April 1, 2019 / 4:13 PM / 24 days ago

ICG launches €214m loan sell off

LONDON, April 1 (LPC) - Bids are due on a €214m portfolio of loans and FRNs from specialist asset manager ICG, one of the largest auctions to hit Europe’s secondary loan market this year, banking sources said on Monday.

ICG launched the sale to conduct a cash raise across multiple vehicles in a bid to accommodate new primary issue in Europe’s leveraged loan market. At the same time it will enable ICG to sell out of non-core positions, the sources said.

ICG declined to comment.

A recent flurry of deals in Europe’s primary leveraged loan market has been warmly welcomed by investors eager to put new money to work after first quarter volume hit its lowest level since 2009, according to LPC data.

“There are a handful of deals in the market now, there is less viability beyond the current wave and secondary has responded so people are selling to make room for new issue,” an investor said.

The new deals are attracting investors as much of it is more richly priced at 400bp and over than existing loans trading in the secondary market that come with a three handle.

French veterinary pharmaceuticals firm Ceva Sante Animale allocated a €2bn term loan on Monday at 475bp over Euribor, at 98.5 OID.

Part of the proceeds of Ceva’s loan will fund a €228m dividend payout and repay €232m of more expensive payment-in-kind paper, the sources said.

“There is not hugely compelling value in secondary. There is diversity in primary and spreads have widened since the start of the year,” the investor said.

A loans trader said: “Primary is coming at 400 and most secondary is 325bp-350bp so it has traded off as primary is getting signed and people are selling off lower margin paper.”

Average bids on Europe’s leveraged loan market were 98.39 on March 29, a quarter of a point softer than 98.64 on March 1, according to LPC data.

MAINLY EUROS

ICG’s portfolio is being sold via a Bids Wanted in Competition process, where prospective buyers submit best bids for the paper. It comprises 46 names and is denominated mainly in euros, with some sterling and dollars. The deadline is April 3 at 2pm, the sources said.

Some of larger positions include €20m of German cigarette filter maker Rhodia Acetow; US$15.5m of Luxembourg-headquartered safety products manufacturer Tractel; €14.1m of Belgium,-based House of HR; and €12.6m of Italian chemicals firm Italmatch.

It is one of the largest BWICs to date in 2019 after a handful of sales so far this year. In mid-March around half of a €145m BWIC from Credit Suisse Asset Management traded, while there was a €67m BWIC in February, the sources said.

Despite a flurry of primary deals, there is unlikely to be enough to soak up access liquidity, leaving investors little choice but to look at secondary, bankers said.

“If investors have money to deploy, there is only so much primary one can do, so people will be forced to do secondary,” the investor said.

While margins can be lower on secondary paper, selling at a discount to par can make the paper attractive to buyers. The latest BWIC is expected to get a lot of attention, especially given its size as it will allow investors to put a meaningful amount of cash to work.

“It is Easter for three weeks and people don’t want a lot of product on the books while they are out so it is slightly strange timing to come to market now. While it may not get brilliant prices it should be okay and get bids for most of it,” the trader said. (Editing by Christopher Mangham)

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