Sanitec hits relative value snag

Relative value concerns are prompting some leveraged loan investors to raise spread expectations on Sanitec’s €135m second lien loan. The deal is part of a US$935m LBO package for EQT’s €951m buyout of the company. RBS is arranging the loans and has had early discussions with investors, in which four-handle pricing was discussed for the second lien tranche.

The loans are not expected in the market for a couple of weeks, but buysiders said they were looking for as much as 100bp on top after the sell off a few weeks ago in the high-yield market. “The loan market has been a screaming buy compared with everywhere else, but a bit of relative value is creeping in in some cases following moves in high-yield,” said a CLO manager.

He added that pricing of 400bp to 450bp was aggressive on the deal anyway, regardless of movements in the markets. Investors said the debt package also included about US$800m in senior debt tranches. Total leverage will debut at around 6x, they said.

The high-yield market has been volatile over the last few weeks, exemplified by Hayes Lemmerz’s decision to cancel a €120m proposed issue. Before it was shelved, investors were sounded at wider price talk of 11.2% with a price discount at 99.

Sanitec, the bathroom products company, is EQT’s second venture in the sanitary ware sector and follows the firm’s successful exit in 2004 from Dahl, the leading heating and sanitation wholesaler in the Nordic region.