Four Seasons subordinated LBO bond sold - sources
LONDON, June 13 (IFR) - Barclays and Goldmans Sachs have sold a GBP175m subordinated high-yield bond for the buyout of UK healthcare group Four Seasons, which should ease the sale of the remaining financing, a GBP350m secured bond, banking sources said on Wednesday.
The June 2020 unsecured bond, expected to be rated Caa1/B-/BB, has been sold to one investor, one of the sources said. The name of the investor, and the terms of the pricing of the deal were not disclosed.
Barclays and Goldman Sachs underwrote the GBP525m debt package financing the GBP825m leveraged buyout of Four Seasons by Terra Firma last month, just before a series of high-yield bonds struggled to get done.
Price talk on the GBP350m Four Seasons senior secured bond, expected to be rated B2/B+/BB rated, is likely to emerge later on Wednesday or Thursday, sources said. The senior secured bond will be issued out of vehicle Elli Investments.
The announcement of the bond roadshow on Monday followed a knee-jerk rally in financial markets following news of the EUR100bn Spanish bank sector bailout.
It has been a volatile market backdrop, with the sharp tightening in the Markit iTraxx index on Monday, which dipped back towards 670bp, suffering a reversal. At 0905GMT on Wednesday the index was back at around 711bp, although it was 4bp tighter on the day as credit spreads tracked higher equity markets.
A successful deal for Four Seasons would not only clear the debt off underwriters' balance sheets, but should also help to boost confidence in the high yield market, which like other asset classes has been hit by the volatile eurozone macro backdrop.
"Those deals that struggled were very different deals to Four Seasons. They were higher risk names with exposure to peripheral economies. This is a sterling deal, in a sector that is already known to investors, with strong assets," said one high-yield syndicate official.
Leverage on Four Seasons, estimated at around 5.25 times earnings before interest, tax, depreciation and amortisation, is lower than that on comparable bond issuers such as the Priory.
The leveraged buyout of the Priory by Advent International was financed with GBP600m of bonds, issued out of holding company Crown Newco 3, in January 2011. Leverage on that deal was closer to 6.3 times EBITDA on an adjusted basis.
The Priory's BB/B2 rated 7% February 2018 bond is bid at a cash price of 94.91 and is yielding 8.1%, while the 8.875% GBP175m subordinated tranche, rated B/Caa1, is bid at a cash price of 85 and is yielding 12.1%, according to Tradeweb.
The leads aim to print the Elli Investments bond, which has a June 2019 maturity, by the end of the week. Lloyds is also a co-manager on the deal.
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