February 10, 2020 / 10:53 AM / 12 days ago

Evonik unit debt saga concludes, but at a price

LONDON, Feb 10 (LPC) - An excess €650m of loans backing Advent International’s buyout of German chemicals group Evonik’s methacrylates plastics unit have finally been sold, bringing an end to a long-running saga that saw arranging banks take a hit of about €50m–€60m between them.

The financing comprised a €977m Term Loan B and a US$612m TLB. Just under a third of the euro and more than half of the dollar tranches were sold in a second syndication process, with the former clearing at a 89.5 OID and the latter at a 86.5 OID.

The loans were relaunched in January to pay 500bp over Euribor/Libor with a 0% floor, at a 95 OID, in line with where they closed after the first syndication process in June 2019.

However, banks revised pricing lower to a final clearing level on February 5, in order to get the loans off their books, with the euro loan guided at a 87–88 OID and the dollar loan at a 85–86 OID.

Following strong demand, and solid oversubscription at those clearing levels, final pricing ended at the higher levels on February 6.

FEEL THE PAIN

The loss was not evenly distributed between the nine banks, as Barclays, Deutsche Bank and Goldman Sachs had more active roles than Bank of America, Bank of China, Helaba, HSBC, RBC and NatWest Markets.

“It is painful but its best that it all cleared. Now they’ve all sold, the loans will probably trade up. But had the banks held on to some of the paper they probably wouldn’t have, which is frustrating but made it easier to take a hit as a loss was inevitable,” a syndicate head said.

The borrower soaked up some of the costs of the issue discount on the loan in the first syndication process by increasing it by €21m prior to closing in June. However, anything after that saw the banks bear the brunt of the costs. Banks on average took a hit of about €7.5m–€8m per point below 95.

“Sometimes you get it wrong,” a second syndicate head said.

The loan emphasises the “fly or bye” mantra from investors where the strong deals sell quickly and the more difficult deals get stuck.

Evonik agreed to sell the unit, called Rohm and formerly known as Madrid, to Advent for €3bn in March 2019, backed with a €1.785bn-equivalent loan.

COORDINATED SELL-DOWN

A most-favoured nation clause on the loan expired in December when arranging banks entered a coordinated sell-down process.

The MFN protected investors by discouraging arranging banks from dumping the paper at low levels in the secondary market. While there were frustrations among some banks eager to do their own sell-downs after the MFN expired, all toed the party line and agreed to a synchronised approach.

“They got it done and moved on, which is sensible for all those involved,” a senior investor said. (Editing by Christopher Mangham)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below