March 26, 2014 / 4:50 PM / in 4 years

RLPC-Ceva Sante raises first pure European cov-lite loan

LONDON, March 26 (Reuters) - 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 Industri Kapital.

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)

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