Dutch academic publisher Springer is back in the market with an ultra-aggressive €1.84bn leveraged recapitalisation that will see Candover and Cinven take more than €500m of equity out of the company. Barclays is the arranger. The deal will replace the borrower’s €1.319bn loan of last year, which itself was a recapitalisation of the €1.075bn facility that supported the buyout of the company in 2003.
The new recapitalisation, which adds €120m of debt to each of the B, C and E term loans and €160m to the second-lien tranche, will push total leverage up a notch from 6.4x to an extremely punchy 7.4x. Senior net debt to Ebitda is 5x and 6.1x including second-lien.
Senior debt comprises a €337m five-year term loan A at 225bp over Euribor, a €272m six-year term loan B at 275bp over, a €272m seven-year term loan C at 325bp over, a €150m five-year revolver at 225bp over and a €270m seven-year term loan E at 325bp over. Subordinated debt is split between a €260m 7-1/2 year second-lien tranche at 600bp and a €278m eight-year mezzanine tranche.
The high leverage multiples are eye-catching at a time when the market seems to be rebelling against the trend. Recent deals for Debenhams and Sanitec are experiencing serious pushback on concerns about multiples. Springer, however, is a strong credit story and has a record of defying market detractors.
Last year’s deal, which was also criticised for being too aggressive, generated a healthy oversubscription, with the company’s strong sales performance more than offsetting concerns about leverage.
Now that leverage is a notch higher, Barclays is betting that the same thing will happen again and that the shorter-than-standard senior debt tenors will also help the deal home. Barclays said that all the mezzanine investors in the 2004 deal had agreed to the recapitalisation and to a reduced coupon, which is a strong endorsement from lenders at the bottom of the capital structure.
Springer is not the only new private equity-backed company starting down the recap trail. New Look has mandated a £750m leveraged recapitalisation.
Debt is split into a £161.7m seven-year term loan A at 225bp over Libor, a £189.25m eight-year term loan B at 275bp, a £189.25m nine-year term loan C at 325bp, a £50m seven-year revolver at 225bp, a £50m
seven-year acquisition line at 225bp and a £30m seven-year capex line at 225bp. Unusually, the deal comprises second-lien and mezzanine subordinated debt with an £80m 9-1/2-year second lien tranche at 500bp and a £55m 10-year mezzanine tranche paying 4.5% cash and 5.5% PIK. Total net debt to Ebitda is 3.9x, while senior net debt to Ebitda is 3.1x.
This full recapitalisation comes after sponsors Apax Partners and Permira amended the original £485m facility earlier this year to pay themselves a £100m dividend. That dividend came after the company reported a strong sales performance over Christmas and the retailer is thought to have traded well since.
SigmaKalon is also due to syndicate a €1bn-plus recapitalisation of its €869m loan that CSFB and SG arranged last year. That deal was itself a recapitalisation of the €779m loan that backed sponsor Bain Capital’s buyout of the group in 2003.