IFR 03.7.2020

International Financing Review March 7 2020 75

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Restructuring advisers eye Pronovias

„ EUROPE Spanish bridal company’s loans fall in secondary market

Restructuring advisers are keeping a close eye

on Spanish bridal company PRONOVIAS, as loans

backing the BC Partners-owned business have

fallen in the secondary loan market over the

past month as sentiment for stressed credits has

become increasingly negative as a result of the

coronavirus threat.

A €154m tranche of the company’s €215m

Term Loan B was trading at 70.2% of face value

in Europe’s secondary loan market on March 4,

down from 80.3% on February 4, according to

Refinitiv LPC data.

Pronovias’ loans have been falling in

secondary over the past year, from 92.6% on

March 5 2019, prompted by negative sentiment

for the retail sector and a downgrade by ratings

agency Moody’s in December.

It is one of a growing list of weak European

credits and is on Moody’s list of companies

rated B3–PD negative. The list comprised 60

companies at the end of 2019, 54% higher than

at the end of 2018.

Most of these companies have so far avoided

debt restructurings thanks to low interest rates, a

lack of financial covenants and enough balance

sheet liquidity.

That situation which was expected to remain

unchanged this year, but the impact of the

coronavirus is driving secondary prices down,

and they could reach levels that could attract

distressed investors.

Advisers say some of these businesses,

especially consumer facing ones such as

Pronovias, could now become more vulnerable to

full-on debt restructurings.

“If a highly leveraged consumer facing

businesses that was already shaky starts losing

more money, and then liquidity in the market

begins to dry up they are in trouble,” said one

restructuring adviser.

“This could be enough to tip some businesses

over the edge. Sentiment it definitely getting

weaker. Pronovias is on our watch list.”

A second adviser said: “It just really depends

on how long this [coronavirus] pandemic plays

out for, and more specifically [in the case of

Pronovias], if people start to cancel weddings.”

NEGATIVE WATCH

Moody’s downgraded Pronovias to negative from

stable in December, and as well as affirming

its B3–PD probability of default rating, it also

affirmed its B2 ratings for its senior secured bank

facilities, which includes the €215m Term Loan B

and a €45m revolving credit facility.

The loans backed BC Partners €550m

acquisition of a majority stake in the business in

September 2017.

Guillaume Leglise, Moody’s lead analyst for

Pronovias and assistant vice-president said at

the time, “The company’s leverage is likely to

remain high in the foreseeable future and there

could be pressures on liquidity if the company

fails to generate positive free cashflow over the

next 18 months.”

Loans for other names on Moody’s B3–PD

negative and lower rated list have also been

falling over the past month.

These include a £450m term loan for health

retailer HOLLAND & BARRETT UK, which fell from

70.5% of face value on February 18 to 67.8%

on March 3, and a €450m term loan for French

digital media company TECHNICOLOR fell from

93.75% of face value on February 14 to 89% of

face value on March 3, according to the data.

Sandrine Bradley

9 IFR Loans 2323 p 63 - 76 .indd 75 06 / 03 / 2020 19 : 19 : 51