REFILE-The European leveraged loan market reopens, at a price


(Corrects typos)

LONDON, May 7 (LPC) – The European leveraged loan market reopened last week for the first time since March. until doing it.

The European syndicated leveraged loan market has been closed since foreclosure measures were imposed in an attempt to contain the coronavirus.

Synlab initiated a modification and extension process to extend loan maturities by two years and convert part of the floating rate notes into loans, while Nielsen launched a term loan equivalent to $ 800 million to refinance the loans. tickets, which was raised to around $ 1 billion previously. close Thursday.

British auto auctioneer BCA Marketplace also recently raised an additional € 70 million facility from a handful of traditional loan investors.

“These agreements show that the European syndicated leveraged loan market is moving in the right direction and opening up for business,” said a union official.

Lenders and borrowers have been anticipating its opening for some time, as it has been slower to do so than its larger, more liquid US counterpart and the US and European high yield bond markets.

The reopening of the CLO market two weeks ago, coupled with the relaxation of containment measures in some European countries has helped revive the loan market and improve investor risk appetite, after an extended period. illiquidity and portfolio management.

Some € 846.5 million of CLOs were issued in Europe over the past week through Permira Debt Advisors, Apollo’s Redding Ridge Asset Management and KKR.

“The syndicated market at large was not there in recent weeks as every investor was busy managing their portfolio. I think this stage has passed, ”said one investor. “If borrowers want to issue add-ons or refinances now, there should be a demand for it.”

A second union leader said: “More CLO shows are underway and this will provide some support to the market.”


The latest loans are likely to entice any borrower facing maturity issues to come into the market despite having to pay a price premium.

“Some companies will take an approach to refinance now and lock in certainty,” the union’s second leader said.

“If the market improves by the time the soft call ends, they can change the price. If the market gets worse, then they’re great.

Nielsen, rated Ba3 / BB, launched a dual currency loan to refinance 4.50% unsecured notes due October 2020. Both tranches – a US $ 550 million B term loan and a TLB of 420 million euros – priced at 375bp against Libor / Euribor, at 98 OID.

The dollar tranche has been increased by US $ 500 million and the euro tranche has been increased by US $ 300 million equivalent. The price was lowered by 400bp on Libor / Euribor, while the OID was tightened from 97.

The dollar tranche has a floor of 1% and the euro tranche has a floor of 0%. Both have soft call 101 protection for 12 months.

Nielsen is paying a lot more than the last time he used the loan market in 2018. Then he got an additional US $ 75 million term loan paying 200 bps on Libor and a term loan of $ 171 million. €, paying 250 bp on Euribor.

BCA’s three-year 70 million euro facility led by Bank of America and KKR Capital Markets, valued at 550 bps against Euribor, at around 97 OID.

BCA raised a £ 997million B-term loan equivalent to two currencies in September to support its acquisition by private equity firm TDR Capital. The euro portion of this TLB stood at 325 bps above the Euribor at 99.75.

Synlab, rated B2 / B +, wishes to extend its TLB1 2022 up to € 450 million and has asked investors to transpose their commitments into a modified TLB3 2024.

He revised the price on Thursday to the lower end of the initial forecast of 400bp-425bp against Euribor and tightened the OID to 99 from 99-99.5 at launch, with a 0% floor. This margin is higher than the TLB1, which returns 300bp.

With a margin increase of at least 100bp and Synlab’s stable risk profile, most investors would choose the extension. “You don’t want to stay in the old tranche with limited cash,” the investor said.


Synlab is also asking some of the investors in a FRN of 940 million euros to swap against the modified TLB3.

Bond-for-loan swaps were common from 2010 to 2013 and allowed vintage CLOs that were past their investment period to make cashless rollovers.

“Let’s see if that’s part of the new playbook. We’re dusting off the old processes given the new environment,” said one banker.

Traditional bondholders have neither the mandate nor the ability to switch from a bond to a loan. However, Synlab’s FRN attracted a large chunk of CLO’s accounts when it was issued in 2016, as the largest FRN since the financial crisis, and CLOs are able to trade bonds for loans. .

“If you are in a CLO that has passed its reinvestment period or has been prevented from reinvesting due to downgrades, a simple refinancing would cause problems as it would return the proceeds to pay off the CLO’s liabilities,” said Steven Hunter, Director general and founder of high-performance analysis firm 9fin.

“But if you trade in a cashless roll in loaned land, that CLO investor could go right into the new deal and stay invested because the proceeds don’t come back to you.”

Non-CLO investors in the original floating rate note will likely participate in any new bond instead of committing to the new loan. As part of the transaction, Synlab is expected to raise up to € 400 million in senior covered high yield bonds, which could come in as early as next week, to partially repay any outstanding FRNs.

Morgan Stanley is the principal appointed manager and sole physical bookrunner of A&E, alongside bookkeepers Goldman Sachs and Deutsche Bank.

Goldman Sachs is the main dealer manager of the FRN stock exchange, with Deutsche Bank and Morgan Stanley as dealer managers. (Edited by Claire Rukin)


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