LONDON, Nov 7 (Reuters) - Swedish alarms company Verisure is looking to raise up to €1.825bn in high-yield bonds and leveraged loans to refinance existing notes and pay €1.05bn in a dividend to shareholders, banking sources said.
Hellman & Friedman bought Bain Capital’s stake in Verisure in October 2015 and has raised a series of loans and bonds since.
The company has performed well and with a large equity holding in the company, the buyout firm is now looking to realise value, the sources said.
The dividend is set to be one of the largest dividends since the financial crisis, two senior loan bankers said.
The new financing will increase leveraged on Verisure to 5.2 times through the senior and 7.2 times in total, up from 4.1 times through the senior and 5.3 times in total, the sources said.
Bank of America Merrill Lynch and Goldman Sachs are leading the leveraged financing, with BAML and Nomura leading the loans and Goldman Sachs leading the bonds. Other banks on the financing include JP Morgan, Morgan Stanley and Nordea, the sources said.
Verisure is seeking to raise up to €680m of leveraged loans that will add-on to Verisure’s existing €1.69bn term loan, the sources said.
Some €625m of the add-on loan will be used to pay a dividend to shareholders.
The loan will price in line with the existing loan at 300bp over Euribor with a 0% floor. The new money is offered at 99.5 OID, while existing loan investors will be paid a 25bp consent fee, the sources said.
A call is set to take place with loan investors on Wednesday and commitments are due November 14.
It is expected to be well received by Europe’s leveraged loan investors, eager for new paper amid a continued supply and demand imbalance, which has plagued the market since last year.
“It may a dividend but at least it is new paper, which is a good thing. Verisure is one of Hellman & Friedman’s biggest investments and they have a lot of money wrapped up in it. The company has performed very well so it makes sense to take money off the table,” a senior leveraged finance investor said.
A senior leveraged finance banker said: “If there is one credit in Europe that jumps off the charts it would be Verisure. Growth has been phenomenal, it has successfully expanded into other geographies including the UK. It has a large exposure to Spain and people can see it still performed well in a challenging macro environment.”
Meanwhile, Verisure is looking to raise €1.145bn six-year non-call two notes, to refinance its existing €692m of private senior notes as well as financing a distribution to shareholders of up to €425m.
Verisure’s €630m 6% senior secured 2022 notes will not be refinanced but a consent solicitation process has launched on them, as the company tries to raise the new debt and pay out the dividend without having to pay restrictive and expensive non-call protection.
An aggressive ask is usually pretty expensive due to non-call periods places around notes, the senior banker said.
“The consent solicitation process undermines one of the main reasons investors do bonds. Instead of being confident your credit is as negotiated or a hefty fee comes as a result of any changes, you are now in the situation where a small fee awaits at the end of it. It is a complete erosion of the product and not much different to a loan,” a second senior banker said.
An extremely hot leveraged loan and high-yield bond market has led to a weakening of terms in favour of borrowers.
“Bond investors are being asked a question and everyone can always say no. Whether they accept it or not is a reflection of the market. The market is borrower friendly and that has been going on for a while. Incrementally every transaction is getting slightly more aggressive than the last one,” the first senior banker said. (Additional reporting by Yoruk Bahceli; Editing by Christopher Mangham)