March 29, 2017 / 2:30 PM / in 7 months

LPC-Springer allocates €1.77bn loan repricing, drops extension

LONDON, March 29 (Reuters) - German publisher Springer Nature has closed a repricing at the tight end of price talk and increased the size of a euro tranche by €125m to repay a portion of its dollar term loan, at the same time dropping an extension request, banking sources said on Wednesday.

Springer’s covenant-lite euro TLB now totals €1.772bn and pays a margin of 325bp over Euribor, with a 0.5% floor at par. The term loan previously paid 350bp over Euribor with a 1% floor.

A US$1.4bn TLB has been reduced by €125m-equivalent. Pricing on that term loan remains the same at 350bp over Libor, with a 1% floor.

Nomura led the deal, which offered lenders 101 soft call for six months.

Springer kept maturities of its euro and dollar term loans and a €250m revolving credit facility at 2020. It initially sought to push maturities out to 2022 offering an OID ranging between 99.875-par.

By extending the term loan, it is expected that Springer would have lost the support of a number of CLOs as the extended loan would have matured beyond the legal maturity of the investment vehicles, the sources said.

Dropping the extension made it easier to push through the lower pricing request, as the borrower could secure support from a larger portion of its investment base, the sources said.

“There was an excuse they didn’t want to pay fees to extend the dollars where the market is more difficult but really, it was easier to get the price execution they wanted on a shorter maturity, because they could get support from all funds that wouldn’t be there if it was longer dated,” a leveraged loan investor said. “Short maturity on 325bp with a 0.5% floor feels okay for this credit, any tighter and it would have traded lower on secondary.”

Banks are increasingly conscious not to push for the most aggressive terms on deals in order to preserve healthy secondary trading performance.

Springer’s euro TLB was bid at par on Wednesday afternoon, maintaining its value unlike other recently allocated deals such as European medical laboratory services operator Cerba Healthcare and Swiss medical diagnostics company Unilabs term loans, which both dropped on Europe’s secondary loan market after allocating at tight terms on March 22.

PUSHBACK

Investors have started to show signs of pushback against an overdose of aggressive terms on deals, in a bid to avoid taking a hit on secondary.

The practice of over-inflating orders is in decline after a number of investors got hit with much bigger allocations than expected on recent deals like Cerba and Unilabs, contributing to the deals softening secondary prices.

Cerba and Unilabs were quoted at 99.6% of face value on March 29, according to Thomson Reuters LPC data.

Without inflated order books, banks are conscious they need as much support for a deal from as wide a group of investors as possible, to secure the terms they want and maintain good secondary performance.

“Big padded orders and quick flips to dealers to make easy money, well that trade has gone off the table, which is good,” the investor said.

Springer, which has 5.1 times leverage through the senior and 5.4 times total leverage, has a corporate family rating of B2/B and a recovery rating of 3.

Springer Nature was formed from the merger of BC Partners-owned Springer Science + Business Media and the majority of Holtzbrinck Publishing Group-owned Macmillan Science and Education in May 2015. (Editing by Christopher Mangham)

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