* Picard eyeing large dividend recapitalisation
* High-yield market getting more aggressive
By Robert Smith
LONDON, Feb 5 (IFR) - Picard's private equity owners are looking to strip EUR602m of cash out of the business through new bonds, the largest dividend recapitalisation deal the European high-yield market has seen since Phones 4U went bust in September.
Dividend recapitalisations, where a company raises new debt to pay a distribution to shareholders, have been an emotive topic in high-yield since the collapse of the UK mobile phone retailer last year.
Phones 4U raised a £205m PIK toggle to pay a multi-million pound dividend to private equity firm BC Partners in September 2013, but went into administration almost a year to the day afterwards.
French frozen food retailer Picard is now looking to raise EUR770m of new senior secured and unsecured notes, which will primarily fund a EUR602m distribution to its shareholders.
Rating agencies Moody's and Fitch moved swiftly, the former putting the issuer on review for downgrade and the latter placing it on rating watch negative.
Lion Capital owns 99% of the company, having bought the business from BC Partners in 2010. The private equity firm put in EUR654m of equity, according to an earlier bond prospectus, so is now looking to cash out the majority of its original investment.
But despite all this, a banker on the deal said he expected the issue to receive a warm reception in the market, pointing out that it had been extensively pre-marketed before launch.
"It's certainly an aggressively structured deal, but it's for a very well liked credit with strong support in the market, he said.
"It's a big dividend because they've deleveraged the business a lot, and I think investors are very comfortable with the company's history of sustaining these levels of debt."
The deal will take net debt to Ebitda from around 2.4x up to 6.1x, a shade higher than the 5.7x multiple when Lion Capital acquired the business.
One investor said the re-emergence of deals like Picard's reflects the wall of cash that has rushed back into high-yield funds after the ECB announced its quantitative easing programme last month.
"It really didn't take long for all the taboo features to return," he said.
"The technicals are just so strong at the moment, it feels like we're reverting back to the first half of last year when everyone had money and just had to buy the market."
He added that the deal also has other aggressive features, such as very short non-call periods and a portability clause.
"The way the deal is structured shows they are clearly planning an IPO or some sort of exit," he said.
Because high yield bonds are more prohibitive to refinance during their non-call periods, sponsors often avoid putting longer non-call periods in place if they are looking to exit a business. Portability clauses, meanwhile, are attractive to private equity firms as they allow bonds to remain in place if a business is sold.
"The structure definitely reflects the fact they're eyeing a near term exit," said the banker.
"By returning money with this deal they'll have a bit more flexibility over the terms of that exit." (Reporting by Robert Smith.; Editing by Alex Chambers, Julian Baker.)