FRONT STORY EUROPEAN LEVERAGED LOANS
Market starts with a bang
Some €10bn of loans in syndication
Jumbo deals are becoming more common
Europe’s leveraged loan market has started
with a bang with over €10bn of loans in
syndication, prompting one of the busiest
ANUARYSûSINCEûTHEûlNANCIALûCRISISûINûTERMSûOFû
new issue volume.
The market picked up where it left off at
the end of last year, having digested a
SIGNIlCANTûNUMBERûOFûDEALSûINûTHEûLASTû
quarter. Around 25 leveraged loans closed in
December.
“It seems unusual that the market has
started off so early as it usually talks a good
game but never quite delivers. This year
however, it did,” a syndicate head said.
USTûlVEûJUMBOûDEALSûACCOUNTûFORûAû
MAJORITYûOFûTHEûVOLUMEûTHISûMONTH ûWITHûTHEû
euro and sterling portions of these deals
totalling €8.2bn-equivalent.
Jumbo loans, typically in excess of €1bn,
were few and far between in Europe’s
LEVERAGEDûLOANûMARKETûPOST
lNANCIALûCRISIS û
but an increase in the depth of liquidity over
THEûPASTûYEARûMEANSûJUMBOûLOANSûAREû
becoming more common.
3OMEûOFûTHEûJUMBOSûINûSYNDICATIONû
include French technology consultancy
ALTRAN’s €2.125bn-equivalent term loan
backing its acquisition of US digital design
ANDûENGINEERINGûSERVICESûlRMû!RICENTûAû
US$1bn euro and sterling-denominated
carved out of a US$4bn term loan backing
Britain’s CINEWORLD GROUP’s acquisition of US
PEERû2EGALû%NTERTAINMENTû'ROUPûANDûAû
€3.1bn-equivalent loan for UK petrol station
operator EG GROUP.
“Jumbos are more normal than in the past
as the market seems to be maturing and
keeping bigger deals in Europe than it has
traditionally,” a syndicate head said.
“European borrowers started going to the
US market because they had no choice as
they needed liquidity that Europe couldn’t
provide. Now the amount that can be done
in the European loan market has grown
exponentially in the past year or so to
around €2bn and its pushing the
boundaries of what people thought was
possible.”
A number of sub-€1bn loans are also in
syndication in Europe that collectively tally
up to around €2.5bn-equivalent.
These include €650m of loans backing
Dutch telecom infrastructure operator DELTA’s
COMBINATIONûWITHû$UTCHûPEERû#AIWAYû
€554m-equivalent for higher education
provider GLOBAL UNIVERSITY SYSTEMSûõMû
backing alternative investment manager CITIC
CAPITAL’s buyout of French packaging company
AXILONEûANDûõMûBACKINGû!RDIANSûBUYOUTû
of Spanish bakeries BERLYS and BELLSOLA.Despite high volumes, all deals are
expected to get through the market, given
the high amounts of cash at play from
existing CLOs, warehousing CLOs and
managed accounts.
“In terms of volume, because of deal sizes,
it is one of the busiest Januarys since the
lNANCIALûCRISISûBUTûITûISûNOTûTHEûBUSIESTûINû
terms of capacity as this can all get through
the market. Cash positions are relatively
high and the technicals are still there. It
shows the strength and depth of the
European loan market,” a second syndicate
head said.DIFFERENT PRICING
Even with the vast amount of liquidity at
play, the market is pricing in risk to an
extent and the deals are expected to price at
different levels, although documentation is
LIKELYûTOûREMAINûWEAKûAFTERûAûSIGNIlCANTû
EROSIONûOFûINVESTORûPROTECTIONSûINû
Short-term visibility looks good, as
bankers prepare to launch in early February
syndication of €5.65bn-equivalent of debt
lNANCINGûTOûBACKû53ûPRIVATEûEQUITYûlRMû
KKR’s €6.83bn acquisition of UNILEVER’s
margarine and spreads business.4HEûDEBTûlNANCINGûISûEXPECTEDûTOûINCLUDEûAû
€3.9bn-equivalent term loan - which will be
mainly denominated in euros and will include
some US dollars and Polish zlotys. Credit Suisse,
Deutsche Bank and KKR Capital Markets are
EXPECTEDûTOûLEADûTHEûDEBTûlNANCING ûALONGSIDEû
a number of other banks that could include
BNP Paribas, ING, Lloyds, RBC and UniCredit.
Still to come also is £2.35bn of new loans
backing multinational sports betting and
gaming group GVC Holdings’ up to £3.9bn
acquisition of UK betting group Ladbrokes
Coral.
Although the pipeline post-February isn’t
clear, there are a number of M&A situations
in auction phase, which if sold to private
equity will be welcomed by Europe’s
leveraged loan market.
JP Morgan and Morgan Stanley are providing
AûSTAPLEûlNANCINGûTOûPOTENTIALûBUYERSûOFû
French drug maker SANOFI’s European
generic drug business ZENTIVA of around
õBN ûORûAROUNDûûTIMESûITSûAPPROXIMATEû
€155m Ebitda.
Banks are also preparing debt packages of
up to US$825m to back a potential sale of
the European rental assets of American
hospitality company WYNDHAM WORLDWIDE.
!NDûAûlNALûBIDûDEADLINEûOFû-ARCHûûFORû
the chemicals division of AKZO NOBEL, the
maker of Dulux paint, could provide the
MARKETûWITHûUPûTOûõBNûOFûDEBTûlNANCINGûINû
the second quarter.
Volume looks set to remain positive for
2018, with growth expected overall. An
increase in public-to-private situations and
ANûINmUXûOFû$OUBLEû"ûCREDITSûINûTHEûLOANû
space should also help facilitate this, people
familiar with the situation said.
“The pot of Double B money has grown in
Europe. The average rating of deals is split
between Double Bs and Single Bs now,
whereas before the market was dominated
by Single B issuance,” an investor said.
The amount borrowers can raise in
Europe is also expected to grow in 2018,
which should facilitate a busier market.
h%UROPEûWILLûBEûABLEûTOûRAISEûõBN
õBNûIFû
tapping both the loan and bond markets on
AûlNANCING vûAûSECONDûINVESTORûSAID
Claire RuckinLOANS
Cambodia China India Indonesia Singapore Belgium Jordan Kenya û Netherlands û
Sweden UAE Canada 80 United States 80 Leveraged Loans 82“Jumbos are more normal than
in the past as the market seems
to be maturing and keeping
bigger deals in Europe than it
has traditionally”