LONDON, Feb 16 (Reuters) - Banks are preparing to syndicate a €1.1bn leveraged loan and high-yield bond financing backing a buyout of European medical laboratory services operator Cerba, banking sources said on Thursday.
Partners Group and PSP Investments agreed to acquire European medical laboratory services operator Cerba from PAI Partners, the companies announced in January, following an auction process.
JP Morgan, Natixis, Credit Suisse, Deutsche Bank and BNP Paribas are leading the debt financing, which has been much anticipated by Europe’s cash-rich investor base, eager to put new money to work.
The financing is due to launch for syndication in the next couple of weeks, the sources said.
The financing is expected to comprise around €550m of senior leveraged loans; around €250m of senior secured bonds and some €180m of subordinated bonds. There is also around €175m of revolving credit, some of which is likely to be sold to other banks.
Some €1.1bn of debt financing equates to around 6.0-6.5 times Cerba’s approximate €170m Ebitda, the sources said.
Europe’s leveraged loan market is on fire, with enough cash to fund a number of jumbo buyouts. Tapping both loans and bonds could create competitive tension between the two markets, enabling the borrower to achieve tighter pricing.
If there is strong enough demand for Cerba’s loans, the bond portion of the debt financing could be dropped altogether and replaced with an all- loan financing.
Germany-based building materials maker Xella raised a €1.45bn covenant-lite term loan B earlier this month, which was increased twice during syndication from an initial target of €1.15bn, after ditching plans to raise a high yield bond.
“It is suspected that Cerba will lose the bonds if they can raise enough loans, like Xella. Loans are generally more flexible as you can prepay them and reprice them,” one of the sources said.
A second source added: “Why have public exposure and more onerous regulation, call protection and less flexibility. There is no reason to do a bond other than it used to be a bond issuer and has a following, so you can build on that to create competitive tension and achieve lower pricing on a loan.”
Partners Group declined to comment. Cerba and PSP Investments were not immediately available to comment.
Cerba employs almost 4,300 people, including 350 biologists and generated revenues of approximately €630m in 2016. (Editing by Christopher Mangham)