Lehman Brothers was involved in four of the 10 largest European mezzanine loans over the last year comprising ProSiebenSat.1/ SBS Broadcasting, PagesJaunes, Formula One and Kion, totalling in excess of €3.3bn.
Lehman Brothers has been a driver of market developments through innovative structures, including toggle mezzanine, PIK loans, European re-pricings and HoldCo structures. As the market reached its peak, Lehman Brothers consistently drove structural changes through distribution, and led some of the most notable deals including Dako, BAWAG and Formula One.
“In defining our franchise and performance in 2007 I’d say in the first half we were at the forefront of structuring innovative deals against the backdrop of unprecedented liquidity. In the second half of the year we demonstrated commitment to structuring deals such as Firth Rixson in a very challenging market,” says Richard Howell, co-head of leveraged finance at Lehman Brothers in London.
The team is recognised not only for the impressive deals the market saw in the first half of 2007 but the complex and challenging deals last year.
Lehman Brothers acted as mandated lead arranger, joint bookrunner and financial adviser on the largest ever mezzanine financing in Europe at €1.88bn in the warranted HoldCo facility for BAWAG. In what was a unique financing structure allowing the leveraged acquisition of BAWAG without affecting its regulatory capital position, the transaction featured a complex structure including contractual return and warrants.
“The BAWAG deal was by no means straightforward, but we had a lot of conviction to get it done,” says Howell. “It was a complicated credit to explain with a unique structure, but we leveraged our strong institutional knowledge as sole M&A adviser to get investors comfortable with the credit.”
Another impressive deal for Lehman Brothers was the KKR and Permira-sponsored €3.3bn acquisition of ProSiebenSat.1, structured as senior and subordinated HoldCo acquisition financing, followed by ProSiebenSat.1’s subsequent €4.6bn acquisition of SBS Broadcasting, financed by senior secured facilities.
Lehman Brothers acted as sole global co-ordinator of the largest, most complex transactions of last year at a total of €7.9bn – the mezzanine loan comprised €606.3m. After a successful reverse flex, the ProSiebenSat.1 mezzanine was placed at 7% (from 8.25%), making this the lowest priced mezzanine facility of the year.
“ProSiebenSat.1 was the last major deal to be completed before the credit crunch. The structure followed on from the successful completion of the PagesJaunes deal that we led, which was the largest ever French LBO,” says Howell.
“ProSiebenSat.1 took the complexity of the PagesJaunes deal to another level as it involved the acquisition of a controlling stake in a public company with the subsequent combination with SBS Broadcasting. At the time, the deal was heavily oversubscribed and the pricing was reverse flexed. Just two weeks later, however, the market had changed dramatically and it would not have been possible to syndicate the deal at all,” he says.