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Tuesday, 21 November 2017

EMEA Leveraged Loan: Verallia’s €1.537bn senior facilities

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The €1.537bn loan backing Apollo Global Management’s acquisition of Saint-Gobain’s glass bottle unit Verallia is the largest new money covenant-lite term loan raised in Europe’s leveraged loan market for a debut issuer.

Verallia’s loan was eagerly awaited, providing a big boost to Europe’s liquid loan market that had been crying out for new event-driven paper following relatively little supply.

The financing was executed in challenging market conditions, navigating around a potential Grexit and a number of failed loans pulled from syndication amid jittery markets.

Arranging banks Deutsche Bank, Credit Suisse, Barclays, BNP Paribas, Nomura and Societe Generale had delayed syndication of the financing at the end of June to await the outcome of an emergency eurozone summit.

It was then launched in mid-July as the first deal to take advantage of the market window reopening following the temporary resolution to the Greek situation.

As a large, first-time issuer, the deal “ticks all the boxes the market wanted to see”, one investor said at the time of launch.

As Apollo’s largest deal in Europe, Verallia tapped both the loan and bond market. However, the success of the loan saw the Term Loan B increased twice by a total of €335m, to €1.337bn from €1.002bn, and the bonds reduced by the same amount. A €200m revolver remained unchanged.

“The term loan’s upsizing and consequent reduction in the bond demonstrates the flexibility and maturity of the loan in a market filled with secondary LBOs and IPO repayments,” said Charlotte Conlan, head of loan and high-yield syndicate, EMEA, at BNP Paribas.

“Verallia, as a new sizeable credit to the LBO market, is a very positive signal for the durability of the European leveraged market.”

The timetable was accelerated and resulted in a speedy one-week syndication, despite market turbulence and competition from other leveraged loans that had been launched into the same market window and were competing for investor attention.

The term loan also closed with a margin of 400bp over Euribor – the tighter end of pricing guidance of 400bp–425bp following a strong response from institutional investors. The 1% Euribor floor and 99.5 OID were unchanged.

The final term loan book attracted five banks and 50 funds, the majority of which were managed accounts. The loan traded up on the break and managed to remain above its break price throughout the year, despite macro volatility suppressing loan prices in Europe’s secondary loan market.

“Verallia tested the depth of liquidity in the loan market as the company wanted to raise as much loans as possible given the volatility in the bond market. The deal had to get the relative value right between the two products [loans and bonds] to attract loan liquidity,” said Hoby Buvat, managing director, leveraged debt capital markets at Deutsche Bank.

To see the digital version of the IFR Review of the Year, please click here .

To purchase printed copies or a PDF of this report, please email gloria.balbastro@tr.com .

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