s other existing facilities, a circa EUR 40m RCF and a EUR 50m guarantee facility, will be rolled over as part of the transaction.

 

Sole global coordinator and book runner UniCredit launched the covenanted deal on Tuesday with a bank meeting. Commitments are due on 7 March.

 

Leadec generated around EUR 60m EBITDA in 2017.

 

The company was known as Voith Industrial Services prior to Triton’s acquisition in 2016. The group is a provider of technical services to the automotive industry and made EUR 973m revenues in 2016 together with affiliated company Veltec, according to Triton’s website.

 

Leadec has access to a workforce of around 16,600 for short term and permanent deployments at more than 200 production sites. It provides production site services, project solutions and engineering services, and assembly solutions.

 


DRT, a France-based producer of plant-based chemicals and ingredients, is guiding its EUR 455m cov-lite TLB at 99.5 paying Euribor+ 400bps with a 0% floor.

 

The financing includes a EUR six-year 100m RCF and supports Ardian’s acquisition of the company.

 

BNP Paribas, Crédit Agricole CIB and Société Générale CIB are bookrunners on the deal.

 

Commitments are due by 5 March.

 

Ardian agreed to buy a majority stake in DRT from family shareholders and Tikehau Capital in November 2017, as reported.

 
  • Borrower: DRT
  • Business: French plant-based producers of chemicals and ingredients
  • Sponsor: Ardian
  • UoP: Finance acquisition by Ardian
  • Facilities: EUR 455m TLB, EUR 100m RCF
  • Margin: E+ 400bps
  • Floor: 0%
  • OID: 99.5
  • Maturity: Seven years, Six years
  • Covenant: Cov-lite
  • Bookrunners: BNPP, CACIB, SocGen
  • Lender meeting: Thursday 15 February
  • Commitments: Monday 5 March
 


Assystem Technologies, a French engineering services provider, is guiding its EUR 197.4m TLB cov-lite add-on at 99.5 paying Euribor+ 475bps with a 0% floor.

 

Proceeds back Assystem’s acquisition of SQS, a Germany-based systems and software testing company, along with a refinancing existing SQS indebtedness.

 

A lender meeting is scheduled for next Tuesday (27 February) at 10am UK time with commitments due on Friday (9 March).

 

Ardian bought a majority stake in the company last year, part-financing the purchase with a EUR 277m cov-lite TLB priced at E+ 475bps with a 0% floor and a EUR 80m RCF.

 
  • Borrower: Assystem Technology Services
  • Business: Engineering services
  • Sponsor: Ardian
  • UoP: Finance acquisition of SQS and refinance certain existing SQS debt
  • Facility: EUR 197.4m TLB add-on
  • Margin: E+ 475bps
  • Floor: 0%
  • OID: 99.5
  • Maturity: Sept 2024
  • Covenant: Cov-lite
  • Bookrunners: CACIB, HSBC, Natixis, SocGen
  • Lender Meeting: Tuesday 27 February
  • Commitments: Friday 9 March
 


Kraton Corp, a US-based NYSE-listed chemicals group, is guiding its EUR 285m TLB refinancing at 99.75-99.875 paying Euribor+ 225bps with a 0.75% floor.

 

Initial guidance on the USD 335m TLB completing the debt package is at 99.75 paying Libor+ 250bps-275bps with a 1% floor. Both facilities are cov-lite, have a 101 six-month soft call period and a seven year tenor.

 

A lender call is scheduled for Friday (23 February) at 3pm UKT/10am EST, with commitments due by 2 March. Allocation is expected on 5 March.

 

Kraton was last in the market in August 2017 when it refinanced existing indebtedness with a EUR 260m TLB priced at par paying E+ 250bps with a 0.75% floor, and a USD 520m TLB priced at 99.875 paying L+ 300bps with a 1% floor.

 
  • Borrower: Kraton Polymers LLC (USD), Kraton Polymers Holdings B.V. (EUR)
  • Company: Kraton Corporation
  • UoP: Refinance existing TLBs due 2022
  • Facilities: EUR 285m TLB, USD 335m TLB
  • Margin: E+ 225bps, L+ 250bps-275bps
  • Floor: 0.75%, 1%
  • OID: 99.75-99.875, 99.75
  • Tenor: Seven years
  • Call pro: 101 6M SC
  • Covenant: Cov-lite
  • Existing Ratings: CFR – B1/B; TLB – Ba3/BB- (RR:1)
  • Bookrunners: JPM, DB, CS (Admin Agent)
  • Lender Call: 23 February at 3pm UKT/10am EST
  • Commitments: 2 March at 5pm UKT & EST
  • Allocation: 5 March
 

Fluidra has set talk for a multi-currency loan package backing its merger with Zodiac.

 

Fluidra announced plans to merge with Zodiac Pool Solutions in November 2017. Following the transaction, the company will keep the Fluidra name and public listing on the Spanish stock exchange.

 

The financing is expected to include a USD 525m TLB and EUR 425m TLB due 2025.

 

PRICE TALK/TIMING:

 
  • USD 525m TLB due 2025 talked at Libor+ 275bps (0% floor) with a 99.5 OID
  • EUR 425m TLB due 2025 talked at Euribor+ 300bps (0% floor) with a 99.5 OID
  • Commitments due 6 March
 

TERMS:

 
  • Led by Credit Suisse, Citi
  • USD 525m TLB due 2025
  • EUR 425m TLB due 2025
  • Includes six-month 101 soft call provision
  • Proceeds fund the merger of Fluidra and Zodiac Pool Solutions
  • Sector: consumer
  • Business description: manufacturer of residential pool equipment and connected pool solutions
  • Ratings: Ba3/BB corporate, Ba3/BB facility
  • BME: FDR (EUR 1.3bn market cap)
  • Commitments due 6 March
 

El Corte Inglés, a Spanish department store group, launched a EUR 1.45bn five-year unsecured amortising term loan to syndication on Tuesday (20 February).

 

The cov-lite debt package includes a EUR 1bn RCF and comes with a 3.5x net senior opening leverage based on EUR 1.1bn pro forma adjusted EBITDA as of February 2018.

 

The facility will refinance debt.

 

Goldman Sachs, Banco Santander and BAML are joint global coordinators on the senior credit facility. BNP Paribas and Caixabank are junior global coordinators, whilst Banco de Sabadell, Crédite Agricole CIB, Credit Suisse, SocGen and Unicredit are mandated lead arrangers and bookrunners. BBVA, Bankia and Deutsche Bank are mandated lead arrangers.

 

A lender meeting is scheduled for Thursday 22 February in Madrid at 11.30 CET.

 

Commitments are due on Wednesday 14 March.

 
  • Borrower: El Corte Inglés, S.A.
  • Business: Privately owned diversified group headquartered in Spain with a primary focus on retail
  • UoP: Refinance of outstanding senior secured indebtedness and certain unsecured indebtedness
  • Facilities: RCF, TLA
  • Size: EUR 1bn, EUR 1.45bn
  • Maturity: 5 years, 5 years
  • Leverage: 3.5x net senior / net total leverage (23% LTV based on RE portfolio value of €16.9bn as of Feb-17)
  • Timing: Madrid bank meeting Thursday, February 22nd
  • GCs: GS, Banco Santander, BAML
  • JGCs: BNPP, Caixabank
  • MLAs: Banco de Sabadell, CACIB, CS, SocGen, Unicredit, BBVA, Bankia, DB
  • BRs: Banco de Sabadell, CACIB, CS, SocGen, Unicredit
 

Genesys Telecommunications Laboratories, a US customer software maker, is guiding a repricing of its euro and dollar TLBs at par paying Euribor/Libor+ 325bps with a 0% floor. That represents a 50bps reduction from the current euro margin of E+ 375bps, and a 75bps reduction of the dollar facility.

 

The floor on the dollar tranche is also guided 100bps down from its current margin level.

 

A lender call took place Tuesday (20 February) with commitments due on Friday (23 February).

 

Genesys was last in the market in August 2017 when it repriced its TLBs to E+ 375bps with a 0% floor and L+ 400bps with a 1% floor for the euro and dollar facility, respectively.

 
  • Borrower: Greeneden US Holdings
  • Business: Customer software maker
  • Sponsor: Permira, Hellman & Friedman, Technology Cross Ventures
  • UoP: Reprice existing facilities
  • Facilities: EUR 527.5m TLB (existing), USD 1.57bn TLB (existing)
  • Margins: E/L+ 325bps
  • Floor: 0%
  • OID: Par
  • Maturity: As existing
  • Lender Meeting: Tuesday 20 February
  • Commitments: Friday 23 February
 

Solera, a US-headquartered insurance software company, is aiming to cut between 75-100bps from the floor on its EUR 634m and USD 1.771bn TLBs. Both floors are guided at 0%, with the floor currently at 75bps and 100bps on the euro and dollar facility, respectively.

 

The margin on the USD 1.771bn TLB is guided at Libor+ 275bps, down from L+ 325bps currently, whilst the EUR 634m TLB is guided at Euribor+ 325bps with a stepdown to E+ 300bps at 6.75x total net leverage. The euro facility currently pays E+ 300bps.

 

Both facilities are guided at par with a 101 six-month soft call. The maturity on both facilities is unchanged.

 

A lender meeting took place on Tuesday (20 February) with commitments due by 12pm ET/5pm UKT on Friday (23 February).

 
  • Borrower: Solera LLC (Parent), Solera Finance (Co-Borrower)
  • Business: Insurance software maker
  • UoP: Reprice existing facilities
  • Facilities: USD 1.771bn TLB, EUR 634m TLB
  • Margin: L+ 275bps, E+ 325bps (stepdown to E+ 300bps at 6.75x total net leverage)
  • Floor: 0% (1% existing), 0% (0.75% existing)
  • OID: Par
  • Maturity: 3 March, 2023
  • Call pro: 6M 101 SC
  • Bookrunner: Nomura
  • Lender meeting: Tuesday 20 February
  • Commitments: Friday 23 February at 12pm ET/5pm UKT
 

Flora Food Group (Unilever Spreads), a plant-based nutrition business, is guiding its EUR 2bn cov-lite TLB at 99.5 paying Euribor+ 350bps with a 0% floor.

 

The EUR 600m-equivalent dollar, EUR 500m-equivalent Polish zloty and EUR 800m-equivalent sterling TLB facilities are all guided at 99.5 and pay Libor+ 325bps, Wibor+ 350bps and Libor+ 400bps, respectively. Each facility has a 0% floor and a six-month 101 soft call.

 

The deal comes with a B1/B+/B+ CFR and includes an EUR 700m 6.5 year RCF guided at E+ 300bps with a 0% floor. There is a springing leverage covenant on the RCF.

 

Credit Suisse (left lead), Deutsche Bank and KKR are physical bookrunners, with BNPP, CA-CIB, GS, HSBC, ING, Lloyds, Mizuho, RBC, SocGen, UniCredit as boorunners and Commerzbank, MBank, Mediobanca, Rabobank and Raiffeisen as MLAs.

 
  • BORROWERS | SIGMA BIDCO BV, SIGMA US CORP
  • BUSINESS | FLORA FOOD GROUP (CURRENTLY UNILEVER SPREADS), THE GLOBAL LEADER IN PLANT-BASED NUTRITION, WITH LEADING. GLOBAL MARKET SHARES IN THE BUTTER AND MARGARINE CATEGORY
  • TRANCHE | RCF | 1LTL | 1LTL | 1LTL | 1LTL
  • CCY | EUR | EUR | USD | PLN | GBP
  • AMOUNT | EUR 700M | EUR 2,000M | EUR 600M-equiv | EUR 500M-equiv | EUR 800M-equiv
  • MARGIN | E+ 300BPS, E+ 350bps, L+ 325bps, W+ 350bps, L+ 400bps
  • FLOOR | 0% on all
  • OID | 99.5 on TLBs, N/A on RCF
  • MATURITY | 6.5 YRS | 7 YRS | 7 YRS | 7 YRS | 7 YRS
  • EXP ISS RATING | B1 (Moody’s) / B+ (RR:4) (S&P) / BB- (RR:3) (Fitch)
  • EXP CFR | B1 (Moody’s) / B+ (S&P) / B+ (Fitch)
  • CALL PRO | NONE | 101 SC(6M) | 101 SC(6M) | 101 SC(6M) | 101 SC(6M)
  • UOP | FINANCE THE ACQUISITION OF FLORA FOOD GROUP, REFINANCE EXISTING INDEBTEDNESS, RELATED FEES AND EXPENSES
  • LDN BANK MTG | MONDAY, FEBRUARY 19TH | 13:30PM LONDON REGISTRATION / 14:00PM LONDON START
  • NY BANK MTG | WEDNESDAY, FEBRUARY 21ST | 09:30AM ET REGISTRATION / 10:00AM ET START
  • COMMITS DUE | TUESDAY, MARCH 6TH, 17:00 PM LONDON
  • PHYSICAL BOOKS | CREDIT SUISSE (LEFT), DB, KKR
  • BOOKRUNNERS | BNPP, CA CIB, GS, HSBC, ING, LLOYDS, MIZUHO, RBC, SG, UC
  • MLAs | COMMERZBANK, MBANK, MEDIOBANCA, RABOBANK, RAIFFEISEN
 


Allocated

 

Itiviti has allocated its USD 540m-equivalent euro term loan B at 97 paying Euribor+ 450bps with a 0% floor.

 

It had flexed margins on the TLB from initial price talk of 99.5 and E+ 400bps-425bps.

 

The debt package includes a USD 50m multi-currency revolver that allocated at par paying E+ 350bps, unchanged from initial guidance, and a pre-placed USD 140m second lien.

 
  • BORROWER | ITIVITI GROUP AB
  • BUSINESS | TRADING TECHNOLOGY AND INFRASTRUCTURE PROVIDER FOR FINANCIAL INSTITUTIONS
  • TRANCHE | RCF | 1L TERM LOAN
  • CURRENCY | MUTLI-CURRENCY | EUR
  • AMOUNT | $50M | €441m ($540M equiv.)
  • MATURITY | 6 years | 7 years
  • CORP. RATING | B3 (stable) / B (stable)
  • ISSUE RATING | B2 / B (RR:3) | B2 / B (RR:3)
  • MARGIN | E + 350bps | E + 450bps
  • FLOOR | 0.00% | 0.00%
  • ISSUE PRICE | Par | 97.00
  • CALL PROTECTION | NONE | 101 SOFT CALL FOR 12 MONTHS
  • UOP | FINANCE THE ACQUISITION OF ULLINK, REPAY ITIVITI'S OUTSTANDING INDEBTEDNESS AND COVER RELATED TRANSACTION FEES AND EXPENSES
  • BOOKRUNNERS | CREDIT SUISSE, UNICREDIT, UBS, DNB
  • AGENT | CREDIT SUISSE