Banks Target June for ThyssenKrupp Elevator $9 Billion Debt Sale
Banks Target June for ThyssenKrupp Elevator $9 Billion Debt Sale
(Bloomberg) -- Banks sitting on 8.3 billion euros ($9.1 billion) of debt from the acquisition of ThyssenKrupp AG’s elevator unit, aim to sell their exposure as early as next month, according to people familiar with the matter.
Underwriters Barclays Plc, Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc., Royal Bank of Canada and UBS Group AG, could launch an offering mid to late June but a formal process has not yet started, two of the people said.
Successfully selling the exposure would lift an underwriting burden that has been weighing on banks’ balance sheets and contributed to first-quarter write-downs.
The debt helps fund Advent International Corp. and Cinven Ltd.’s acquisition of the ThyssenKrupp unit, the biggest European private equity buyout in a decade. That deal was agreed at the end of February but the financing became entangled in a credit-market crash as the coronavirus spread around the world.
Representatives for all the arranging banks, sponsors Advent, Cinven and ThyssenKrupp declined to comment on the financing. The four people familiar with plans to sell next month all asked not to be identified discussing private information.
Read more: Credit Suisse Loan Woes Fueled by European Buyout Deal of Decade
When demand for leveraged debt collapsed in March, banks were unable to sell this and other packages funding acquisitions they had committed to financing. In Europe, they were left with some $13 billion of exposure on their books.
As the market has begun to recover--albeit not to where it was at the start of the year--bankers have been advising high-yield borrowers to raise cash now in case markets turn hostile again.
The average secondary price for leveraged loans has rallied in both the U.S. and Europe, regaining just over half of what was lost in March, and bond indexes show yields falling.
Nothing of the scale of the elevator buyout has emerged since the markets reopened, however, and the deal would need broad support across Europe and the U.S. to place the full amount.
The acquisition is due to close by the end of September. While net sales for the ThyssenKrupp group dropped about 5% year-on-year in the three months to end-March, the elevator division only saw a small decline, attributed to the coronavirus impact in China, according to the firm’s interim results.
Opening Up
When the deal was shown to other banks in March, it included term loans worth 5.55 billion euros and 2.7 billion euros of high-yield bonds. In addition there are undrawn facilities worth 2 billion euros, plus a 2 billion-euro junior debt portion that has already been placed.
So far, M&A deals since the virus crisis have been much smaller. A $1.35 billion cross-border bond for BMC Software Inc. wrapped earlier this month, pricing at the tight end of earlier guidance, and in Europe a 725 million euro loan is being sold for French insurance broker Financiere CEP.
In the U.S., banks are also rushing to take advantage of a thaw in the market to sell junk-rated loans--although not all of them are going to plan. Around $5.31 billion of loans have launched to syndication so far in May, the highest for a month since February, according to data compiled by Bloomberg.
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