Thunderclouds depart but corp borrowers stay under cover
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Corporate Bonds

Thunderclouds depart but corp borrowers stay under cover

Markets have stabilised after the recent turmoil, but a lack of issuance across corporate bonds and loans this week illustrates how nervous borrowers are that further upheaval could be on its way.

The investment grade bond market has entered its fourth week of dysfunction. After three weeks of volatility spurts and uneasy calm, activity has slipped into a mundane gear.

Reasonable stability from the end of last week has carried over into this. But no one is comfortable enough to get deal flow going again.

Amadeus and TDF Infrastructure both held investor calls on Monday. Both are still yet to follow up with deals.

One issuer has come though. French investment firm Wendel brought a €300m no-grow on Monday, so far the week’s only euro offering. Bankers away from the deal estimate that the firm paid a new issue premium between 30bp-40bp.

Wendel priced the 4.5 year notes at 170bp over mid-swaps, the same level at which it priced €500m 12 year notes in January.

Both investors and issuers are unwilling to muck in unless the market moves in their favour. Bankers should start hoping for an improvement in weather if they want to get some joy out of the week.

HY fear

Fear is the word in the European high yield market. The euro high yield buy-side gang began October more frightened than it ever was during the first half of this year. While in July, 29% of investors surveyed by Bank of America Merrill Lynch Global Research were concerned about a slowdown in China and emerging markets, now 55% are.

Of those surveyed, 4% worried about deflation in the Eurozone in July, but that figure has more than doubled to 10%. And a quarter of them now believe that demand is ebbing away, 4% up from two months ago.

Could the announcement of the Securitas buyout deal’s €700m of senior secured bonds signal the return of investor confidence and recovery of supply levels? Hellman & Friedman is acquiring a majority stake in the Swedish company Securitas Direct with a €2.7bn financing package involving also loans.

High yield bankers speak of it with a mixture of hope and apprehension — understandably so, as the background is not inspiring. In another research paper published on Wednesday by CreditSights, the picture of the high yield market that rises from the summer break is cloudy, with just about €4bn of offerings in August and September.

As a senior analyst at one of the ratings agencies put it on Tuesday: where are the familiar issuer faces hiding?

Commodity confidence

There are deals to be done in investment grade loans. These might normally be seen as run-of-the-mill refinancings, but the size of the books suggest that confidence in commodity traders is not completely shattered, even while Glencore is under pressure.  

Vitol and Gunvor have come to the market for their annual loan refinancings. Switzerland-headquartered Vitol signed its annual loan refinancing this week and increased the loans from $7.5bn to $8bn. The loan was oversubscribed at $8.7bn and the syndicate consists of 57 banks. ABN AMRO, Crédit Agricole, Lloyds, Rabobank and UniCredit were active bookrunners and mandated lead arrangers for the deal.

Gunvor launched syndication for its $1bn refinancing of one year and three year loans. Bookrunning mandated lead arrangers for Gunvor are ABN AMRO, Crédit AgricoleCredit Suisse, DBS, ING, Natixis, Rabobank, Société GénéraleUBS and UniCredit.

New financings are few and far between in the loan market, but the European Investment Bank has provided its first green property loan in a €100m deal for Swedish real estate company Fabege. The bank has until now focused on funding transport and energy efficiency projects.

Meanwhile the Dealogic released its Global Loans Review for the first nine months of 2015. Global loan activity was at its lowest Q3 level since 2003 with 1,611 deals totalling $757.4bn. EMEA syndicated loans volume was down 25% on 2014, totalling $784.6bn for the first nine months of this year.

Deals are, however, progressing in the leveraged loan market. Nomad Foods, the packaged foods company, has arranged an incremental cov-lite term loan of €285m through its subsidiary Iglo Foods Midco. Nomad's debt has a 0% floor, maturing June 30 2020 with expected ratings of B1/B+. It will use the proceeds in its acquisition of Findus Group, maker of fish fingers and Crispy Pancakes, for approximately £500m.

Bravida, the Swedish electricity and plumbing group, is to obtain a SEK4bn (€430m) five year unsecured term loan facility. The company will use proceeds in refinancing all its outstanding senior secured notes, totalling SEK1.3bn (€225m). The interest rate for the deal is 1.65% at current IBOR rates with adjustable margin based on Bravida’s net debt/Ebitda ratio, with a floor of 0%.

Hellman & Friedman is raising a €1.3bn term loan within a total new debt package of €2.7bn, to finish its acquisition of Securitas Direct. The debt takes Securitas' total leverage ratio to 7.5, or 5.6 times senior secured.

And Intertrust has agreed €605m of credit facilities as precursor to upcoming initial public offering. The debt is split between a €440m term loan facility and a €75m revolving credit facility, as well as a $100m US based term loan facility.

Dan Alderson, syndicated loans editor +44 207 779 7311

Max Bower, leveraged loans, +44 207 779 8964

Robert Cooke, +44 207 779 8124

Jon Hay, corporate finance editor +44 207 779 7321

Victor Jimenez, high yield +44 207 779 7379

Ross Lancaster, corporate bonds +44 207 779 7322

Elly Whittaker, investment grade loans +44 207 779 8361

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