LBO France cashes in on buoyant debt markets for Labeyrie and Exxelia

Greg Gille
24 March 2014

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LBO France’s Labeyrie Fine Foods has tapped into a buoyant bond market to issue €275m of senior secured notes with a record low yield, while the GP has taken money off the table in Exxelia’s €175m dividend recap. Greg Gille reports

LBO France has had a busy few days on the refinancing front. Last week, Labeyrie Fine Foods, a French luxury food producer backed by the GP, took to the high-yield market to simplify its debt structure, issuing €275m of senior secured notes to refinance its existing facilities. The notes will mature in 2021 and came with a 5.625% coupon. Labeyrie has now moved to an all-bond debt structure.

According to LBO France, the placement was more than 15x oversubscribed, which, when combined with the low coupon, highlights the current appetite for European assets on the high-yield market.

Indeed, European single-B bonds yielded 7.17% on average in Q4 last year, according to a recent report by debt advisory firm Marlborough Partners – making Labeyrie's 5.62% coupon a relatively inexpensive option for the business. By comparison, Weinberg Capital Partners' French portfolio company Alliance Automotive issued a €185m private high-yield bond with a 7% coupon in November last year.

"The Labeyrie placement was very impressive," says a London-based banker. "At that point, it really begs the question of whether it should still be called high-yield."

The proceeds of the refinancing will be used to repay in full Labeyrie's existing facilities, which included €160.6m of term A and B loans, €35.2m of senior mezzanine bonds and €28.5m of junior PIK mezzanine bonds. LBO France will also partially realise its investment in the business, since part of the proceeds will go towards repaying subordinated shareholder convertible bonds (€59.5m overall, leaving roughly €21m outstanding). Finally, senior mezzanine warrants amounting to €1.1m will also be redeemed.

Labeyrie will also enter into an €80m three-year factoring facility agreement and a €35m 6.5-year revolving credit facility (RCF). The factoring facility will allow Labeyrie to eschew a larger RCF, which it would typically need to cope with the busy Christmas period but can be costly given the fees levied on undrawn amounts during the rest of the year.

"We had already looked at the possibility of a high-yield financing when we worked on the original investment in late 2011, but decided against it in light of market conditions at the time – in retrospect, it proved to be a sound decision," partner Thomas Boulman told unquote". Indeed, the new structure will prove to be less costly (the overall rate on the previous facilities stood at more than 8%) and simpler, awarding Labeyrie with some leeway to pursue its acquisitive growth strategy, he added.

Friendly terms
It is not just the high-yield market that has proven favourable for borrowers in recent weeks. LBO France has taken advantage of general lender appetite to refinance another portfolio company, Exxelia, to the tune of €175m. The package will include a €130m senior facility as well as a €45m mezzanine tranche, according to a source close to the situation. More importantly, LBO France will net an €82m dividend in the process, a sum understood to be significant with regards to the GP's initial investment in the business in 2010. Finally, the new debt package is portable, which should help with LBO France's future divestment.

In another example of increasingly borrower-friendly terms for refinancings in France, Ceva Santé Animale has just secured a cov-lite package of nearly €1bn from a group of banks, according to media reports. The fresh facility will reportedly eschew debt-to-earnings ratios and include a payment-in-kind (PIK) element – two characteristics that remain rare in large debt packages for European private equity-backed companies, let alone French ones.

The veterinary laboratory – backed by Nixen, Euromezzanine and Sagard – mandated Lazard in Q3 last year to explore the possibility of a sale in the first half of 2014. A deal could value the business at close to €1.5bn, with valuations in the 12-13x EBITDA range not uncommon in the sector.

The management of Ceva acquired a majority stake in a tertiary owner buyout backed by Euromezzanine and Nixen in 2007. The financial sponsors invested both equity and junior debt instruments. In 2010, Sagard invested €100m in the business in exchange for a 25% stake. Ceva's management is still believed to be holding onto the majority of the company's shares.