Bond, high-yield bond
British film studio Pinewood, where 23 out of 25 of the James Bond films have been shot, leant on its new property rental credentials in order to transform itself as a credit.
The outcome was a £550m senior secured six-year non-call two bond in September that was the biggest high-yield offering in sterling in 2019.
The deal came off the back of two long-term rental contracts with Disney and Netflix of 12 and 10 years, respectively.
Pinewood used those two leases as the springboard for a new, punchier approach to its debt model.
"It was what the bond the market was looking for in 2019: a strong story with good credit fundamentals," said Robert Wartchow, managing director of leveraged finance capital markets at Credit Suisse. "The market is prepared to support companies like that."
Despite landing glitzy tenants, Pinewood's issue wasn't straightforward.
"It was the largest sterling high-yield bond to date, and it was effectively a dividend recap in the midst of a volatile period related to Brexit," said Wartchow. "It wasn't an obvious mix of ingredients to say a successful deal."
Bookrunners Credit Suisse, Goldman Sachs, Barclays, HSBC and NatWest Markets got the deal ready as soon as possible after the summer break to tap the September window ahead of the ECB restarting its bond-buying programme.
In addition, syndicates positioned the credit as a Brexit hedge: Pinewood had just signed its deals with Disney and Netflix that took occupancy risk off the table.
Bankers also got investors comfortable with the credit by shifting their perspective to focus on Pinewood's LTV of 47%, rather than its leverage – especially important as Pinewood's debt-to-Ebitda would be going from 5.3 times to 10 times after the deal.
The tactic worked: demand enabled Pinewood to accelerate pricing, wrapping up the sale a day before the ECB's meeting on September 12.
Leads also upsized the bond from £500m while pricing came at the tight end of the 3.25%–3.50% range.
High-yield investors were able to see through Brexit noise and concerns over the company's increasing debt levels – and picked up an attractive spread at 280bp over Gilts, compared to low Triple B rated credits.
The sale was also buoyed after Fitch gave a thumbs up to the company's pivot to real estate by an investment-grade rating of BBB to the senior secured bond.
The ratings agency also put Pinewood's long-term issuer rating of BB on positive watch.
S&P rated the bond at BB, one notch above its corporate rating.
Proceeds went to refinancing Pinewood’s only other bond and also fund a £250m dividend recap to Pinewood owner Aermont Capital.
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