WeBuild looks to get refi across the line with chunky yield

5 min read
Eleanor Duncan

Italian construction company WeBuild, formerly known as Salini Impregilo, is looking to win investors over to its refinancing bid by offering a large premium on its new high-yield bonds.

The Covid-19 impacted company (rated BB- by S&P and BB by Fitch, both negative) is taking another run at refinancing its €479m 3.75% June 2021 notes by marketing a five-year unsecured bond alongside a cash tender offer for the notes. Investor calls began on Tuesday via Bank of America, Goldman Sachs, IMI - Intesa Sanpaolo, Natixis and UniCredit.

This time around, the company is leaving nothing to chance with its refinancing efforts.

WeBuild announced a €400m five-year bond on Thursday with initial price talk of 6.25% area - indicating a large premium over outstanding bonds. The chunky yield attracted demand, with price talk then revised to 6% area (+/- 12.5bp) by midday for an upsized €500m bond.

The company's 3.625% January 2027s, priced at the start of this year, were seen at 4.83% pre-announcement, but have since jumped to 5.4%, according to Tradeweb. The bonds hit 12% during the peak of the coronavirus crisis in March.

WeBuild's 1.75% October 2024s were spotted bid at 3.365% pre-announcement, and are now seen at 4%.

The purchase price for the tender is 101.625% plus accrued interest.

First attempt

WeBuild had looked to refinance €250m of its 2021 bonds earlier this year with an exchange offer. The company priced a €250 seven-year non-call life bond in January, but the take-up from investors on the exchange was low, with holders of €121m worth of notes opting to exchange their 2021s out of a total €600m outstanding.

"This looks to be a better structured (and priced) than the abortive attempt earlier this year to refi the 21s, with a separate issue and cash tender rather than an exchange offer," wrote CreditSights analysts in a report published on Thursday.

Analysts suggested a comparable credit might be Ellaktor, a Single B rated Greek construction company which issued a €600m 2024 bond at 6.375% in late 2019. That bond is now seen bid around 8%.

WeBuild is one of several Covid-19 impacted credits to be welcomed by the high-yield market after several vaccine announcements caused risk assets to rally. The company's bonds have also been helped in secondary by the US election and infrastructure optimism around Joe Biden.

Still, as might be expected, WeBuild has had a rough year. Commercial activity is down 42.8% from the same time last year, and the number of contract delays due to the pandemic has continued to rise, with some €20bn of tenders now postponed beyond 2020, despite the Italian government bringing forward a number of projects that had initially been scheduled for 2021, wrote CreditSights analysts.

The company reported a 54% drop in Ebitda in its July half-year earnings, and a 18% drop in revenue thanks to what it called the "extraordinary impact" of the pandemic - and the safety measures that were implemented to protect workers.

Deal documents for the new five-year show that the company's gross indebtedness was €3.1bn as of June 30, up from €2.2bn at December 31 2019.

One investor said he would have trouble getting involved in the bond because the company does not provide investors with a project-by-project breakdown of cashflow.

"The company groups all projects together, so you don't know where the money is coming from - or going - or the quality of the working capital. You just don't have that much visibility under the hood," said the investor.

"Growth story"

WeBuild acquired smaller rival Astaldi earlier this year, via a capital increase that was completed in early November.

"From our end, we are a growth story," said a company spokesperson. "We have been leading the consolidation of the fragmented construction sector in Italy. We have done several acquisitions, the best of which was Astaldi, which was completed recently."

The company is also hoping to be a beneficiary of any action taken by government to stimulate the economy in the post-pandemic world.

"In times of economic crisis, governments revert to investing in infrastructure because of the multiplier effect public works have on the economy. Even before Covid-19, there [was] a pent-up demand for infrastructure works," said the spokesperson.

Projects in Italy include the extension of the high-speed railway from Milan to Venice - work started in August on a section between Verona and Padua, said the company.