European loan players are waiting for activity to pick up in the secondary loan market as the slew of new deals in the healthy primary pipeline get ready to break. Loan sources noted that many firms were ramping up new funds and as deal allocations get cut back, the fund managers are mopping up any supply that becomes available in the secondary market.
One of the deals investors are eagerly anticipating is Clondalkin Group's new EUR460 million loan. The credit for the Irish specialist converter of packaging and printed products backs the EUR630 million purchase of a majority stake in the company by Warburg Pincus. All the institutional investors got cut back on this deal, noted one buysider, explaining that there is likely to be a "feeding frenzy" if any supply leaks out in the secondary market.
In addition, despite much ado over the structure of Brenntag's new EUR1.2 billion loan, investors are waiting to scoop up more paper when the name breaks for trading. The loan was fully subscribed and the institutional tranches should trade well, one dealer said. Moreover, a few investors who signed up for small allocations during syndication are waiting to see if they can buy the paper at a slim discount in the secondary market. The oversubscribed U.S. "B" loan has already broken and is trading in the 1001/2-1003/4 context.
Finally, the European loan market is waiting for the new EUR1.4 billion loan for Valentia Telecommunication's eircomm. But banks, rather than institutional investors, are looking for this loan due to the significant reduction in coupon. The new loan will include term loan and revolver tranches both priced at LIBOR plus 11/2%, compared to the more traditional LBO pricing that was applied to the company's existing loan, which was refinanced less than a year ago. This latest refinancing comes in alongside eircomm's EUR300 million initial public offering.
The existing facility includes a EUR730 million, seven-year amortizing term loan and a EUR150 million, seven-year revolver both priced at EURIBOR plus 21/4%. The facility also comprises a EUR260 million, eight-year term loan priced at EURIBOR plus 23/4% and a EUR260 million, nine-year term loan priced at EURIBOR plus 31/4%. Calls to Peter Lynch, eircomm's cfo, were not returned by press time.