Private equity firm Blackstone has sweetened terms on a €1.56bn-equivalent US dollar and euro high-yield bond to help finance its buyout of Spanish gaming company Cirsa following pushback from investors.
Price talk on the deal emerged late New York time on Thursday at levels wider than where the deal was first marketed to investors. The maturity of the bonds has also been shortened, while several covenants on the deal were changed.
Price talk on the euro and dollar fixed rated tranches is now at a yield of 6.75-7.00% and 9% area respectively, which includes an expected original issue discount (OID).
Bankers on the deal were initially sounding out investor interest at around 6% on the euro-denominated fixed-rate tranche.
Price talk on the euro floating rate note is now at a yield of 6-6.25% including an OID.
The maturity of the debt was also changed.
Instead of seven-years on all three tranches, the life of the bonds has been reduced to 5.5-years.
Blackstone has also changed other terms on the deal that should offer investors better protections. A portability feature which allows the bonds to stay in place even if the company is sold, has been removed.
The restricted payments basket, which determines the capacity to pay dividends and make other payments away from creditors’ reach, has also been cut in half.
Analysts at Covenant Review and CreditSights warned earlier that the deal documentation would give the company generous flexibility to raise debt and make distributions away from creditors. nL8N1TN350
“Blackstone is a decent operator and not looking to take dividends, but documentation provides no protection if they were to reverse course,” one investor told IFR.
Cirsa is not the only issuer that has faced pushback of late in the high-yield market.
On Wednesday, TDC had to concede on the documentation for its deal that forms part of the financing of its buyout by a Macquarie-led consortium.
It had to cut flexibilities providing dividend capacity, and also widened pricing on the US dollar tranche to 9.375% from 9% area whispers heard earlier in marketing.
With the changes on the Cirsa deal now out, bankers are hoping to price the trade on Friday. Deutsche Bank,Barclays and UBS are joint global co-ordinators on the deal.
Cirsa, based outside Barcelona, is owned by 73-year-old Spanish billionaire Manuel Lao who founded it in 1978. Blackstone and Apollo were the final bidders on the deal, Reuters reported in April, citing sources. nL8N1RX4C7
Blackstone is also buying a 55% stake in Thomson Reuters’ Financial and Risk unit, which includes IFR.