European Chemicals Distributor Pulls Debut Offering

Brenntag AG, a German chemicals distributor, pulled a Goldman Sachs-led E190 million high-yield offering last week after investors demanded an 11% coupon on its debut junk sale and the company would not budge past 10%. "We had sufficient demand to price a deal, but at a price level beyond the point of indifference of our client," said Martin Thorneycroft, executive director in European high-yield capital markets at Goldman in London. Instead, Brenntag opted to stick with its current mezzanine financing rather than tap the high yield-market. Hubertus Spethmann, spokesman for Brenntag in Mülheim-an-der-Ruhr, did not respond to calls or emails by press time.

Initial price talk on the credit was at 10%. Investors, however, pushed for 11% and the deal fell apart last week amid broader weakness in fixed-income markets worldwide. "Investors were positive on the credit, but the insurance premium they required to buy the transaction with the market trading off substantially made the offering less attractive for the company," Thorneycroft said. The proceeds from the offering were to refinance a mezzanine facility that is due in 2011, on which it pays Euribor plus 5% cash interest plus 6 1/2% paid-in-kind interest.

Other high-yield deals in Europe also faced choppy waters last week. U.K. department store Debenhams cut the size of its Credit Suisse First Boston and Morgan Stanley deal from £325 million to £275 million equivalent and was forced to price the sterling and euro classes a half point wider than guidance, at 10.5% for sterling and 9.5% for euro. And ProSiebenSat.1, a German television provider, shortened the maturity on a E150 million deal from seven to five years, and removed a call option. J.P. Morgan Securities and Deutsche Bank underwrote that deal.