| LONDON, March 14
LONDON, March 14 Pricing has fallen across the
board in Europe's leveraged loan market, eroded by a lack of
supply and high demand, as well as competition from high-yield
bonds and the US loan market.
The slump in interest margins has occurred on new buyout
deals such as French veterinary pharmaceutical firm Ceva Sante
Animale and UK credit reference business Callcredit, and on
existing credits that are now repricing, often mere months after
last tapping the market.
"There is new pricing in Europe. There is not enough supply,
which is setting a precedent for future deals," an investor
Many European buyout loans were being offered at 450bp six
months ago and last month pricing for new buyouts was reduced to
425bp for deals such as classified advertising business Scout24
and catering equipment firm Hofmann Menu.
Since February pricing has fallen further, with Ceva Sante
in the market with a dual-currency 668 million euro-equivalent
($930.36 million) Term Loan B that will pay 350bp on the euro
portion and 325bp on the US dollar tranche. Both are offered
with a 1 percent floor.
"Ceva's pricing is hard on the European market and it is
structured like a US deal with no covenants. Many investors
would prefer 425bp with no floor than 350bp with a floor," a
leveraged finance banker said.
Prices have also dropped on sterling deals. A 177.5 million
pound ($296.01 million) Term Loan B backing Callcredit's buyout
will pay 475bp, down from 500bp paid on Term Loan Bs backing the
buyout of Burton's Biscuits in December and UK-headquartered
packaging company Chesapeake in September.
Interest margins on repricings are even more aggressive as
investors succumb to harsh cuts rather than be taken out of a
deal and repaid if they refuse the request.
As a result, borrowers are making a rapid return to the
market to lower interest margins, even if there has not been any
great improvement in company performance.
French smartcard maker Oberthur Technologies allocated a 461
million euro-equivalent repricing this week, cutting pricing on
a $280 million loan from 475bp to 350bp and on a 260 million
euro loan to 375bp, down from 500bp on the previous deal. Both
were offered with a 1 percent floor.
Oberthur conducted a refinancing of its 2011 buyout loan in
October on more favourable terms but decided to conduct another
repricing after the market tightened further.
French funeral firm OGF also launched a repricing of loans
that backed its buyout by Pamplona Capital Management less than
six months after they were put in place.
"OGF is less than six months old and it is repricing
already, that is crazy. The company's performance has not
changed and there has been no great improvement," a second
leveraged finance banker said. "M&A hasn't come through so
borrowers are thinking, why not reprice? Borrowers can get
better terms as the market has tightened a lot since they did
Goldman Sachs and JP Morgan are leading the repricing and
are seeking to shave between 50bp and 75bp off a 575 million
euro TLB to pay between 375bp-400bp from a current level of
450bp. They are also looking to remove a covenant.
($1 = 0.7180 Euros)
($1 = 0.5997 British Pounds)
(Editing by Christopher Mangham)