July 1 (Bloomberg) -- Armacell International Holding GmbH and Altice VII SA are among European borrowers increasing rates on their loans as the price of the floating-rate debt falls to a more than three-month low.
Armacell. the Munster, Germany-based insulation products maker being bought by Charterhouse Capital Partners LP, and Altice, a Luxembourg-based telecommunications investment company, increased the interest margins offered on their loans in dollars and euros last week by as much as 125 basis points, according to data compiled by Bloomberg.
Investors are demanding higher prices to buy the debt of non-investment-grade companies after Federal Reserve Chairman Ben S. Bernanke laid out a timetable for stimulus reduction. Prices of the largest leveraged loans fell 0.26 cent last week to 92.2 cents, the least since March 14, according to the Standard & Poor’s European Leveraged Loan Index.
“It’s inevitable that pure European syndicated deals will also be affected as investors will compare the yield available in secondary and primary markets,” said David Milward, London-based head of loans at Henderson Global Investors Ltd. “Some of the European companies tapping the U.S. market may not be well known to U.S. accounts and in periods of volatility investors will inevitably be more cautious. It would be ok when liquidity is there but when it’s not, borrowers and the arranging banks may need to be flexible to get the deals away.”
Arrangers of a 200 million-euro ($260.5 million) add-on term loan for Intertrust Group Holding SA, a corporate management company owned by Blackstone Group LP, lowered the proposed issue price of the deal to 98 percent from 99.5 percent, according to data compiled by Bloomberg. This increases the yield for investors and lowers proceeds for the borrower.
Armacell offered a first-lien term loan in euros at 475 basis points, or 4.75 percentage points, more than benchmark rates, and a term loan in U.S. dollars at 450 basis points, according to two people with knowledge of the matter. That compares with margins of 375 to 400 basis points on the euro portion and 350 to 375 basis points on the dollar piece proposed earlier.
Altice increased the interest margins of at least $700 million of term loan to 450 basis points more than the London interbank offered rate, compared with a guidance of 375 basis points to 400 basis points proposed earlier this month. The euro-denominated portion is now offered at 475 basis points more than the ruo interbank offered rate. Tenor of the debt was reduced to six years from seven years and the issue price lowered to 98 percent from 99.5 percent, Bloomberg data show.
The average yield investors demand to buy corporate high-yield bonds in euros spiked to 5.9 percent from record low of 4.56 percent May 8, according to Bank of America Merrill Lynch Euro Non-Financial High-Yield Constrained Index.
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