Best foot forward
Chinese sportswear giant Anta Sports Products wrapped up a €2.2bn five-year loan that attracted 21 banks, winning an overwhelming vote of confidence in a transformational European acquisition.
The recourse financing was essential to the purchase of Finland’s Amer Sports and stood out for its successful execution despite the lack of familiarity with Anta among lenders, geopolitical issues, timing and tight pricing.
In September 2018, Hong Kong-listed Anta and Asian private equity firm Fountainvest Partners tabled a bid of €40 per share for Amer, a business Anta had been eyeing for a long time.
By early December the Anta-led consortium had grown to four members, including Hong Kong-listed Chinese internet giant Tencent Holdings and Chip Wilson, the billionaire founder of yoga apparel retailer Lululemon Athletica, and offered €5.7bn in cash for Amer Sports. The price represented an EV/Ebitda multiple of 18x.
Citigroup, as sole M&A and financial adviser to Anta and the consortium, initially provided commitment letters on the debt financing to support the non-binding bid before the purchasers agreed on a combination of recourse and non-recourse loans.
The €2.2bn Anta loan complemented €2.015bn of senior secured non-recourse loans at the target level.
Anta, which began making shoes in 1991, had never borrowed previously in the international loan markets and most of its existing relationships were with Chinese banks. Being privately owned posed another challenge, after a number of defaults from China in the previous couple of years and amid a bleak outlook for China’s economy as a result of the trade dispute with the US.
The recourse loan also represented a jump in Anta’s gearing to around 3.5x from practically zero leverage.
Nonetheless, by early December when the consortium made the tender offer, six banks had formed an underwriting group for the recourse loan with Bank of China, Citigroup and JP Morgan as global coordinators. HSBC joined as the seventh underwriter, providing momentum ahead of the deal’s launch into general syndication in mid-January.
The loan crossed the finish line in relatively quick time by early March, navigating the Lunar New Year holiday in February that typically prolongs syndication for deals in Greater China.
The top-level all-in pricing of 216bp, based on an opening interest margin of 200bp over Euribor and a blended average life of 4.795 years, was also considered tight for a debut loan from Anta, particularly as the seven-year non-recourse covenant-lite loan for Amer Sports priced at 450bp over Euribor and original issue discount of 99 – after a flex from an initial guidance range of 400bp–425bp with an OID of 99.5.
Anta’s recourse loan attracted 14 lenders in general syndication, underscoring the strength of the company’s brand and its potential for growth through the acquisition.
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