Several large European LBO bonds are expected to launch after the August break, with deals from financial firms such as Lowell, Leaseplan and ICBPI all on the slate. Bankers say more large deals are likely to hit the market in September and October. "It won't be as busy as the end of July, but there'll still be plenty going on," said one banker.
European high-yield saw a flood of underwritten M&A trades in July as banks cleared an enormous backlog of junk-rated debt before the bond market's customary August break. Permira's acquisition of debt purchaser Lowell is one that could come in September, he said. That should see around ?1bn of new bonds, partly to refinance the firm's ?390m outstanding high-yield notes.
Permira intends to merge Lowell with GFKL, a German debt collection firm it recently acquired. GFKL raised a 365m senior secured bond in July and indicated to investors at the time that a large acquisition was in the offing. That bond's covenants mean that if a merger happens, the combined entity would have to reduce its secured leverage to 4.25x from 4.7x. But it does leave room to raise unsecured bonds, which bankers say the new deal should include.
Credit Suisse and Goldman Sachs are expected to lead the deal, according to a banker. Also eyeing the high-yield bond market is Dutch vehicle leasing firm LeasePlan, which Volkswagen and German bank Metzler agreed to sell to a consortium of investors last month. The consortium is providing 480m of preferred equity through a mandatory convertible while looking to raise 1.55bn of bond debt.
The company has a banking licence and a banker on the deal said the new debt would be structurally similar to the high-yield bonds above regulated infra firms in the UK such as Heathrow and Thames Water. "In a way it's not dissimilar from some of the AT1s and CoCos you see in the FIG space as well," he added.