CVC Said to Tap Europe Loan Demand to Fund Campbell Unit LBOPatricia Kuo
CVC Capital Partners Ltd. is taking advantage of increasing investor demand for European leveraged loans to fund its bid for the European businesses of Campbell Soup Co., the world’s largest soup maker.
The private-equity firm plans to finance its purchase with 320 million euros ($429.4 million) in loans, according to a person with knowledge of the matter, who asked not to be identified because the deal is private. Prices of senior-ranking loans have risen about 2 percent this year, according to the Standard & Poor’s European Leveraged Loan Index.
Issuance of speculative-grade loans in Western Europe, that are used to finance buyouts, is at $131 billion this year, more than the $92 billion raised in all of 2012, according to data compiled by Bloomberg. CVC, one of Europe’s biggest private-equity firms, has announced three acquisitions since Aug. 12.
“There is a lot of pent-up demand for leveraged loans in Europe since buyout firms have increasingly turned to high-yield bonds,” Michael Guy, London-based money manager at Tenax Credit Opportunities Fund, said in a telephone interview. This has left “investors chasing limited number of loan deals”, he said.
The financing for Campbell’s European business consists of a 190 million-euro seven-year term loan B, which pays interest at about 475 basis points more than the euro interbank offered rate, according to a person with knowledge of the matter, who asked not to be identified because the deal is private. A basis point is 0.01 percentage point.
The funding also includes a 65 million-euro six-year term portion A and a 65 million-euro six-year revolving credit line both paying an interest margin of about 425 basis points, the person said.
The debt is about 4.5 times the company’s earnings before interest, taxes, depreciation and amortization, lenders said in a Aug. 12 statement.
Ed Moore, a spokesman for CVC employed by Brunswick Group, declined to comment on the debt financing. BNP Paribas Fortis, ING Groep NV, and Rabobank International are arranging the loans, Bloomberg data show.
“The recent growth of loan supply coincides with the recovery of new European CLO issuance and comeback of demand for floating-rate credit investments as risk of rising interest rates is rearing its head again,” Tenax’s Guy said.
Money managers have sold 4.5 billion euros of European collateralized loan obligations this year, prompting analysts at Citigroup Inc. and JPMorgan Chase & Co. to double their 2013 issuance forecast to as much as 10 billion euros.
CLOs pool high-yield loans and slice them into debt securities of varying risk and return, typically from AAA ratings down to B.
Campbell Europe, based in Puurs, Belgium, generated about 400 million euros of net sales in 2012 financial year, and owns brands primarily in soups, sauces and bouillons such as Devos Lemmens, Royco, Liebig, Deli Soup and Lacroix, CVC said in a statement.