ISS Shuns Bonds in $4.1 Billion Loan Refinancing Warm-Up to IPO

ISS A/S, which is refinancing 23.7 billion kroner ($4.1 billion) in loan facilities before an initial public offering, will sidestep the bond market as the cleaning company favors bank loans, its chief financial officer said.

“We have no plans of issuing more bonds,” CFO Henrik Andersen said in a phone interview. “We have a good relationship with our lenders as we’ve had a long-lasting working relationship. You don’t have to look for something different if the people you’re working with are happy with how things are.”

ISS today said it will extend maturities on five different bank credit lines expiring in 2014 and 2015. The company will repay remaining bank debt maturing before 2015 using its own cash flow. The Copenhagen-based firm, which is the world’s largest provider of cleaning services, has previously said it targets an IPO as early as 2014 after an attempt in 2011 failed.

ISS is shunning bonds at a time when the Danish market for company credit is expanding amid growing investor demand. At the end of the third quarter, ISS had about 25 percent of its total credit facilities in bonds. That compares with a ratio of about 58 percent for Dong Energy A/S, Denmark’s biggest non-financial issuer of bonds, according to its 2012 report.

Earthquake Tsunami

ISS, which is due to publish full-year earnings on March 7, had seasonally-adjusted net debt of 25.9 billion kroner in the third quarter. That gave the company debt ratio to earnings before interest, tax, depreciation and amortization of about 5.

ISS is “aware a company undertaking an IPO will need to have a debt to Ebitda ratio of 3 to 3.5 times,” Andersen said. “Anything more will be too much.”

ISS Chief Executive Officer Jeff Gravenhorst said on Aug. 16 that the company, which has 530,000 employees, targets a 2014 or 2015 listing. Its owners pulled an $8.2 billion IPO in 2011, one day after an earthquake and tsunami hit Japan, triggering a nuclear crisis that sent stock markets around the world plunging.

“Instead of pooling the refinancing and the IPO in one go we’re making sure the financing can help us towards an IPO as well as beyond an IPO,” Andersen said.

The owners of ISS include Goldman Sachs Capital Partners and EQT Partners AB. In August, Kirkbi A/S, the parent of Lego A/S, and Ontario Teachers’ Pension Plan bought a 26 percent stake for 500 million euros ($650 million). ISS used the proceeds to repay a 525 million-euro 11 percent callable bond maturing in 2014 at the end of the year.

In 2011, G4S Plc (GFS) pulled an attempt to buy ISS after the shareholders of the Crawley, U.K.-based company rejected the takeover.

To contact the reporter on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net

To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net

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