Secondary leveraged buyouts are becoming a stock feature of the European high-yield market as LBO sponsors hungry for assets snap up existing LBOs and use the high-yield market to fund their purchases.
Two secondary LBOs, also known as LBOs of LBOs or LBO squareds, have occurred in recent weeks. Market players expect the lack of new assets in the private equity market to fuel more secondary LBOs, some of which will end up being financed in the bond market. "Sponsors have capital to spend and there haven't been that many new assets up for auction this past year," said Jim Amine, head of European leveraged finance at Credit Suisse First Boston in London.
In Europe, E5 billion of secondary LBO senior debt across 15 deals has been syndicated this year, up from E3.5 billion across 11 deals in all of last year, according to CSFB.
Recent examples include a sale to finance Credit Suisse First Boston Private Equity and Texas Pacific Group's acquisitions of Grohe (BW, 9/13), which was followed a week later by a E150 million bond from German auto parts company Auto Teile Unger. That sale was part of a secondary buyout of the company by Kohlberg Kravis Roberts.