Greek glassmaker Yioula sounds out investors over new bond

Fri Jan 17, 2014 9:38am EST

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LONDON, Jan 17 (IFR) - Greek glassmaker Yioula met credit investors in London on Thursday to get feedback on a potential new senior secured bond deal, according to three sources with knowledge of the matter.

Citigroup arranged the pre-marketing exercise, which was attended by more than 70 investors, according to one of the sources. Yioula's website confirms that it has mandated Citigroup to arrange bond investor meetings and that a debt capital markets transaction may follow.

Yioula is looking to raise new debt primarily to refinance its existing EUR140m senior notes that mature in 2015, according to the investor presentation. These bonds were issued in 2005 out of holding company Yioula Glassworks and carry a 9% coupon.

Yioula is looking to issue new senior secured paper out of a newly created entity called Glasstank BV, however. Glasstank BV will create a new restricted group that ringfences off Yioula's Bulgarian and Romanian assets from its weaker Ukrainian business.

This new paper would carry a six-year maturity and three-year non-call period.

Yioula is primarily family owned, with more than 70% of its share capital held by the Voulgarakis family. Although Greek in origin, the company has expanded into Eastern Europe, with facilities in Bulgaria, Romania and Ukraine.

According to one investor, this expansion was mistimed and explains why Yioula now languishes at the very bottom of the ratings spectrum, with Moody's rating the company Caa3 and Standard and Poor's even lower, at CC.

"Part of the original play for investors was that demand was increasing massively in Eastern Europe and that major breweries were moving into the area," said the investor.

"Of course, what looks attractive to you looks attractive to your larger international competitors. The Ukraine business particularly has been a disaster for them."

Under the proposed structure for the new bond, however, Yioula's Ukraine business would not be included in the restricted group, but instead held by a parent entity called YALOS Holdings.

Yioula's Bulgarian and Romanian businesses accounted for nearly 80% of the group's EUR53m Ebitda in 2012, according to the presentation.

The new transaction would leave Yioula with a net debt to Ebitda ratio of 5.8x.

FAILED HAIRCUT

Yioula's potential new bond issue comes off the back of a failed attempt to persuade bondholders to accept a haircut on the senior notes, according to two investors.

"Yioula's bonds were trading around 60, so the company talked about doing an exchange transaction whereby investors would take some haircut but realise a capital gain versus where the bonds were marked," said one of the investors.

Under this scenario, even a 25% haircut to 75, for example, would allow investors to realise a significant capital gain if the bonds were bid at 60.

"The problem is that when the rumour of this exchange leaked out, the bonds were steadily bid up to a point where a haircut did not look attractive," said the investor.

In April 2013, the cash bid on Yioula's bonds reached a low of 57.50, according to data provided by one of the investors. The price languished in the 60s until October, when it hit 70.

Since November, however, Yioula's bonds have been on a tear, trading rapidly closer to par as the potential for a refinancing has increased. One of the investors added that one broker is showing Yioula paper at a bid/offer of 95.75-97.75 today.

Yioula's existing bondholders have seen a rapid turnaround in fortune, therefore, from potential haircuts to being able to sell the bonds close to par.

Both investors were cautious about investing in new Yioula paper, however, and said that a new deal would be difficult. While last year saw a brace of Greek high-yield corporates accessing the market, one of the investors pointed out that fellow Greek glassmaker Frigoglass posted bad results at the end of last year and saw its bond prices drop accordingly. (Reporting by Robert Smith; Editing by Philip Wright)

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