Unilabs Revives Bond Sale as High-Yield Issuance Rises in EuropeKatie Linsell and Verity Ratcliffe
Unilabs, a Swiss operator of clinical testing laboratories, is returning to Europe’s high-yield bond market today after postponing a sale last month as speculative-grade issuance in the region surges.
Unilabs plans to sell 485 million euros ($622 million) of senior secured notes and 200 million euros of payment-in-kind toggle notes to repay existing debt, according to a person familiar with the matter, who asked not to be identified because the details are private. The Geneva-based company pulled a sale of notes on June 13, another person familiar with the deal said at the time.
Italian automaker Fiat SpA and Continental AG, Europe’s second-biggest auto-parts supplier, led 2.1 billion euros of speculative-grade bond issuance yesterday, according to data compiled by Bloomberg. The sales outpaced the 500 million euros of junk sales for the whole of last week, the slowest since the week ended March 30. Credit Agricole SA and the European Financial Stability Facility, both investment-grade issuers, also marketed notes today, people familiar with the deals said.
“We are seeing a lot of issuance and a big pipeline this week for a market that was in free-fall only a few weeks ago,” said Henry Craik-White, a senior investment analyst at ECM Asset Management Ltd. in London. “Investors are right to still be cautious and select the right deal on the right terms.”
Credit markets were buoyed on July 4 after European Central Bank President Mario Draghi and Bank of England Governor Mark Carney both distanced themselves from the U.S. Federal Reserve’s signal that the U.S. is preparing to pare back stimulus measures. Both officials’ rhetoric helped to stem a rout in bond markets triggered by Fed Chairman Ben S. Bernanke on June 19.
The average yield investors demand to hold non-financial high-yield bonds in euros dropped to an almost three-week low of 5.9 percent yesterday, down from a seven-month high of 6.3 percent reached on June 25, according to Bank of America Merrill Lynch index data.
“Just the fact that the market’s become calmer in the post-Fed tapering headlines has helped to create an environment in which issuance can be more readily done,” said Nick Burns, a credit strategist at Deutsche Bank AG in London.
Credit Agricole SA, France’s third largest bank, priced 1.25 billion euros of 10-year bonds to yield 3.171 percent, while EFSF sold 5 billion euros of seven-year bonds yielding 1.755 percent, people familiar with the deals said today.
Unilabs, owned by funds advised by private-equity firms Apax Partners LLP, Apax Partners SA and Nordic Capital Svenska AB, is selling its new notes through units Unilabs SubHolding AB and Unilabs MidHolding AB, according to the person. The company is marketing 385 million euros of five-year fixed-rate securities, 100 million euros of five-year floating-rating notes, and 200 million euros of second-lien PIK Toggle notes due in 5 1/2 years, the person said.
Payment-in-kind, or PIK, notes allow borrowers to toggle between paying interest in cash or with more debt.
Sarah Rajani, a spokeswoman at Apax Partners LLP in London, and Coralie Cornet, a spokeswoman for Apax Partners SA in Paris, declined to comment on the bond sale. Katarina Janerud, a spokeswoman at Nordic Capital in Stockholm, also declined to comment.
Moody’s Investors Service assigned Unilabs a provisional rating of B3, six levels below investment grade, in a report on June 5, while it ranked the company’s proposed PIK notes two levels lower at Caa2.