Victoria falls on debut bond
UK carpet-maker suffers big share price fall after bond announcement
"RITISHûCARPET
MAKERûVICTORIAûISûSETûTOûPAYûAû
HEFTYûPRICEûFORûITSûDEBUTûHIGH
YIELDûBOND û
after an anxious market reaction to the
announcement saw its shares fall as much
ASûûDURINGûMARKETING
The deal is expected to price this week
after the roadshow wrapped up on
4HURSDAY
,EADSûONûTHEûõMûlVE
YEARûNON
CALLû
two senior secured set initial price
THOUGHTSûATûûTOûû-ARKETING û
HOWEVER ûHADûSTARTEDûATûLOWûTOûMIDûSû
WHISPERS ûACCORDINGûTOûINVESTORS ûRAISINGû
QUESTIONSûASûTOûWHYûTHEûCOMPANYûDECIDEDû
TOûPAYûUPûSOûMUCHûTOûRElNANCEûAûBANKûLOANû
THATûWASûAGREEDûJUSTûTHREEûMONTHSûAGO
4HEû""
""û30&ITCH ûRATEDûBONDûISûDUEû
to price as one of the widest Double B
ISSUESûTHISûYEAR ûACCORDINGûTOû)&2ûDATA
TERM OR BRIDGE?
4HEûPROCEEDSûRElNANCEûWHATû6ICTORIAû
DESCRIBEDûINû-ONDAYSûBONDûOFFERINGû
MEMORANDUMûASûAûBRIDGEûFACILITY ûBUTûWASû
INITIALLYûREFERREDûTOûASûAûTERMûLOANûWHENûITû
WASûAGREEDûINû!UGUST
!UGUSTSûõMûTWO
YEARûFACILITYûWASû
EARMARKEDûTOûRElNANCEûBANKûDEBT ûAROUNDû
aMûOFûTHEûaMûACQUISITIONûOFû3PANISHû
TILEûMAKERû3ALONI ûANDû3ALONISûõMûDEBTû
4HEûRESTûOFûTHEûACQUISITIONûWASûFUNDEDûBYûAû
aMûSHAREûPLACEMENT
h4HEYREûSAYINGûTHEYûRElNANCEDûTHEIRû
DEBTûWITHûAûBRIDGE ûWHICHûDOESNTûMAKEû
SENSEû)TûDOESNTûGIVEûAûGOODûMESSAGE vûSAIDû
an investor.
3HORT
TERMûBRIDGEûLOANSûAREûUSUALLYûPUTû
INûPLACEûINITIALLYûTOûlNANCEûACQUISITIONSû
ANDûAREûTYPICALLYûRElNANCEDûBYûLONGERû
TERMûDEBT ûNOTûVICEûVERSA
4HEûINVESTORûSAIDûTHEûQUICKûRElNANCINGû
had caused speculation that one of
6ICTORIASûLENDERSûHADûPULLEDûOUTûFROMûTHEû
loan.
4HEûTERMSûOFûTHEûLOANûAREûNOTûKNOWN û
ANDûINVESTORSûSAIDûTHATûQUESTIONSûDURINGû
the roadshow on the matter were not
answered. It is not unusual for listed
companies to release details of their
BANKûLOANSûANDû6ICTORIAûHASûGIVENûDETAILSû
OFûITSûFACILITIESûINûTHEûPAST ûACCORDINGûTOû
,0#ûDATA
6ICTORIAûADDRESSEDûTHEûRUMOURSûAROUNDû
lender support in a statement on
7EDNESDAYû)TûSAIDûITûHASûBEENûWORKINGûONû
THEûBONDûWITHûBANKSûFORûSEVERALûMONTHS û
and “continues to have a close and positive
RELATIONSHIPûWITHûITSûLENDINGûBANKS ûHSBC
and Barclays ûANDûCONTINUESûTOûOPERATEûWITHû
SIGNIlCANTûHEADROOMûWITHûRESPECTûTOûITSû
COVENANTSvû4HEûTWOûBANKSûAREûALSOûJOINTû
global coordinators on the bond.
)TûSAIDûTHEûBONDûISûANûENTIRELYû
DISCRETIONARYûEXERCISEûANDûTHATûITûWANTSûTOû
SECUREûlXED
RATEûDEBTûANDûTHEûmEXIBILITYû
PROVIDEDûBYûAûBOND
$ESPITEûTHATûSTATEMENT ûINVESTORSûWEREû
approached about a potential FRN tranche
BYûLEADSûINûINFORMALûDISCUSSIONSSLIMMING MARGINS
)Nû-ONDAYSûTRADINGûUPDATE ûRELEASEDûINû
CONJUNCTIONûWITHûTHEûBONDûMANDATE û
6ICTORIAûSAIDûRECENTûACQUISITIONSûWOULDû
mean its overall margins missing forecasts
BYûONEûTOûûPERCENTAGEûPOINTS
It said margins are still expected to
EXCEEDûTHEûPREVIOUSûYEARSûANDûTHATûITû
remained committed to increasing market
share and plans to make up the margins
over the next 12 months.
6ICTORIASûSHARES ûWHICHûWEREûATûPûATû
THEûCLOSEûONû/CTOBERû ûSANKûASûLOWûASû
350p over the course of marketing.
7HILEûTHEYûRECOVEREDûTOûP ûTHATû
DOESNTûCHANGEûTHEûFACTûTHATû6ICTORIAûHASû
lost over half its value since the end of
-AY ûWHENûTHEûSHAREûPRICEûREACHEDûAûHIGHû
OFûP
“The share fall has real implications for
THEûCOMPANYSûABILITYûTOûCONTINUEûWITHûITSû
GROWTHûSTRATEGY vûSAIDûAûSECONDûINVESTOR û
REFERRINGûTOû!UGUSTSûSHAREûPLACEMENT
6ICTORIASûGROWTHûSTRATEGYûSINCEûAû
management change in 2013 has relied on
expanding market share through
ACQUISITIONS ûWHICHûTHEûCOMPANYûSAYSûAREû
FOCUSEDûONûHIGH
MARGINûTARGETSûTHATûITû
intends to operate on a standalone basis.
)TûHASûMADEûûACQUISITIONSûSINCEûTHEN û
SEEINGûUNDERLYINGû%BITDAûGROWûFROMûaMû
INûûTOûaMûINûûANDûITSû%BITDAû
MARGINûINCREASEûFROMûûTOû
7HILEûTHEûCOMPANYûSAIDûONû-ONDAYûTHATû
it is committed to increasing its market
share, INVESTORSûWORRYûTHATûTHEûSTRATEGYû
COULDûALSOûBEûJEOPARDISEDûBYû"REXITû4HATû
COULDûCUTû6ICTORIASûMARGINSûFURTHERûASûTHEû
5+ûISûITSûLARGESTûMARKET ûACCOUNTINGûFORû
ûOFûPROlTS ûWHICHûWOULDûLEADûTOûANû
increase in leverage.
6ICTORIAûWILLûBEûXûLEVEREDûPRO
FORMAû
RECENTûACQUISITIONS
4HEûDEALûWASûALSOûNOTûHELPEDûBYûPOORû
TRADINGûONû"ALTA ûAû"ELGIANûPEER ûWHOSEû
õMûûSENIORûSECUREDûûBONDû
"" ûISûTRADINGûAROUNDûûDUEûTOûPOORû
EARNINGS ûCAUSINGûCONCERNûAROUNDûTHEû
sector.
Yoruk BahceliWEEK IN NUMBERS
37%
THE FALL IN UK CARPET-MAKER
VICTORIA’S SHARE PRICE LAST WEEK AFTER
ANNOUNCING A PLANNED REFINANCING
OF BANK DEBT WITH A €450m BOND.
THE COMPANY ISSUED A STATEMENT TO
REBUFF “MISLEADING” RUMOURS ABOUT
THE REASONS FOR THE BOND3
THE NUMBER OF US HIGH-YIELD
ISSUES THAT WERE PULLED LAST WEEK
FOLLOWING THE WORST MONTHLY
RETURNS FOR THE ASSET CLASS IN
ALMOST TWO YEARS€1bn
THE SIZE OF THE FIRST JAPANESE
COVERED BOND AFTER SMBC PRINTED
A FIVE-YEAR CONTRACTUAL DEAL THAT
ATTRACTED OVER €1.4bn OF DEMAND€12bn+
THE SIZE OF KFW’S BOOK FOR ITS €5bn
FIVE-YEAR GLOBAL BOND THAT PRINTED
AT 20bp THROUGH SWAPS. THAT WAS AT A
MUCH WIDER SPREAD THAN THE LESS 34bp
IT PRINTED A FIVE-YEAR IN OCTOBER 2017
AS THE ECB RETREATS FROM THE MARKET€801m
THE AMOUNT THE ECB BOUGHT
THROUGH ITS CSPP IN TRADES SETTLED
IN THE WEEK UP TO OCTOBER 26
In total, it has bought €173.427bn640660680700720740760780800820840Oct-05 Oct-12 Oct-19 Oct-26€m3003504004505005506006507007508001/10/201803/10/1805/10/1809/10/1811/10/1815/10/1817/10/1819/10/1823/10/1825/10/1829/10/1831/10/18PenceSource: ECB