In February 2014, when UK petrochemicals business Ineos was looking to redeem €1.032 billion 7.875% bonds due in 2016, it turned to the booming European high-yield market, selling €1.035 billion bonds in euros and dollars in a trade that attracted a combined order book of €7.8 billion.
Fast forward a year to March and the firm is now looking to redeem senior secured bonds due in 2019, but has taken a very different tack.
It has mandated five banks – Bank of America Merrill Lynch, Barclays, Citi, JPMorgan and Morgan Stanley – to arrange a €750 million term loan to take out the bonds. The firm is looking for loans in euros and US dollars, and held a lender call on Tuesday. Pricing of around Libor plus 350 basis points with an original issue discount of 99 has been suggested.
Ineos is the latest European corporate to take advantage of the recent surge in appetite for leveraged loans.
As Euromoney reported in its February cover story, institutional appetite from both loan funds and collateralized loan obligations together with a recovery in bank lending, has tipped the balance in favour of the loan market in Europe.
The coming year could see more and more loan-for-bond take-outs in a reversal of the bond-for-loan take-out narrative that has dominated the region since the financial crisis.
Read Euromoney's recent in-depth coverage of the return of the loan market: Euromoney February 2015 Europe’s great disintermediation is stalling. Yield-hungry institutional investors are driving demand for loans at the riskier end of the credit spectrum. Banks, pumped with ECB-printed liquidity and desperate to put their capital to work, are getting off the fence. It could be music to Mario Draghi’s ears. But is a sudden turn away from the bond markets, at increasingly aggressive lending rates, what Europe really needs? |
