Sanofi’s €3bn underlines deleveraging trend

Sanofi’s €3bn underlines deleveraging trend

French pharmaceutical Sanofi-Aventis is the latest borrower to cut back on the size of its credit facilities as strong cashflows allow borrowers across Europe to deleverage.

Sanofi’s €3bn one year plus one plus one facility, which is being co-ordinated by BNP Paribas, Royal Bank of Scotland and Société Générale, will replace a €5.8bn revolving line from 2005 that is due to expire next year.

"We have reduced the amount of the facility not only because of banks’ capacity but because we want to cut back on our corporate lines," Olivier Klaric, vice-president of treasury finance at Sanofi in Paris, told EuroWeek.

As part of its drive to deleverage, A1/AA-/AA- rated Sanofi would be happy if not all of its 16 existing relationship banks commit to the new line, but the company has also made a concession to its lending banks, the majority of which are French, by changing the currency in which the facility can be drawn.

"The facility used to be in dollars and euros, but the new deal is single currency," said Klaric. "By doing it as a dual currency deal we would have had to accept higher pricing, as very few banks have good access in both the euro and dollar markets."

Sanofi also has a €7bn five year revolver completed in July last year that will be unaffected by the new facility. That 2010 facility has two one year extension options, which the borrower expects to trigger.

Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, Bank of America Merrill Lynch, BBVA, Citi, Crédit Agricole, Deutsche Bank, HSBC, ING, Intesa Sanpaolo, JP Morgan, Natixis, Royal Bank of Scotland, Santander, Société Générale and UniCredit provided the 2010 facility.



Roche returns

Meanwhile, another pharmaceutical firm, Roche, is also marketing a syndicated loan transaction in Europe. The Swiss company has returned to the market to refinance a €2.5bn facility maturing in May next year.

The A1/AA-/AA- rated borrower has not tapped the loan market since that inaugural transaction was completed in 2005, and in 2009 it instead turned to the bond markets to finance its $47bn acquisition of US rival Genentech. However, the borrower may have misjudged the mood of the loans market in the setting of its terms for the new deal.

"Roche is certainly looking much lower than we would have advised them to go," said a senior loans banker in London. "They’ve always been a fairly aggressive name, but at the moment prices are increasing all the time. There isn’t really a credit issue with Roche — after all, it’s a very M&A busy company. But this deal at this price is not a shoo-in."

Despite the tight pricing, the deal is still expected to find plenty of traction with lenders. One banker noted that if a bank was serious about the its dedication to the pharmaceutical sector then it would need to have Roche’s facility on its balance sheet.

"Roche is a big company and a good credit," said a senior loans banker in London. "They also spread their mandates back in 2009. But there could be a sense that they’ve done all their bonds now, so what more business do they have to offer? If this is too skinnily priced then there could be problems."

Roche is out with a €3.5bn five year revolver, co-ordinated by Deutsche Bank. The new facility will replace a seven year line from 2005 agreed with BBVA, Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, Barclays Capital, Citi, Credit Suisse, Deutsche, JP Morgan, Royal Bank of Scotland, UBS and UniCredit.

Almost all the lenders were mandated on the bonds — totalling more than $40bn — that were sold to finance the acquisition of Genentech. The bonds broke records for the largest transactions in the euro, Swiss franc and dollar corporate bond markets.

In the first half of 2011, Roche Holdings reported profit before taxes of $2.365bn. The company is deleveraging, aiming to return to a net cash position by 2015. In 2010 it reduced net debt by 20% through bond buybacks and amortisation.

Related articles

Gift this article