| LONDON, March 26
LONDON, March 26 An 818 million euro loan
backing the buyout of French veterinary pharmaceutical firm Ceva
Sante Animale will be Europe's first 'pure' covenant-lite loan
as investors accept riskier structures that offer fewer
safeguards, sources said on Wednesday.
Ceva's 818 million euro loan, which backs the sale of a
minority stake in the company, is the first euro-denominated
covenant lite loan to be raised for a European company.
The deal was initially launched in euros and dollars, but
was heavily oversubscribed in euros, which allowed the arranging
banks to remove the dollar tranche.
Ceva declined to comment.
Covenant-lite loans, which lack traditional maintenance
covenants that protect investors, are common in the US but have
been controversial in Europe.
Covenant-lite loans were introduced to Europe on dollar and
euro-denominated cross-border deals, initially for US companies
and subsequently for European companies.
The Transatlantic connection has allowed arranging banks to
push US terms into the European market. European investors
initially protested against covenant-lite loans but have become
more willing to invest in these riskier deals due to a lack of
alternative deals to invest in.
"The dollar portion of Ceva's deal made it easier for
European investors to accept US terms on a European deal, namely
a lack of covenants. The bait worked as European investors have
signed up to it, making it the first pure European covenant-lite
deal," a banker said.
Ceva's deal was seen as aggressive. In addition to being
covenant lite, it did not have a 'double luxco' structure which
means that investors cannot enforce security without going
through French courts if the company defaults.
Ceva's loan was launched as a dual-currency 668 million
euro-equivalent term loan B with pricing of 350 bps (basis
points) over Euribor on the euro tranche and 325 bps over Libor
on the dollar tranche.
Both were tranches were offered with a 1 percent Libor
floor, which guarantees returns to investors, and a 99.5
Original Issue Discount.
Credit Agricole, Goldman Sachs, Natixis and Nomura are joint
bookrunners and BNP Paribas and ING are mandated lead arrangers
on the deal which is due to be allocated to investors and start
trading in Europe's secondary loan market this week.
Ceva was originally part of Sanofi-Aventis, which sold it in
1999 to PAI Partners, which in turn sold it in 2003 to Sweden's
In 2007 management and employees acquired a majority stake,
and Euromezzanine and Natixis took a minority stake, backed with
433 million euros of loans. Sagard joined as a minority
shareholder in 2010.
(Editing by Tessa Walsh)