LONDON Feb 7 Israeli furniture maker Keter
Group has increased the size of an add-on loan to 320m, having
navigated one of the more tricky syndication processes in
Europe's leveraged loan market to close oversubscribed, banking
sources said on Tuesday.
Keter set out to raise a 300m incremental term loan to
finance its acquisition of Italian peer ABM Italia. The extra
20m raised will now be used for a number of other potential
add-on acquisitions, the sources said.
The incremental term loan is due to allocate on Europe's
secondary loan market with a 97 OID on Tuesday afternoon. It
pays 425bp over Euribor, with a 1% floor.
The lower OID reflects the secondary trading level of the
company's existing debt. Its 690m term loan, raised as part of
a wider 790m financing in October 2016 to back its buyout by
private equity firm BC Partners and pension fund manager PSP
Investments, was bid at 97.3 percent of face value on Tuesday
morning, according to Thomson Reuters LPC data.
It is one of the more generous paying leveraged loans in
Europe, attracting investors desperate for yield in a very
technical market where most deals allocate at par, as demand far
"Keter is seen as one of the trickier loans as it has a few
short term issues and you have to buy into its longer term
story. If you can do that, it is a great deal to invest in, in
this market," a loan investor said.
UBS and BNP Paribas are physical bookrunners, along with RBC
and JP Morgan as bookrunners.
Its secondary trading level compressed following issues
during the 2016 syndication process.
Many investors inflated their orders for the loan, which
priced tighter due to an oversubscribed book. Despite scalebacks
during the allocation process, investors were still awarded more
paper than they bargained for and were unable to sell out of the
tightly priced deal on secondary. The loss of liquidity in the
loan pushed the price down.
Lenders to European leveraged loans have seen their
allocations scaled back to such an extent that they have been
forced to inflate orders in a bid to attempt to secure decent
ticket sizes. The process is risky though.
"People oversize orders to try and manage allocations and
every now and then they will get it wrong. On Keter they got it
wrong big time and ended up with higher participation than they
wanted. If you oversize your commitment you are taking a risk
and the cost of that is in the secondary price," a leveraged
loan banker said.
Keter produces a wide range of consumer goods including
indoor and outdoor furniture, home accessories and hardware
(Editing by Christopher Mangham)