| LONDON, March 4
LONDON, March 4 Spanish blood products group
Grifols' debt refinancing package includes a $3.8
billion Term Loan B that has the same pricing structure on both
the euro-denominated and the dollar-denominated tranches,
eliminating the pricing premium on euro facilities that have
been a feature of all recent cross-border leveraged loans for
A $3.25 billion tranche and a $550 million-equivalent
tranche denominated in euros are both guided to pay 300 bps-325
bps over LIBOR/EURIBOR. They are both offered with 101 soft-call
for 12 months and a 99.5 OID.
The deal is covenant loose as there is one net leveraged
covenant of 5 times.
European investors committing euros to cross-border deals
have traditionally been offered a premium of between 25 bps-50
bps over the pricing on the dollar tranche. French smartcard
maker Oberthur Technologies is in the market with a refinancing
and has outlined pricing guidance of 375 bps on its 260 million
euro ($358.11 million) loan compared to 350 bps on the $280
The erosion of a pricing premium on euro portions of
cross-border deals has been anticipated by Europe's leveraged
loan market amid deeply technical conditions as borrowers become
increasingly aggressive on structuring deals.
"Presumably Grifols' view is that if euro investors don't
like it, they will just do more dollars instead. There are so
few deals in the market, borrowers have got more aggressive and
are taking an indifferent approach to euros and dollars. They
are happy to take euros but are not going to pay up for it. It
is surprising if more borrowers don't do the same," a loan
European borrowers traditionally pay higher pricing for
euros on leveraged loans compared to their US peers because risk
in Europe is more difficult to price as there is less
transparency than the US. There are also jurisdictional issues
in Europe and it is less liquid compared to the far larger US
market, which makes it harder to sell in Europe's secondary loan
"Europe's loan market is more risky than the US loan market
which is why there has been a pricing premium for euro tranches
on cross-border deals. A pure euro deal will pay a far more than
a pure US deal," a second investor said.
MORE TO COME?
It is expected that Grifols' loan will be the first of many
deals to do away with a pricing premium and investors are
anticipating that French veterinary pharmaceuticals firm Ceva
Sante Animale's cross-border buyout loan could be next. Pricing
on that financing is expected to come at around 325 bps-350 bps
over Libor with a 1 percent floor, banking sources said.
Loan investors are disappointed at the thought of losing the
pricing premium on euro facilities and say that the move is
solely down to the lack of supply in the leveraged loan market.
"No differential between pricing on the dollar and euro
tranches is something we don't like and we don't want to see it
coming through on other deals. Market technicals are pushing
structures and pricing as much a possible. It is frustrating,"
the second investor said.
Grifols' new refinancing also includes a $300 million
revolver and a $700 million Term Loan A, as well as $1 billion
of eight- year, non-call 3 senior notes. Together, the loans and
bonds will be used to replace a $1.5 billion bridge loan from
January that was used to back Grifols' acquisition of the blood
diagnosis business unit of Novartis, as well as Grifols'
existing debt of around 2.4 billion euros.
Morgan Stanley, Nomura, BBVA, Deutsche Bank and HSBC are
joint lead arrangers and bookrunners on Grifols' refinancing and
commitments are due by March 6.
($1 = 0.7260 euros)
(Editing by Christopher Mangham)