Mid-market corporate auctions in Europe to watch

Inflexion Private Equity has emerged as the frontrunner to acquire Quilvest-owned sushi chain Yo! Sushi, according to reports. Quilvest mandated Canaccord Genuity to run the process, which attracted several financial sponsors understood to include 3i Group and Morgan Stanley Private Equity, as well as Inflexion. Inflexion has subsequently won exclusivity after the final round of bidding, and is expected to acquire the company for roughly £100 million.

The auction of Dutch lingerie retailer Hunkemöller has taken an interesting twist, with U.S.-based private equity group Sycamore Partners reportedly submitting a last-minute bid that could trump offers from rival buyout groups CVC Capital Partners, Apax Partners, and The Carlyle Group, according to reports. The company, which is owned by PAI Partners, is valued at roughly €440 million.

Corsair Capital is understood to be close to launching a formal sale process for ATM company NoteMachine, according to market sources, who suggest Jefferies is likely to run the auction, which could begin in September or early October.

NoteMachine – which Corsair acquired in 2012 from buyout peer Rutland Partners – could fetch roughly £320 million. The business is backed by a £120 million unitranche loan provided by GE Capital and Ares Capital Europe joint venture the ESSLP, upsized last June from an existing £76.5 million facility.

Health and safety consultancy Santia is also set for the auction block, with turnaround investor and current owner Better Capital mandating PwC in recent weeks to advise on strategic options for the business. In Better Capital’s most recent financial statements, Santia carried a NAV of £40 million as of March 31, 2015 – up from £36.2 million a year earlier.

After a flurry of deals already in the sector this year, two more travel agents are soon to carry ‘for sale’ signs. Equistone Partners Europe is eyeing an exit for Audley Travel, according to reports, and has mandated Rothschild to run the auction. The business could be valued at more than £200 million.

Inflexion is also understood to be eyeing a realisation of its investment in On the Beach, which carries a £250 million valuation. The firm is reportedly exploring an IPO of the business, but could yet run an auction process.

Polish national airline LOT has attracted the interest of private equity group Indigo Partners, according to reports. Indigo, an experienced airline investor, is reportedly looking to buy a stake in the carrier and invest several hundred million zloty to help Warsaw, the airline’s home city, become a hub for the Central and Eastern Europe region.

In Ireland meanwhile, private equity group CapVest is lining up financing to support a bid for plastics and environmental services company One51. CapVest made a preliminary approach to the firm’s board regarding a €288 million (or €1.80 per share) offer for the Irish company. The firm generated EBITDA of €21.9 million last year, on revenue of €276.5 million. – Oliver Smiddy


High yield pipeline in Europe: Supply at €2.1B as market winds down

The pipeline for primary issuance in the European high-yield market remains at €2.1 billion, as the market takes a summer breather. The year-to-date volume now stands at €54.4 billion from 128 deals, according to LCD. In the same period last year, €62.8 billion had been issued through 172 deals. Sources say it’s unlikely there will be much in the way of new issuance before early September, although most don’t rule out opportunistic issuers looking to get in ahead of the crowd before then.

Latest developments
Permira last week agreed the acquisition of Lowell Group from TDR Capital, and is understood to have paid roughly £1.1 billion for the business. Permira plans to merge the company with existing portfolio business GFKL Financial Services. Bonds issued by both companies were stable in secondary following news of the deal.

Financing details have yet to emerge for the Lowell deal, although sources suggest Goldman Sachs – which was a joint bookrunner (B&D) on GFKL’s €365 million issue of 7.5% secured notes due 2022 last month (the proceeds of which were used to finance Permira’s acquisition of the business for €600 million) – is likely to be involved in any new bond launch. Citi, Credit Suisse, and ING were also joint bookrunners on the GFKL bond.

VimpelCom and CK Hutchison Holdings have agreed the long-awaited merger of their Italian mobile operations, known as Wind and 3 Italia, respectively. The deal led VimpelCom’s bonds to rise 1-2 points in secondary, while Wind’s notes rose by less than a point.

Tank & Rast’s 6.75% second lien notes due 2020 will remain in place following the company’s acquisition by an Allianz-led consortium, despite the use of €1.4 billion of new term loans to support the deal.

The notes, issued in November 2013, are first callable in December next year, at 103.375.

Cinven last week acquired Tractel from LBO France in a deal understood to be worth €350-400 million. Cinven has opted for an all-senior loan financing to support the deal, sources say, mandating HSBC, BNP Paribas, and IKB as bookrunners, with Crédit Agricole CIB as an MLA.

Cerved meanwhile is planning to redeem some of its outstanding bonds using proceeds from €660 million of bank loans it has signed with Banca IMI, BNP Paribas, Credit Agricole, Mediobanca, and UniCredit.

The bank financing comprises a €100 million five-year RCF paying E+200, a €160 million four-year TLA paying E+200, and a €400 million six-year non-amortising loan paying E+250. Cerved will redeem its 6.365% notes due 2020 at 103.19, and its 8% notes due 2021 at 106 when they hit their first call dates in January. The bonds are said to be quoted at their call prices. Analysts say the company will save roughly €23 million in annual interest charges.

HeidelbergCement is likely to refinance a €4.4 billion bridge loan used to back its acquisition of a 45% stake in Italcementi, via a combination of new bond issuance and asset sales. The new issue will be led by Morgan Stanley and Deutsche Bank, sources say, although it is unclear whether the new paper will be investment-grade or high-yield rated. The company is currently rated Ba1 with a positive outlook by Moody’s, while Fitch rates the firm BB+. Ratings at Standard & Poor’s were withdrawn in 2012 at the company’s request.

General Motors hired Deutsche Bank to arrange fixed-income investor meetings in Europe for the weeks beginning June 8 and 15, according to sources.

Medical Properties Trust hosted fixed-income investor meetings in late May, paving the way for a euro-denominated capital markets transaction to launch.

Findus is another firm that will see its capital structure refinanced in the event of a buyout. Nomad Foods confirmed last month that it is in exclusive early stage discussions with Findus to acquire its continental Europe business and the Findus Brand.

PAI is considering an IPO of Perstorp, which could value the company at roughly €1.5 billion including debt, according to sources. A refinancing of its bonds is also being looked at, sources add, and the €1.095 billion, triple-tranche cross-border deal is currently callable, with the call price coming down a few points in November this year. – Oliver Smiddy 


Post Holdings outlines $1.2B, two-part bond deal for this week

Post Holdings has announced a $1.2 billion offering of senior notes via joint bookrunners Barclays, Credit Suisse, Nomura, BMO, Goldman Sachs, and SunTrust Robinson Humphrey, along with co-managers J.P. Morgan and Deutsche Bank, according to sources.

Pricing is expected later this week following a two-day investor roadshow, with an investor call scheduled for tomorrow, Aug. 11, at 11 a.m. EDT.

The deal is split between equally sized tranches of 8.5-year (non-call three) notes, which will be first callable at par plus 75% of the coupon, and 10-year (non-call five) senior notes, with a first call at par plus 50% of the coupon, sources relay. Proceeds will be used to refinance a portion of the company’s existing term loan and for general corporate purposes.

Distribution of the new deal is 144A-for-life and existing ratings are B-/B3.

Post Holdings last tapped the high-yield market in May 2014, pricing $630 million of 6% notes due 2022. That issue currently trades at 98.50 to yield 6.26%, according to trade data.

St. Louis-based Post Holdings manufactures, distributes and markets large range of ready-to-eat cereal products. The company trades on the NYSE under the symbol POST. – Joy Ferguson


Freescale Semiconductor borrows $200M under revolver to redeem bonds

Freescale Semiconductor disclosed that it has received $200 million under a draw from its $400 million revolver to facilitate, along with cash on hand, the redemption of all $302 million outstanding under its 10.75% senior unsecured notes due 2020.

The revolver, which is due February 2019, has a committed capacity of $400 million. After giving effect to the $200 million draw, the available capacity under the 2019 revolver is $184 million.

Pricing on the revolver is tied to a leverage-based grid, opening at L+350.

Austin, Texas-based Freescale Semiconductor makes processors worldwide. – Richard Kellerhals


High Yield Bond Market Index Report as of Aug 6

The S&P U.S. Issued High Yield Corporate Bond Index tracks U.S.-dollar-denominated high-yield bonds issued by U.S.-domiciled companies and includes ratings-based sub-indices. Observations below are as of the most recent close, the prior close, a week ago, and a year ago. The data is courtesy of S&P Dow Jones Indices. Further details can be found online at

HY bond index report as of Aug 6 2015


Mohegan Tribal Gaming inks add-on high yield bonds at 102.50 to yield 9%

Mohegan Tribal Gaming Authority this afternoon completed its add-on offering to its 9.75% senior notes due 2021 via Bank of America Merrill Lynch, RBS, SunTrust Robinson Humphrey, Jefferies, Credit Agricole, and KeyBanc. Terms were finalized at the wide end of guidance. Proceeds will be used to refinance the company’s 11% senior subordinated notes due 2018. The existing $500 million issue was priced in August 2013 and matures on Sept. 1, 2021, and currently trades at 105.625 to yield around 8%, trade data show. It is callable on Sept. 1, 2016 at par plus 75% of the coupon. The company completed a $90 million add-on B term loan last week, which priced at L+450, at 99.05, with a 1% LIBOR floor. Proceeds were also used to repay a portion of the 11% senior subordinated notes. The Mohegan Tribal Gaming Authority, an instrumentality of the Mohegan Tribe of Indians of Connecticut, is the owner and operator of Mohegan Sun in Uncasville, Conn., and Mohegan Sun Pocono in Wilkes-Barre, Pa. Terms:

Issuer Mohegan Tribal Gaming Authority
Ratings CCC/B3
Amount $85 million
Issue senior add-on (144A)
Coupon 9.75%
Price 102.50
Yield 8.997%
Spread T+
Maturity Sept. 1, 2021
Call nc-1 @ par plus 75% coupon
Trade Aug. 6, 2015
Settle Aug. 11, 2015 (T+3)
Bookrunners BAML/RBS/STRH/Jeff/CA/Key
Price talk 102.50-103
Notes Total size now $585M. First call par + 75% coupon.



Chesapeake Energy bonds, shares slip on 2Q results

Bonds and shares backing Chesapeake Energy slumped today after the company posted its second-quarter results, which included a net loss of $4.1 billion. The company’s 5.75% notes due 2023 slipped over two points to trade at 81 at midday, while the 4.875% notes due 2022 shed four points to trade at 76.50, yielding 9.74%, trade data show. Chesapeake shares fell more than 9% to $7.25 in recent action.

Chesapeake’s net loss of $4.1 billion includes a $3.67 billion impairment of oil and natural gas properties, and compares to a net income of $145 million in the 2014 second quarter. When adjusted for the impairment charge and other items, the net loss was $126 million, filings show. Adjusted EBITDA was $600 million, compared to $1.277 billion in the 2014 second quarter, while operating cash flow was $606 million, compared to $1.269 billion in the year-ago quarter.

The company stated that the decreases in adjusted EBITDA and operating cash flow were primarily the result of lower realized oil, natural gas, and natural gas liquid prices, which were partially offset by an increase in realized hedging gains and lower production costs. Chesapeake’s production for the quarter averaged 703,000 boe per day, up 13% year-over-year, while total capital expenditures decreased to $957 million compared to $1.5 billion in the 2015 first quarter.

Two weeks ago, Chesapeake announced it would eliminate its common stock dividend effective in the third quarter and redirect the cash into its 2016 capital program to maximize the return available to shareholders. The 5.75% notes slumped over two points to an 85 context on that news. – Joy Ferguson


Arch Coal: TL lenders ask admin agent to not cooperate with exchange

A group of Arch Coal’s lenders that purportedly hold more than 50% of the approximately $1.9 billion term loan have directed the administrative agent to not cooperate with the company’s proposed uptier exchange offer, asserting, among other things, that the transaction triggers the MFN protection on the term loan and that the company cannot tap its incremental facility for non-cash consideration, according to a statement released by the company this morning.

While the company believes the lenders assertions, which were made in a July 28 letter to admin agent Bank of America Merrill Lynch, are “without merit” and it plans to “contest them vigorously,” Arch said that if the admin agent were to follow the lenders’ direction, the exchange offers would not be completed. The company adds that it has “expressly reserved all of its rights against the lenders who sent such letter.”

To recap, Arch Coal on July 3 launched a multitiered uptier exchange on four series of unsecured notes in an effort to deleverage its balance sheet and improve liquidity, with the majority of one series driving the deal. Note that the proposed transaction entails tapping the remaining capacity under the company’s incremental facility, as well as utilizing capacity under its revolving credit, to back the issuance of pari passu trust certificates issued to junior debtholders at premium to where the deeply distressed bonds trade. The trust certificates would pay 6.25%, effectively the same coupon as the term loan (L+500, 1.25% LIBOR floor).

As reported, sources earlier said that lenders had voiced concerns that the transaction should trigger the MFN on the existing term loan (see “Arch Coal TLB slides as lenders digest uptier bond exchange,” LCD News, July 10, 2015).

In a July 28 letter to admin agent Bank of America Merrill Lynch, lenders assert the following, according to Arch Coal:

  1. The proposed amendment to the revolver requires the consent of the majority of all lenders under the credit agreement;
  2. The transaction trips the MFN protection on the term loan, which is covered by 50 bps of MFN protection, since the effective yield on the incremental loan is more than 50 bps higher than that on the existing term loan;
  3. The credit agreement does not allow incremental term debt to be borrowed in a transaction for non-cash consideration;
  4. That the company is in default under the credit agreement for failure to pay previously invoiced legal expenses of counsel to a group of lenders under the credit agreement.
  5. The new intercreditor agreement is not acceptable;
  6. The proposed replacement of the collateral agent is not acceptable

In today’s statement, Arch refutes each of these as follows, in the same order as listed above:

  1. The company says this is incorrect, pointing to language in the credit agreement that stipulates that proposed revolver amendments “require the consent of only a majority of lenders making revolving loans.”
  2. With respect to the lenders’ claims that the transaction triggers the 50 bps of MFN protection, the company argues that there are no fees associated with the issuance of the incremental term debt per the exchange, and the definition of “effective yield” under the credit agreement takes into consideration only ‘“applicable interest rate margins, interest rate benchmark floors and all fees, including recurring, up-front or similar fees or original issue discount (amortized over four years following the date of incurrence thereof …) payable generally to the lenders making such Class of Loans….”’ The company adds that since it is exchanging more than $367 million of debt at a “substantially higher” interest rate for $154 million of term loans with a lower interest rate and $22 million of cash, “there is clearly no original issue discount in the nature of fees associated with the exchange offers.”
  3. The company argues there is no provision in the credit agreement requiring new term loans must be funded in cash, adding that “such lenders therefore were unable to cite any such provision.”
  4. The company argues that it has no obligation for reimbursement because it says the exchange offers are permitted by the credit agreement and that the invoices received cover a period of time prior to the public announcement of the exchange offers.
  5. The company deems the lenders’ claim that the new intercreditor agreement is not acceptable “irrelevant” because it says the credit agreement requires intercreditor documentation be “acceptable to the Administrative Agents in their sole discretion.” The company notes the documentation is the same as previously approved for use with its existing junior-lien debt.
  6. The company also deems the lenders’ claim that the replacement of the collateral agent is unacceptable to be “irrelevant,” noting that the credit agreement says “the administrative agents shall have the right, with the approval from the Borrower . . . to appoint a successor, such approval not to be unreasonably withheld or delayed.”

Click here to read the company’s full statement. The company is expected to release second-quarter results tomorrow.

Bloomberg News reported late last week that two groups of lenders were preparing to direct the agent not to sign off on the agreement. The report said Paul Weiss Rifkind Wharton & Garrison LLP and Kaye Scholer LLP are representing the lender groups.

Under pressure
Following the news today, the company’s covenant-lite term loan initially gained about 1.5 points, to bracket 57.5, though has since eased from highs, recently marked at 56.25/57.25, up about a three quarters of a point from yesterday.

However, recall the company’s term loan tumbled on the news of the exchange. By contrast, the paper had been up near 70 prior to the news of the exchange, so is down roughly 13 points since the news hit. Losses in the credit have been exacerbated by a deeply negative bias towards the coal sector. The average bid of coal loans in the S&P/LSTA Leveraged Loan Index had tumbled to 67.96% of par as of yesterday’s close, from 76.56 at the end of June.

S&P earlier this month downgraded by three notches the Arch Coal corporate credit rating to CC, from CCC+, and left the outlook as negative. The senior notes were also cut to CC, though from CCC-, but the loan rating was left at B-, with a 2H recovery rating. S&P said it views the related transactions to be distressed, and the determination is based on the company’s financial condition and the significant discounts associated with the exchange offer.

“We intend to lower the corporate credit rating to ‘SD’ and the affected issue-level ratings to ‘D’ on completion of the exchange offer. Subsequently, we would assign a corporate credit rating and outlook that would reflect the new capital structure,” explained S&P credit analyst Chiza B. Vitta.

Moody’s in May downgraded the company to Caa3, also maintaining its negative outlook.

Arch Coal’s term loan, originally $1.4 billion, dates back to May 2012, though the company subsequently placed two add-ons, the most recent of which was a $300 million fungible incremental loan placed in December 2013 to help back a tender offer for the company’s $600 million issue of 8.75% notes due 2016. That deal cleared the market at L+500, with a 1.25% floor, and was issued at 98. – Kerry Kantin


Molycorp creditor panel amended to add steelworkers’ union

molycorp-minerals-companynewsThe U.S. Trustee for the bankruptcy court in Wilmington, Del., has added the United Steelworkers to the official unsecured creditors’ committee in the Chapter 11 proceedings of Molycorp, according to a court filing.


The entire membership of the committee and their contact info is as follows:

  • Wilmington Savings Fund Society (Attn: Patrick Healy, (302) 888-7420)
  • MP Environmental Services (Attn: Richard Turner, (661) 393-1151)
  • Computershare Trust Company of Canada (Attn: Shelley Bloomberg, (212) 238-3148)
  • Veolia Water North America Operating Services LLC (Attn: Van A. Cates, (813) 983-2804)
  • Delaware Trust Company, as Indenture Trustee (Attn: Sandra E. Horwitz, (877) 374-6010 x62412)
  • Wazee Street Capital Management (Attn: Michael Collins, (303) 217-4506)
  • Plymouth Lane Partners (Master), LP (Attn: Mark Kronfeld, (212) 235-2275)
  • United Steelworkers (Attn: David Jury, (412) 562-2545)

– Alan Zimmerman


European high yield bond market springs to life after three-week lull

For the third week running, no high-yield paper priced last week – leaving the year-to-date volume at €45.8 billion, according to LCD. In the same period last year, €58.3 billion of paper had been issued.

However, the market exploded into life this morning as banks looked to make up for lost time and began jamming deals into the market – most typically in an attempt to derisk buyout bridges. There are currently eight issuers out to market offering 11 bonds, for a total of roughly €4.4 billion. That activity makes this week the joint-busiest of the year by deal count, with the supply the second-largest in terms of volume, according to LCD.

The forward calendar stands at €6.6 billion, up from €4.5 billion last week.

Latest developments
GFKL will later today price €365 million of secured notes at 7.5%, having dropped proposed FRNs in favour of all fixed-rate issuance earlier today. Proceeds back Permira’s buyout.

Cellnex is driving by with €600 million of bonds that are set to price at 3.25%. Books were 6x covered, and proceeds will refinance debt. The borrower is split-rated at BB+/BBB-.

Verallia will roadshow today and tomorrow €560 million of euro- and dollar-denominated secured notes, and €300 million of unsecured notes. Proceeds, along with the accompanying €1.002 billion, seven-year cov-lite TLB, will be used to finance the buyout by Apollo Global Management.

Labco/Synlab this morning launched a three-part bond offering comprising €675 million of secured notes, split between add-ons to its 6.25% notes due 2022 and E+500 FRNs due 2022, as well as €375 million of new unsecured notes. The roadshow runs today through Wednesday. Proceeds back Cinven’s acquisition of Synlab, and refinance Synlab debt.

Dufry will this week sell €500 million of unsecured notes, with a European roadshow running from tomorrow through Thursday. Proceeds, along with those from bank-provided term loans and a rights issue, will be used to finance the purchase of World Duty Free (WDF) for roughly €2.6 billion, and refinance debt.

Balta will market its €290 million secured bond offering from today through Wednesday. Proceeds will be used to fund the €300 million acquisition by Lone Star Funds, and to fully repay bank debt.

Center Parcs is another issuer on the road today through Wednesday, as it looks to sell £560 million of class B2 secured notes. Proceeds are earmarked to repay existing class B notes via a tender offer, and partially finance Center Parcs’ recent acquisition by Brookfield.

Thames Water will roadshow today and tomorrow £175 million of secured notes in order to repay debt.

The vast majority of known situations are attempting to derisk underwritten bridges over the next few days (see above). Those that are still ahead include the following:

A consortium of Advent International, Bain Capital, and Clessidra earlier this month signed a definitive agreement to acquireIstituto Centrale delle Banche Popolari Italiane (ICBPI), for €2.15 billion. Financing isn’t likely to emerge until after August because ICBPI’s future capital structure must be agreed by the Bank of Italy. Sources say the debt financing is expected to be sized at roughly €1 billion, and will likely be all-bond.

Cinven, CVC Capital Partners, and Advent International have all been linked to bids for Telecable de Asturias, according to reports, which suggest the trio would face competition from trade player Euskaltel.

The auction for Tank & Rast has gone quiet since April.

As well as the list above, this part of the pipeline is filling with potential financings, some of which are more imminent than others (further details can be found here).

General Motors hired Deutsche Bank to arrange fixed-income investor meetings in Europe for the weeks beginning June 8 and 15, according to sources.

Medical Properties Trust hosted fixed-income investor meetings in late May, paving the way for a euro-denominated capital markets transaction to launch.

Findus is another firm that will see its capital structure refinanced in the event of a buyout. Nomad Foods confirmed last month that it is in exclusive early stage discussions with Findus to acquire its continental Europe business and the Findus Brand.

PAI is considering an IPO of Perstorp, which could value the company at roughly €1.5 billion including debt, according to sources. A refinancing of its bonds is also being looked at, sources add, and the €1.095 billion, triple-tranche cross-border deal is currently callable, with the call price coming down a few points in November this year. – Luke Millar