Europe's high-yield market is set to remain busy this week, after UK gym chain PureGym and Vespa-owner Piaggio announced refinancing deals on Monday.
PuryGym is making a comeback to the public debt markets with its first benchmark deal in nearly three years. The company, through Pinnacle Bidco (B3/B–), is aiming to raise £805m-equivalent in a five-year non-call two senior secured dual-tranche bond offering split between euros and sterling. The minimum size for each tranche is £/€300m. It was last in the market with a benchmark trade in November 2020, launching a high-yield bond to refinance the bridge loan for its purchase of Fitness World. It did a small tap in 2021.
"This is a pretty well-telegraphed supply item ... it’s a refinancing transaction to term out their 2025 debt stack," said a banker with knowledge of the deal. "It’s the largest sub-IG deal this year ... we’ve had strong feedback from a pre-marketing process we ran."
PureGym was hit hard during the pandemic, when it was forced to shut its doors, though it has recovered since.
"It’s a PE-owned entity with a lot of debt in there and, as we saw during Covid, it is easily and highly impacted by changes in social behaviour. This is reflected in the pricing," said a second banker familiar with the deal.
Initial price talk for the sterling bond is in the low 10s, while for the euro tranche it's the mid-8s. "[The] pretty cheap pricing here [should help] get a bit of momentum in the trade and then drive it back in again. But they’ve recovered well from Covid and investors have had a fairly decent experience holding the existing bonds," the second banker said.
"The five-year rate differential between euro and sterling is only about 110bp, so you would expect the bond tranches to be not much further apart than 110bp or 120bp, and maybe during the execution they’ll get there. It is true you have to butter up the sterling investors a bit more, given there are fewer of them. So perhaps there is a need to pay a premium just to get the liquidity in sterling. "
A banker away from the transaction noted that there was a lot of demand for sterling-denominated paper, which would be supportive.
Proceeds from the new issue, alongside £50m of cash from balance sheet, will be used to repay the existing £430m senior secured notes and €490m euro senior secured notes, both due on February 2025. Additional cash from its balance sheet will be used to pay accrued and unpaid interest as well as deal-related fees and expenses.
According to the roadshow presentation, the company will also look to put in place a new £175.5m senior secured revolving credit facility to replace its existing £145m one.
Investor meetings are slated through Tuesday. Barclays (B&D) and physical bookrunners alongside RBC, which is also a joint global coordinator with Barclays and Deutsche Bank. ING and JP Morgan are joint bookrunners.
Scooting to the market
High-end scooter manufacturer Piaggio is also in the market, marketing a €250m seven-year non-call three senior note to refinance 2025 senior bonds. A banker with knowledge of the transaction noted that the deal wasn't pre-marketed in advance as it didn't seem necessary for the well-known, Double B rated issuer. It has typically undertaken exchanges in the past.
While existing bondholders could roll into the new issue, the banker said the transaction was open for everybody. The deal is intended to extend Piaggio's maturity profile.
The second banker said Piaggio should have a lot of local investor interest.
"This is just a small deal, a pure refinancing. It’s a good company and investors really like it. You can tell that by how well its bonds trade for the rating. I think even for a Double B this will be able to price quite aggressively, just because of the interest in the name and the size of the deal. They only need to find €250m and they’ll find that easily."
Both the Vespa owner and the new bond are expected to carry ratings of Ba3/BB– from Moody's and S&P, respectively.
The company has also obtained a new €200m revolving credit facility to refinance its existing one, according to a deal presentation. The facility will remain fully undrawn at closing, with the company's liquidity position above €560m as of June 23.
Investor meetings are scheduled until Wednesday, with pricing expected thereafter.
BNP Paribas is B&D and joint global coordinator and physical bookrunner alongside Bank of America and IMI-Intesa Sanpaolo. Banca Akros, HSBC, ING and UniCredit are acting as joint bookrunners.