International Financing Review February 29 2020 9For daily news stories
@ visit http://www.ifre.comFears creep into
European loan land
Loans German gas outfit Messer scraps repricingBY PRUDENCE HOFears over the spread of the
coronavirus has hit sentiment in
the European leveraged loan
market, prompting German gas
lRMûMESSER to scrap its repricing
deal and the biggest decline in
secondary prices since the 2016
Brexit vote.
While the loan market is
typically insulated from wider
macro-events, volatility caused by
pandemic fears has fuelled
uncertainty over supply-chain
issues and borrower exposure to a
growing number of affected areas.
-ESSERûBECAMEûTHEûlRSTû
European casualty, calling off
plans to lower the margin on an
existing dual-currency term loan.
The repricing, which
comprised a €540m Term Loan B
and a US$2.2bn term loan, was
supposed to cut 50bp off the
euro-denominated loan and 25bp
off the US dollar loan that the
company raised in October 2018.
“It was an opportunistic trade
based on good market conditions,
but when those conditions
change it is hard to complete the
deal,” a banker said.
Repricings and dividend
recapitalisations, which have
dominated Europe’s loan
market so far this year, are now
expected to be reserved for only
the strongest of credits as the
market bases decisions on credit
fundamentals as opposed to
market technicals.
The change in sentiment could
also affect pricing on new money
deals that are already being
syndicated in the market such as a
€1.61bn Term Loan B to back Dutch
EQUIPMENTûRENTALûlRMûBOELS‘
€614m acquisition of Finland’s
Cramo, which was launched at
300bp-325bp guidance.
“Market sentiment isn’t great
now and it’s obviously tough to
do a repricing,” said a leveraged
lNANCEûHEADûh7ELLûSEEû
whether we need to widen the
pricing to complete the
launched deals.”UNDER SCRUTINY
While the secondary market has
not shown panic selling across
the board, Europe’s top 40
leveraged loans have recorded
the biggest drop in more than 3.
YEARS û2ElNTIVû,0#ûDATAûSHOW
Average bids on Europe’s top
40 leveraged loans plunged 24bp
on Wednesday to 97.95, the
largest daily drop since the day
after the Brexit referendum vote
in June 2016 when it fell 66bp.
“We see some selling, but it’s
not a one-way street or
disorderly. While some will see
whether this is an opportunity to
add names, others will obviously
have more concern about what
the outbreak means,” said a loan
trader in London.
Some investors have already
started reviewing potential
impacts to their portfolio by
putting individual names,
especially those with Asian
links, under close watch.
UK theme park and attraction
operator MERLIN ENTERTAINMENTS,
which partly owns Legoland theme
parks in South Korea and Malaysia;
Chinese consortium-backed AMER
SPORTS and UK-based event
organiser CLARION EVENTS, which
generates more than a quarter of its
revenue from China and Hong
Kong, are all trading down.
Loans in Amer Sports and
Merlin fell to 96.95 and 99.375 of
face value last week,
respectively, the lowest level
since the buyout loans freed to
trade last year. It was Merlin’s
lRSTûTIMEûTRADINGûBELOWûPAR
“Amer Sports held an investor
call. People are concerned about
its China exposure, like what
sales come from the country and
how much is being sourced from
there,” a loan investor said.
The scale of the impact of the
virus remains a mystery.
“The problem is when you
start looking at every company
to sort out the impact, it’s just
like falling down a rabbit hole,”
said the loan investor. “You justdon’t know.” (^)
existing shareholders earlier
this year.
Using an adjusted run-rate
%BITDAûlGUREûOFû#BNûBASEDû
on fourth-quarter results and
pro forma for recent
acquisitions (the number GFL
uses in its roadshow), GFL’s post-
IPO leverage would drop to 4.
times, and as low as 3.8 times if
the greenshoes on its IPO and
MCB are exercised. This is down
from 6.7 times at year-end.
The leverage ratio of GFL’s
direct comps averages three
times, though GFL is growing
faster.
'&,SûROADSHOWûSPECIlCALLYû
tries to address investor
concerns that contributed to
November’s failure, one being
that the company’s growth is
too reliant on acquisitions.
In the roadshow
presentation, Dovigi said that
organic growth topped 9% last
year on a blended basis across
its business lines.
GFL’s fourth-quarter results
were better than the
underwriting banks’ analysts
had previously modelled,
bankers said, another reason
why GFL was presenting a more
compelling story this time.
The IPO will leave BC
Partners and Ontario Teachers
with a combined 55.5%
holding and voting power of
41.6%, while Dovigi will own
just 3.7% of the company
but maintain voting power of
27.8%.
The number four player in
the North American waste
management industry, GFL
has more than 100 solid
waste collection operations,
14 soil remediation facilities,
50 liquid waste collection
facilities and more than
11,500 employees. (^)
conditions may prompt some
issuers to stay on the sidelines.
Last Thursday, the Dow Jones
Industrial Average posted its
biggest one-day point drop ever
as uncertainty over the impact
of the coronavirus rattled global
markets. The index plunged by
1,190.95 points or 4.4%,
following a 7% drop from
Monday to Wednesday. Hong
Kong’s Hang Seng index fell
4.3% last week.
InnoCare has a pipeline of
nine drug candidates focusing
on therapies for the treatment
of cancer and auto-immune
diseases. It posted a loss of
Rmb322m (US$45m) for the
six months ended June 30,
compared with Rmb279m for
the same period a year earlier.
Goldman Sachs and Morgan
Stanley are the joint sponsors.
For its part, Bright Culture is
selling 400m shares for a 25%
FREEûmOATûINûANûINDICATIVEûRANGEû
of HK$2.25–$3.37 per share,
equal to a 2020 P/E of 11.6–17.4.
China Fortune Rich Private
Equity Fund is the only
cornerstone investor in the
deal with a US$10m
investment.
The deal is scheduled to
price on March 5.
BoCom International and Haitong
International are the sponsors.
Bright Culture produces video
programmes for TV networks
and online video sites. It posted
AûNETûPROlTûOFû2MBMûFORûTHEû
eight months ended August 31
2019, down 34% from the same
period in 2018.
The company will use the
funds raised for the
development of its pipeline
programmes expected to be
released mainly in 2020, to
hire in support of its business
expansion and for working
capital. (^)
“Investors seem to
take the new format
well and we don’t
think it will affect
demand”
GFL is compensating
for the smaller IPO deal
size this time around
by adding a concurrent
US$700m mandatory
convertible bond that
taps a different type of
investor
4 IFR Top news 2322 .p 4 - 14 .indd 9 28 / 02 / 2020 19 : 41 : 47