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LONDON, Dec 20 (Reuters) - 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 the financing.
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 Rom Food.
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)