(Firms OID, adds quote, updates comment)
By Claire Ruckin
LONDON, Feb 4 (LPC) - Bankers are in the final stages of selling €650m of excess loans backing Advent International’s buyout of German chemicals group Evonik’s methacrylates plastics unit, sounding out clearing levels with investors below 90% of face value, that will see bankers make a loss, banking sources said.
The financing comprises a €977m term loan B and US$612m term loan B and just under a third of the euro and over half of the dollar tranches are being sold in this second syndication process. It relaunched in January 2020 after banks were left holding paper when a first syndication closed in June 2019.
The loans were relaunched to pay 500bp over Euribor/Libor with a 0% floor, at 95 OID, in line with where the loans closed after the first syndication process.
However, banks are working out the final clearing level, in order to get the loans off their books, with the euro loan guided at 87-88 OID and the dollar loan at 85-86 OID.
Investor commitments were due by January 28 but the deadline was pushed back by a week to reflect on updated trading results from the company.
A final pricing level is expected to emerge on Tuesday, with the loan subsequently wrapping up later this week, sources said.
The borrower soaked up some of the costs of the issue discount on the loan in the first syndication process by increasing the loan by €21m prior to closing in June.
However, in the mid-high 80s it is the banks that will be taking a hit and bearing the brunt of the costs, sources said.
It will bring an end to a long running saga that shows the ‘fly or bye’ mantra from investors where the strong deals sell quickly and the more difficult perceived deals are harder to sell.
Evonik agreed to sell the unit, known as Madrid, to Advent for €3bn in March 2019, backed with a €1.785bn-equivalent loan.
A most-favoured nation clause on the loan expired in December when arranging banks entered a coordinated sell-down process that runs until the end of March.
The MFN protected investors by discouraging arranging banks from dumping the paper at low levels in the secondary market. If the leads sold lower than 95%, then all of the investors who bought the deal in primary syndication would be compensated for the difference.
While there have been frustrations among some banks eager to do their own sell-downs since the MFN expired, all have towed the party line and agreed to a synchronised approach.
“In the mid-to-high 80s the loan becomes attractive. People want to know if the whole deal clears but if not, what the overhang is and then what the MFN and any secondary coordination agreement looks like. People will defintiely have FOMO,” a banker said.
Barclays, Deutsche Bank and Goldman Sachs are leading the financing alongside Bank of America, Bank of China, Helaba, HSBC, RBC and NatWest Markets.
Advent declined to comment. (Editing by Christopher Mangham)