Huge institutional responses to two European leveraged buyout deals out to sub-underwriters at the moment illustrate just how big this investor base has become in Europe.
The fund tranche on Orangina’s €1.44bn LBO financing is a staggering 10x oversubscribed, while the same tranche on TDC’s €8.5bn LBO loan is also a blow-out. Banks on both deals are still processing the credits before seeking lending approval.
“It’s crazy. The funds know the size of these tranches and carve-outs but still they commit on huge tickets. It makes the allocation process a nightmare,” said a senior European leveraged finance banker. “But it’s good for the market as a whole and it’s showing no sign of abating.”
Orangina’s €1.44bn loan, which backs the Blackstone and Lion Capital buyout of the Cadbury Schweppes European drinks unit, is expecting sub-underwriting banks to respond with commitments early next week. MLAs are Banc of America Securities, Citigroup and JPMorgan. While funds love the deal, banks reportedly have some concerns over its leverage.
Senior debt comprises a €245m seven-year term loan A at 225bp over Euribor, a €270m eight-year term loan B at 275bp, a €270m nine-year term loan C at 325bp, a €150m seven-year bridge to disposals at 225bp, a €30m seven-year restructuring facility at 225bp and a €75m seven-year revolver at 225bp.
Subordinated debt is split between a €126m 9-1/2-year second-lien tranche at 525bps and a €279m mezzanine bridge loan. Total net debt to Ebitda is just over 7x, while senior net debt to Ebitda is 5.1x.
Banks are asked to sub-underwrite €75m with a €50m target hold for 145bp all-in.
Meanwhile, sub-underwriting commitments to TDC’s €8.5bn senior debt backing an Apax Partners-led consortium’s US$15bn buyout of the Danish telecommunications giant, are still a couple of weeks away.
MLAs are Barclays, Credit Suisse, Deutsche Bank, JPMorgan and RBS, with Nordea, SEB Merchant Banking, Danske Bank and DnB Nor joined ahead of launch.
The leads said banks were making all the right noises, with the deal’s size the only real issue as leverage is conservative and the company will deleverage quickly through asset disposals after two years.
Senior debt comprises a €2.1bn seven-year term loan A at 225bp over Euribor, a €2.85bn eight-year term loan B at 275bp, a €2.85bn nine-year term loan C at 325bp and a €700m seven-year revolver at 225bp.
Subordinated debt comprises a €1.1bn four-month cash bridge paying 75bp–225bp, a €245m 11-year PIK note at 13.75% and a €2.275bn 18 month high-yield bridge paying 675bp over Euribor for the first six months and then rising by 50bp every three months until maturity. The MLAs hope to take the deal out in the high-yield bond market this year.
Banks are asked to sub-underwrite €250m with a €150m target final hold for 150bp and €175m with a €100m target final hold for 135bp.
Senior net debt to Ebitda (including the outstanding bonds for which there is a tender) is 4.4x, while total cash pay leverage is 5.6x.
The sponsors, bidding through a specially created acquisition vehicle called Nordic Telephone, are Apax Partners, Blackstone, KKR, Permira and Providence Equity Partners.