Cashflow is king

That the European market continues to be tough despite an improvement in tone is demonstrated by the two most high profile leveraged deals in the market – one likely to roll smoothly over into an existing group, the other – for the time being at least – a deal that appears to be more an object of interest than of investment.

The approximate £240m in debt financing the sale of Wood Mackenzie to Charterhouse Capital Partners at an enterprise value of £553m, which is mandated to HBOS, HSBC and Nomura as bookrunners, is the debut leveraged finance transaction for Nomura in Europe since its acquisition of Lehman Brothers in Europe and one of the first LBO financings out of the traps in Europe since the banking crisis took hold last autumn.

The debt is split between £170m of senior debt, which comprises a six-year tranche A of £80m paying 475bp and a seven-year tranche B of £90m paying 525bp.

There is a nine-year mezzanine tranche of £70m which has a yield above 10% and a six-year £10m revolver paying 475bp.

Much of the debt is amortising and Wood Mackenzie, which the underwriters described as a “very usual asset” in terms of its anti-cyclicality, cash conversion and visibility on revenues, is expected to delever quite strongly.

This profile – together with a deep liquidity cushion – is one of the reasons why most of the existing syndicate is expected to roll, even though total leverage is above five times. Another reason is that those banks that invest in credits around the oil sector – such as those that supported the recent acquisition financing from Premier Oil – tend to be loyal.

Wood Mackenzie, which provides consultancy services to the oil and gas industries, is one of the most attractive investments in Candover’s portfolio and the sale generates proceeds of £36.2m for the hard-pressed private equity group. It is expected that Candover will sell further assets.

The sale of Wood Mackenzie comes in the same week as bankers began discussions about financing a potential buyout of the eastern European assets of A-B InBev.

While these two deals could suggest that the market is finally starting to thaw after a very chilly six months, the progress of the closely watched US$1.3bn financing supporting the buyout of NDS is a reminder that conditions are still anything but easy.

Here with senior debt totalling US$960m and pricing ranging from 350bp on the revolver up to 450bp on the term loan B, bankers said the package, which was put together last year, needs quite a large OID to get it over the line. JP Morgan, Morgan Stanley, Bank of Ireland, BNP Paribas and Lloyds TSB are bookrunners.