LONDON, Nov 23 (Reuters) - French glass bottle maker Verallia has repaid €100m of term loan and reduced pricing by 25bp, becoming one of the cheapest Single B borrowers in Europe’s leveraged loan market.
Apollo-owned Verallia used cash on its balance sheet to reduce its term loan debt and tighten pricing by 25bp to 275bp over Euribor, according to its third quarter results announced on November 17.
A banker on the deal said the pricing reduction resulted from a margin ratchet on the loan, which sees pricing tighten when a leverage threshold is met.
Pricing of 300bp over Euribor has become an unofficial threshold for single B issuers of leveraged loans, as CLO investors find it hard to accept pricing below that level due to return requirements.
Verallia has been known for its aggressive pricing strategy, conducting three repricings within the space of a year on its €1.375bn term loan B that concluded at 300bp, with a 0% floor in May 2017.
The term loan originally priced in July 2015 at 400bp with a 1% floor. It reduced to 350bp with a 1% floor in June 2016 and tightened further to 375bp over Euribor, with a 0% floor in December 2016.
French telecoms group Altice last month finalised a cross-border loan refinancing to lower the cost of its borrowings and extend maturities. A €1.07bn-equivalent leveraged loan, split between a €300m tranche and US$900m tranche, paid 275bp over Euribor/Libor, 25bp tighter than initial guidance of 300bp over Euribor/Libor.
While Altice’s corporate ratings are B1/B+, facility ratings are B1/BB-.
Verallia on the other hand has both corporate and facility ratings of B1/B.
“I’m not aware of anything else at that price at that rating,” a senior leveraged finance banker said. “Verallia’s loan ticks boxes though because it’s big and investors like packaging.”
Leveraged loan market pricing has ground tighter over the past year, largely due to a fundamental shortfall of new paper compared to the overwhelming demand for it. Much of the money is coming from managed accounts that find it easier to accept lower pricing and don’t have a natural floor on returns, compared to CLO investors.
Verallia’s net leverage fell to 3.7x adjusted Ebitda in the third quarter, from 3.9x in the Q2, while Ebitda rose 6.8% year-on-year to €131.1m in the third quarter. It had net sales of €2.4bn in 2016.
Verallia produced around 16bn glass bottles and jars in 2016, and counts champagne house Dom Perignon and chocolate spreads maker Nutella among its clients. (Editing by Claire Ruckin)