A shining light:
As the capital markets adjusted to the challenges posed by the coronavirus pandemic, Credit Suisse showed why it is one of the US loan market’s most nimble financiers. For its array of market-moving transactions that proved to be an ideal bellwether for lenders and borrowers, Credit Suisse is IFR’s Americas Loan House of the Year.
Credit Suisse was quick out of the blocks in the early months of 2020, launching meaningful, cross-border financings that set the tone among peers in the US leveraged loan market.
In just two months, the Swiss bank had wrapped up two of 2020’s largest buyout-linked financings as borrowing costs remained low and investor demand for event-driven transactions was sky-high.
In February, the bank led a US$5.6bn dual-currency term loan that supported the US$14.8bn buyout of telecommunications infrastructure firm Zayo Group by Digital Colony Partners and EQT. At the time, Zayo’s debt financing, which also included more than US$2.5bn in bonds, was one of the largest sponsor-backed leveraged buyouts for a Single B name that the market had seen in years. And a month earlier, Credit Suisse syndicated a €5.7bn-equivalent loan deal for ice cream company Froneri, which funded its takeover of Nestle’s US-based ice cream business.
“When we launched Zayo, there were some questions on market depth, but the timing couldn’t have been more perfect and it ended up being one of the marquee trades of the year,” said Jeff Cohen, the head of leveraged and acquisition finance at Credit Suisse.
“On Froneri, we had a coordinated effort across our teams in New York and London and it ended up being the tightest all-in yield for a loan in Europe in years.”
Froneri’s €2.18bn first-lien tranche priced at 262.5bp over Libor, while its US$2.67bn first-lien loan finalised at just 225bp over Libor. The company’s euro-denominated tranche is the tightest all-in yield for a first-lien Single B tranche seen from the Continent since the financial crisis of 2008 and 2009.
Froneri’s US$245m second-lien tranche also broke boundaries. The deal, launched at an initial price of 700bp over Libor, received a wealth of demand that enabled Credit Suisse to tighten the spread to 575bp.
“A lot of people suggested Froneri shouldn’t risk syndicating a second-lien loan like that and just place it with direct lenders,” said Cohen. “But with Nestle as an ongoing shareholder, we argued it was going to get a lot of eyes from crossover investors. It ended up being the largest reverse flex in nine years.”
Building on a strong start to 2020, it was the bank’s work throughout the pandemic that bolstered its position in the US loan market.
In March, as Covid-19 cast its shadow on the global economy, borrowers drew down on their revolving credit lines to bolster liquidity as consumers moved indoors.
Credit Suisse had committed significant loans for acquisitions and market players doubted whether the bank could syndicate those debt commitments while investors shied away from risky, low-rated financings.
As borrowing conditions improved on the back of unprecedented intervention from the US Federal Reserve, Credit Suisse sensed an opportunity to draw investors back into deals and wasted little time in leveraging demand.
In April, the bank launched a US$4bn loan for mobile telecommunications operator T-Mobile’s acquisition of peer Sprint Communications. The deal was the first broadly syndicated loan for an acquisition following the dislocation of the capital markets in March, successfully reopening the leveraged loan market.
Credit Suisse followed up with more acquisition-related deals, including a US$1.8bn loan for casino operator Caesars from one of the sectors hardest hit by the global pandemic.
Not only did the bank reopen the space for acquisition-led financing, it proved a market leader in opportunistic dividend recapitalisations for private equity sponsors, a move that underscores Credit Suisse’s ability to drive market trends.
“By June 30, we’d brought down our risk dramatically. We eliminated about 80% of our underwriting backlog,” said Cohen. “We had a variety of transactions that were aggressively underwritten and phenomenally executed.”
Since the beginning of April, Credit Suisse led 37 leveraged loan transactions, 22 of which priced at the tight end of or inside price guidance, showcasing the bank's ability to deliver to its clients during historic levels of market volatility.
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