LONDON Dec 20 Europe's leveraged loan market is
gearing up for a busy January with around 7.5bn-equivalent of
underwritten paper set to be syndicated.
The pipeline has been building with a number of auction
processes concluding at the end of November and December,
leading banks to hold off syndication until next year.
The loans will be welcomed by a growing number of buyers in
Europe's leveraged loan market, including new and existing CLOs,
managed accounts and banks, many of which have an increasing
appetite for higher yielding, covenant-lite term loan B paper.
One of the most anticipated deals for January is
US$1.907bn-equivalent of loans backing US-based website domain
name provider GoDaddy's acquisition of peer Host Europe Group.
The fully committed debt financing includes a
US$1.377bn-equivalent incremental term loan, split into a
dollar-denominated tranche and a euro-denominated tranche.
Other large deals include 1.5bn of leveraged loans to back
buyout group Lone Star's acquisition of Germany-based building
materials maker Xella and 1bn to back UK software company Micro
Focus International's acquisition of Hewlett Packard
Enterprises' software business, which forms part of a wider
US$5bn loan financing.
In another cross-border deal, banks will syndicate around
200m for Blackstone's Acetow buy, the cigarette filter business
spun out of Belgian chemicals group Solvay. That deal is also
likely to have around US$600m of loans. Credit Suisse, Goldman
Sachs and Deutsche Bank are among the line-up of banks providing
Credit Suisse, UBS and Rabobank are lining up a leveraged
loan financing to back CVC Capital Partners' buyout of Belgian
aluminium systems manufacturer Corialis, while Onex's buyout of
British holiday park operator Parkdean Resorts will be backed
with a £750m leveraged loan.
Smaller deals include around £150m of loans for EQT's buyout
of UK veterinary care business Independent Vetcare; 260m for
Ardian's buyout of French medical packaging manufacturer Unither
Pharmaceuticals; 300m for Israeli furniture maker Keter Group's
acquisition of Italian plastic furniture manufacturer ABM
Italia; and a 286m-equivalent loan financing to back Mid Europa
Partners' buyout of Romania's largest supermarket chain Profi
A £285m term loan for UK private hospital operator BMI
Healthcare also has to relaunch. It was postponed in November
until negotiations with its external landlord are completed.
While some bankers are not delighted at holding paper on the
balance sheet during the Christmas period, others feel confident
it will sell quickly once launched.
"Holding loans is generally something to be avoided but
people are pragmatic about it and it is arguably better than
launching a process now as the window is shut. Syndicate desks
don't have a problem from a market risk perspective, but banks
as a whole prefer not to hold significant positions over the
year-end. It is more of an issue for banks with December
year-end," a syndicate head said.
The flow of deals will go some way to alleviate the
technical conditions and downward pricing pressure that have
plagued Europe's leveraged loan market in 2016, but is unlikely
to reverse it entirely.
"It is good that deals are lined up to launch, but the
expectation is that it will not be enough to mop up surplus
capacity. It should take some pressure off price tightening, but
not enough to reverse it and see pricing rise again," the
syndicate head said.
(Editing by Christopher Mangham)