June 15, 2017 / 3:05 PM / in a month

LPC-European buyout deals swamp leveraged loan investors

4 Min Read

LONDON, June 15 (Reuters) - Four highly anticipated leveraged buyout deals hit Europe's leveraged loan market this week, much to the relief of investors who have grown weary of a raft of refinancing and repricing transactions, but questions have been raised about whether the market can process all of the new deals at the same time.

Investors are considering a US$2.2bn-equivalent financing for Hong Kong-based international schools operator Nord Anglia Education; €1bn for European industrial supplies distributor IPH Brammer; a €444m loan for Dutch chemical distributor Caldic; and a €357m loan for European engineering company Assystem Technologies.

They were also offered new paper on a €335m loan for Dutch theatre group Stage Entertainment, as CVC finally opted to leverage the business, after acquiring a majority stake in 2015.

Investors have been desperate for new issuance following a lack of event-driven financings since the last quarter of 2016. Yet the emergence of a handful at the same time is causing issues internally at some funds as they struggle to attend all the bank meetings and take a view on the credits within the two-week timeframe typically given for a syndication.

Instead, many investors are opting to pick the deals they perceive to have the greatest chance of getting approval from internal committees, shunning the rest.

“The deals have all come at the same time and all require work. We are picking the best ones and taking those forward. [And that means] only two out of the current batch,” an investor said.

A second investor said: “There are less people attending the bank meetings. Some people have to decide what to go to as there is so much happening at the same time. Having spoken to other funds, they are also struggling and making decisions from the beginning which ones are convertible and more likely to be approved.”

In additional to the new deals, investors are also working on existing deals in the market including a repricing for UK petrol station operator MRH and dividend recapitalisations for UK petrol station operator Motor Fuel Group and German packaging company Kloeckner Pentaplast, among others.

“We don’t focus on new deals rather than repricings. If repricings come in then we’ll do those as well,” the first investor said.

Frustration

Some bankers are getting frustrated with investors, especially if they are prioritising existing deals over new ones.

“ spend ages complaining about a lack of new deals, then get them and say they have to do repricings first as new deals require a bit of work and thought process. They then end up not doing the new deals. They should endeavour to do more. If investors are telling people there is a finite number of deals they can process then it sends out a message it is a constrained market with capacity issues,” a syndicate head said.

The new deals are broadly pricing in the same area between 350bp-400bp but could diverge if certain loans become more or less popular, amid increasing investor selectively. This could prompt welcome credit differentiation that has so far been amiss this year due to the supply and demand imbalance. (Editing by Christopher Mangham)

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