There was a flurry of activity in Invensys' bank debt in front of the company's announcement that it will pursue a balance sheet overhaul, including the refinancing of its bank loans. A large piece of Invensys $1.5 billion '04 revolver traded in the 97 context shortly before the deal was announced. That loan had been quoted in the 95 1/2 range previously. The company also has a $1.46 billion revolver that matures in 2005, which was quoted in the mid to low 90s before the announcement. All the pieces are now set to be repaid in March. "It's a five- or six-point pickup," noted one European buysider.
The new financing is set to include a GBP1.45 billion senior secured piece, a GBP150 second-lien tranche, GBP650 million of high-yield notes, and about GBP450 million of equity. The deal is underwritten by Deutsche Bank. One European trader noted that underwriting the financing is the only way for the large scale refinancing to be completed. Each part is vital to the whole deal, he explained. The package will be syndicated globally with financing denominated in dollars, euros and sterling.
A few European loan investors noted that the new financing would provide the opportunity to bow out for some lenders who had experienced fatigue over the last couple of years as the company fell from investment grade. The bank group did not earn leveraged margins although it had leveraged risk, noted one European buysider. But another market player asserted that the banks would not choose to walk away at this time now that the new deal will be secured and carrying a LIBOR plus 2 1/2% pricing. The fees are also pretty rich, he added.
Regardless, the market player said Invensys picked the right time to pursue the transaction. The market is extremely liquid and receptive to transactions, one trader said. Without the refinancing, the company's future would look bleak, noted a European buysider. Calls to Adrian Hennah, cfo of Invensys, were not returned by press time.