Pricing has been increased on a range of buyout loans in the last couple of weeks, including the UK's Motor Fuel Group, German laboratory services company amedes, and London-listed Bwin.party.

“Pricing has been amended on several deals. They have been priced to clear and it is a great time to be an investor,” a leveraged loan investor said.

All of the deals with increased pricing are new buyouts, which have met a less enthusiastic reception than deals for well-known names as investors grow pickier.

A rush of deals in July offered lenders more choice for the first time in 2015, which has otherwise been defined by low deal flow.

Deals for popular, well-known companies such as UK pharmaceuticals firm AMCo and European cable and telecoms group Altice (>> Altice) were well received in the summer and pricing was reduced, but some newer buyouts have struggled recently.

“When people really like credits the price becomes secondary, such as on AMCo and Numericable. When people don’t have high conviction you start getting into discussions on price and it is usually on deals involving new clients or credits,” a leveraged loan investor said.

UNFAVORABLE COMPARISONS

Several recent buyout loans have suffered due to comparable deals offering higher pricing, including a $600 million-equivalent term loan backing online gambling company 888 Holdings’ (>> 888 Holdings Public Limited Company) acquisition of Bwin.party (>> Bwin.party Digital Entertainment Plc).

Pricing widened to 400 basis points (bp) with a discount of 99–99.5 percent of face value, up from initial guidance of 325bp–350bp with a 99.5 OID. A one percent Libor floor, which guarantees returns for investors, remained unchanged.

The loan, which was roughly split between a $350 million tranche and a euro-denominated tranche, increased pricing to stay in line with a comparable $400 million-equivalent add-on facility for Canadian online gaming company Amaya, which was in the market at the same time.

Amaya’s add-on loan had price guidance of 400bp on the dollar tranche and 425bp on the euro tranche, in line with existing loans.

A 425 million euro ($464.61 million) term loan backing the acquisition of amedes Group was also affected by investors' comparing the deal with German laboratory operator Synlab, which priced a high-yield bond financing on July 23, which backed its buyout by Cinven.

Investors wanted amedes to pay up for the loan after receiving higher pricing on Synlab’s bonds, which yield 6.429 percent on the senior secured notes and 500bp with a 99 discount on the Floating Rate Note (FRN).

Amedes flexed pricing higher on a 425 million euro term loan B 475bp with a 98 discount, from initial guidance of 450bp and a 99.5 discount. Soft call protection of 101 was also added to the deal for six months.

Bankers were trying to close amedes before the expected summer slowdown. The price increase had the desired effect of attracting investors and banks to the yield on the covenant-loose deal.

BETTER DOCS

As well as higher pricing, documentation has also been improved on some buyout loans to attract investors, including a 300 million pound ($464.25 million) term loan backing the buyout of Motor Fuel Group.

Pricing increased to 500bp with a 99 discount from initial guidance of 475bp with a 99–99.5 discount. Soft call protection of 101 for six months was added to the deal.

The documentation changes on Motor Fuel Group’s loan included a reduction in the Most Favoured Nation (MFN) cap to 50bp from 100bp, which means that any incremental debt raised cannot pay any more than 50bp over the term loan.

Some arranging banks are keen to derisk and sell their exposure quickly to avoid a repeat of previous summers, when several buyout loans were 'hung' in the market.

Arrangers were left overexposed and were forced to offer heavy discounts and sell the deals at a loss in September.

“The investment banks are a lot more focussed at getting stuff off of books,” the banker said.

NEW DEALS

Lenders also want to clear their books for new deals that will hit the market in September, including up to 400 million euros of loans led by Goldman Sachs to back French digital media company Technicolor’s (>> TECHNICOLOR) acquisition of Cisco’s (>> Cisco Systems, Inc.) home equipment business.

Loans totalling 595 million euro are also expected for Netherlands-based textile technology group TenCate’s buyout by a consortium led by Gilde Buy Out Partners and around 1 billion pounds will also be needed to refinance British cereal maker Weetabix.

“Lenders don’t want any overhang and they don’t want to hold product or risk as there are a lot more deals coming in the final quarter,” an investor said.

(Editing by Tessa Walsh)

By Claire Ruckin