German sanitary fittings company Grohe is expected to offer the first European high-yield bond of the fall season and last week roadshowed a €335 million offering of senior notes due in 2014. Investors at a roadshow in London on Wednesday said they expect a coupon between 8.75% and 9.75%; the deal should be priced as early as this week.
The proceeds will be used to refinance a bridge facility put in by Credit Suisse First Boston Private Equity and Texas Pacific Group when they acquired Grohe from BC Partners in July. CSFB, Citigroup and Deutsche Bank are joint leads on the upcoming deal.
Fixed-income investors say their opinion of Grohe is mixed. Bearish investors point out the company is highly levered at 6.5 times debt to earnings before taxes, depreciation and amortization, and the cost savings forecast by management are aggressive at €90 million over five years. "BC Partners made their money out of multiple expansion on Grohe and now it's up to the new owners to improve performance, which is a much tougher job and won't happen overnight," said one London-based investor.
But bullish investors buy the growth story. They said Grohe's brand positioning in high-end consumer products and room to increase penetration in major markets such as the U.S. bode well. And since 70% of Grohe's business comes from home renovations and not new home sales, the company is not as vulnerable to a slowdown in the housing market as it might appear.
