LBOs back from the dead
By Robert Smith
LONDON, March 4 (IFR) - The high-yield LBO market is reopening on both sides of the Atlantic, with Solera selling US$1.73bn of Triple C bonds and LeasePlan on the verge of relaunching its 1.55bn hung deal.
Solera's US$3.9bn bond and loan deal was an important test for the market, as it was the largest LBO since the November collapse of data storage firm Veritas's US$5.6bn bond and loan package.
Solera is also in the under-pressure tech sector and many investors pegged its leverage at well above the already high 6.8x official figure.
A banker on the deal said that while leverage was high, the underlying business was "one of the best" within the high-yield software space.
"If we hadn't got this done, the read across to the hung deals in the US would have been terrible," he said.
That is not to say underwriters, led by Goldman Sachs, had an easy time placing the paper, which took nearly a month to sell.
Leads had to hike yields and change the deal's structure several times, while also rewriting documents on both the bonds and loans to appease wary investors.
Increased demand for the secured loans allowed those involved to reduce the size of the more difficult to place bonds by US$300m to US$1.73bn. And while leads briefly entertained the idea of placing a planned euro tranche privately with a handful of investors, they eventually ditched that piece entirely. Continuación...