LONDON Feb 11 European leveraged loan bankers
are putting together debt packages with more aggressive terms to
back a number of potential sales as they compete to underwrite
new buyout loans.
Leverage multiples for the potential sales of French natural
ingredients producer Diana Ingredients and French veterinary
health company Ceva Santé Animale could fetch as high as 7 times
while some bankers are proposing around 6.5-7.0 times on
Europe's second-largest card payment services company Nets
Holdings and 6.0-6.5 times for Spanish food group Deoleo.
"The companies coming to market are very good which is why
you can put high leverage on them. Historically it has been
better to overleverage good companies versus underleveraging
poor companies. This is leverage finance, not slightly leveraged
finance," a syndicate head said.
The companies are expected to attract a lot of attention
from private equity and trade buyers, eager to do deals
following a dearth of acquisitions business in 2013.
Ardian, formerly Axa Private Equity, bought Diana in 2007
backed with 517.9 million euros ($708.31 million) of leveraged
loans. Last year JP Morgan and Lazard were hired to manage a
sale of the company for about 1.2 billion euros. First round
bids in an auction process are expected to be submitted at the
end of February.
Bankers were given information at the end of January to
enable them to put together packages to pitch for the business
and debt is likely to total about 700 million euros in senior
leveraged loans and subordinated debt, denominated in euros and
JP Morgan is also running a sale process for Deoleo, a food
group which includes a number of olive oil brands including
Bertolli and Carbonell. It is quoted on the Spanish stock market
and shareholders include Spanish banks.
First round bids are likely to be submitted in the coming
weeks and bankers are considering debt packages of around 560
million euros denominated in euros and dollars.
A sale of a minority stake in Ceva Sante is set to attract
bids from several buyout groups and BC Partners, Charterhouse,
Cinven, CVC, Hellman & Friedman and KKR have shown interest and
may submit offers by a late February deadline.
Ceva, the ninth-largest animal health group globally with
sales of more than 600 million euros, may be valued in total at
about 1.4-1.5 billion euros or 12-13 times its Ebitda of 116
Bankers are preparing debt financing of around 7.0 times and
the deal is expected to be the first pure European covenant-lite
But despite the aggressive terms being placed on deals,
bankers and investors are certain it is not a return to 2006-07.
"The leverage multiples are high and terms are getting
aggressive but the EV of the businesses is also at the high end
so you can get the leverage up. This is not 2007, it is much
more of a case of strong cash flow businesses supporting high
levels of leverage with big equity cheques behind them," a
leveraged finance banker said.
Investors have been sounded out on a number of the deals and
a pre-syndication process is not uncommon at the moment in
Europe's highly technical leveraged finance market.
"We are being sounded out on the deals before a buyer has
even emerged or placed a bid, but we want to do deals, so if the
company is good, we are likely to accept aggressive terms be it
leverage, pricing or covenants," one investor said.
A 3.735 billion euro-equivalent dual currency loan backing
Liberty Global's acquisition of Dutch cable company Ziggo was
oversubscribed, despite some investors finding pricing too
aggressive and a ticking fee insufficient.
Terms are also getting aggressive on deals currently being
syndicated in Europe's leveraged loan market.
Dutch information provider Bureau Van Dijk Electronic Publishing
reverse flexed pricing on its dividend recapitalisation.
It's new 525 million euro TLD priced at 425bp on the dollar
and euro tranches and 450bp on the sterling portion, 50bp lower
than BvD was paying on the existing tranches.
The new deal increased BvD's total leverage to around 6.7
times from 4.7 times.
BvD's new 145 million euro second-lien facility, which pays
700 bps, is set to pave the way for more second liens in Europe
as investors search for yield.
"We want to see more second liens in Europe as they are the
only way to get yield when pricing is tightening to unattractive
levels on senior debt," the investor said.
($1 = 0.7312 euros)
(Editing by Christopher Mangham)