Tranche 1: Eu850m
Maturity: 15 May 2016
Issue price: 100.00
Coupon: three month Euribor plus 662.5bp
Call option: at 102.00 from 9 May 2006
Spread at re-offer: three month Euribor plus 662.5bp
Tranche 2: Eu454m
Maturity: 15 May 2016
Issue price: 99.182
Call option: at 104.438 from 15 May 2011
Yield at re-offer: 9%
Launch date: Friday 28 April
Payment date: 8 May
Joint books: Citigroup, Goldman Sachs
Goldman Sachs — In the end this deal was successful and one that did well. There was a lot of speculation towards the end of last week that the ratings agencies had stepped in when we had suggested that we would increase the size of the deal.
However, the truth is that we were in dialogue with the ratings agencies throughout the process and the point that we were delayed on was a documentation problem and not one connected in any way to the suggestion that agencies stopped the deal being priced last Thursday.
The issuer has prevented us from revealing what that documentation issue was.
S&P's opted to maintain the ratings, whereas Moody's decided to downgrade them by one notch.
It is fair to say that some investors, those that were restricted to buying paper rated above Caa1, pulled out of the deal when Moody's acted last Friday, while some also thought that the trade had been pushed a little too high.
However, we achieved a healthy book — the fixed rate tranches were priced on the 9% yield guidance, whereas the floater came inside the guidance level.
The floater is a unique transaction — it is the biggest floating rate high yield deal ever and has no call protection. It is trading well at 101, while the fixed rate tranche has come under a little pressure. It was priced at 99-1/8 and is now trading at 98.5.
The company is a very acquisitive group and will continue to be so in the future. However, this trade only effects the gross leverage of the group, it is financing pre-funding needs and therefore does not impact upon net leverage, as S&P's decided.
Naturally, the absolute levels of debt are increased, and that is why Moody's acted. The floater was anchored by hedge funds, with considerably long only fund bid. The fixed tranche was the reverse of that.
It is understandable if some investors thought that in the end the deal was a little sloppy, but the result has been good for the issuer and market.
"...the feeling we have is that a lot of investors were irritated by what happened with this trade — some pulled orders on the Thursday night when the ratings agencies announced that they were looking to downgrade the company.
We have also heard that there was quite a row over pricing between the Goldman and Citigroup — Citigroup were on the left hand side but Goldman, because of the private equity interest, were very much involved.
That said, the deal has gone well, and they sold well. The fixed rate deal has struggled a little and is now trading at 98/98.5, which is disappointing considering the bull market we are in. The floater is above par."
"...they were caught speeding."
"...there has been a little poor performance this week, and that has been disappointing, but generally we are comfortable with the credit and gladly participated.
The Moody's downgrade was hardly a surprise, but we see the increase in debt as going to re-financing and so didn't mind too much about the downgrade.
We bought bonds and like the credit."