LONDON Jan 17 The abundance of liquidity in the
European leveraged loan market has restored its capacity to
finance bigger deals, prompting sponsors to consider pure
European financings to back potential M&A deals, including
French broadcasting masts operator TDF's domestic business.
Liquidity has been boosted by a lack of M&A last year, a
number of repayments and the emergence of new CLOs and credit
Private equity firm Dering Capital is in advanced talks to
buy TDF as the last remaining bidder in the sale process and is
approaching a number of banks to see what financing can be put
in place to back an acquisition.
The sale would require over 2 billion euros ($2.71 billion)
of debt and Dering is seeking to fund the potential buyout with
debt denominated solely in euros, structured as all-senior
leveraged loans or senior and subordinated debt.
The loan could be a similar size to last year's 2.3 billion
euro financing backing CVC's acquisition of a majority stake in
German energy metering firm Ista, which was the largest pure
European buyout loan since 2007, according to Thomson Reuters
"A lot of money has been raised in new CLOs, managed
accounts that have come to Europe and international funds that
have European baskets, which means that although it isn't pure
European money, it is denominated in euros. There is an awful
lot of liquidity to do pure European leveraged financings and
people wouldn't blink at raising 3 billion euros of loans for
one deal," a syndicate head said.
Bankers are also preparing leveraged loans of up to 700
million euros for the planned sale of a minority stake in
veterinary pharmaceutical firm Ceva Sante Animale.
Ceva's management held presentations with a large number of
banks last week to talk through potential debt packages. The
company wants an all-euro covenant-lite financing consisting of
senior loans and a preplaced subordinated loan.
With so much liquidity in the market, loan terms are getting
more aggressive and it is only a matter of time before the first
pure European covenant-lite loan launches.
Nevertheless, some banks remain cautious and will want to
make sure they have a safety net and are likely to push for flex
in documents to allow them to raise dollar financing if
"On a very large deal it is preferable to have flex language
to go to the dollar market because it is deeper and more liquid.
A lot of times, bankers will want that flexibility," the
syndicate head said.
An overwhelming amount of liquidity is also pushing pricing
tighter in Europe. On Friday, pricing emerged on a loan
financing backing Hellman & Friedman's acquisition of a 70
percent stake in Deutsche Telekom's classified advertising
A 645 million euro seven-year Term Loan B will pay
425bp-450bp and is offered with a 99.5 OID, while a 50 million
euro six-year revolver will pay 425bp. The financing also
comprises a 50 million euro eight-year second-lien tranche,
which was preplaced with Macquarie.
"Scout 24 could even flex down to 400bp. At the moment,
400bp to 425bp is the market," an investor said.
That represents a fall of 25bp-50bp from a year ago, when
the average Term Loan B margin was 450bp, Thomson Reuters LPC
($1 = 0.7376 euros)
(Editing by Christopher Mangham)