October 3, 2017 / 4:46 PM / 10 months ago

LPC-Corialis launches latest attempt to cut loan pricing

LONDON, Oct 3 (Reuters) - Belgian aluminium systems manufacturer Corialis is the latest borrower in Europe’s leveraged loan market to try to cut its its borrowing costs with a €630m-equivalent loan repricing, which was launched on Tuesday, banking sources said.

UBS and Rabobank are leading the repricing, which follows the recent expiration of a six month soft-call period, the sources said.

Corialis’ opportunistic repricing is the second deal to launch this week and follows a similar request by Swiss sales tax refund firm Global Blue, which launched a €630m repricing on October 2.

Both deals follow Swiss packaging firm SIG Combibloc, which launched a repricing of its €1.04bn term loan B last week.

Repricings have flooded Europe’s leveraged loan market since September 2016 and dominated activity in the first half of 2017 as supply far outweighed investor demand.

The surge of repricings helped to push EMEA leveraged loan volume to the highest level for the first nine months since the financial crisis, according to Thomson Reuters LPC data.

“The repricings in the fourth quarter of 2016 and the first quarter of this year were a no-brainer frankly. They repriced deals that were done a year previously when oil was at $26 a barrel, China was a big worry and deals were pricing very wide,” a senior portfolio manager said.

That repricing surge pushed margins as low as 300bp on several deals, despite the fact that many Collateralised Loan Obligation (CLO) funds struggle to to function economically if pricing falls much below 400bp.

The emergence of event-driven loans just before the summer diverted investors’ attention to new money deals and curbed borrowers’ ability to reprice.

With a range of large new money buyouts successfully placed, including deals for German generic drugmaker Stada and life sciences company Avantor, some credits are attempting to reprice again.

A banker said it was inevitable that some credits were returning to the market in the fourth quarter to cut pricing further now that the bigger deals are out of the way.

“It’s only natural when the market is a little quieter towards the end of the year and a lot of M&A is out of the way,” the banker said.

However, it is expected that only stronger credits will be able to come to the market with an opportunistic repricing.

“Just because a loan is quoted at 101 it doesn’t mean an issuer should try to reprice. It’s not as easy now to push pricing, the CLOs are pushing back more,” a second banker said.

Corialis’ repricing comprises a €355m, seven-year term loan; a £130m, seven-year term loan; and a €125m, six year revolving credit facility.

A lender call is set to take place on October 5 when margin guidance will emerge. A 0% floor will remain unchanged, while 101 soft-call will be reset for six months.

Lenders have been asked to commit to the repricing by October 11.

In February, Corialis priced the euro term loan at 375bp over Euribor and the sterling term loan at 475bp over Libor. Both were offered with a 0% floor.

Those loans backed its €1bn buyout by CVC from Advent International. (Editing by Claire Ruckin and Tessa Walsh)

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