* Hung deal revived in stronger market
* Leads targeting tighter pricing (Updates with price whispers)
By Robert Smith
LONDON, March 9 (IFR) - LeasePlan has announced its 1.55bn-equivalent buyout bond ahead of a crucial European Central Bank meeting, relaunching just one month after a sharp sell-off forced underwriters to pull the deal.
The Dutch vehicle-leasing company is taking advantage of a more stable market backdrop to revive the three-tranche holding company bond, which was pulled after investors demanded higher than expected yields to buy the trade.
LeasePlan had to complete its full-year 2015 results before it could return to market, which it announced on Wednesday, showing a 19% increase in net profit year-on-year to 442m.
Sources told IFR last week that the company could relaunch this week following the results, with the aim to price the deal following Thursday’s ECB meeting.
Leads announced the revived deal on Wednesday with pricing pencilled in for Friday, a day after the crucial meeting.
But some investors expressed surprise that the leads would formally announce the trade ahead of the meeting, given the potential for the ECB to disappoint the market.
“It’s ludicrous that they are leaving the deal open over tomorrow’s ECB meeting,” said one. “Management is taking a huge risk here, and it’s not easy to bounce back from pulling a deal the second time.”
A banker close to the deal was more sanguine, however.
“There’s some noise around it, and we’re not trying to price ahead of the ECB so we’re not blind to that fact,” he said.
“But you can’t ignore the US$9bn that’s come into US high-yield funds over the past two weeks, or the much stronger technicals in the European market. We live in volatile times and this is an incredibly attractive window.”
A second banker on the deal told IFR last week that the deal would not be pulled a second time, even if markets turned against it again.
“We cannot fail with the relaunch, so once you see the announcement on the screen you know the deal’s done. If you fluff your lines a second time, you’re out of the show.”
The structure of the transaction is largely unchanged and LeasePlan is still looking to sell a euro five-year non-call two, a euro seven-year non-call three and a US dollar five-year non-call two.
These tranches were talked at 7.50%-7.75%, 8.00%-8.25% and 8.25% area before the trade was pulled last time.
Sources close to the deal said that they are trying to price it tighter this time around, as the iTraxx Crossover has rallied from 454bp on the day this talk was set to around the 380bp mark on Wednesday morning.
Two investors said on Wednesday afternoon that price whispers on the deal are now at 7.25%-7.50% on the euro 5NC2 and at 7.75%-8.00% on both the euro 7NC3 and dollar 5NC2.
The Additional Tier 1 market also suffered its worst sell-off since opening in 2013 the week when LeasePlan originally tried to price, which knocked the deal as it is issued from a holding company that sits above an operating company with a banking licence.
“Anyone trying to make a comparison to AT1s is just off the mark,” said the first banker. “In the AT1 market your instrument can just dissolve entirely. This now has nearly 4.5-years of interest coverage, so it’s not even in the same stratosphere.”
In order to get regulatory approval for the acquisition’s holdco structure, the deal’s sponsors agreed to prefund an interest reserve account equivalent to 2.5-years of interest.
On top of this, the LeasePlan operating company is about to pay a 266m dividend up to the holdco. While last time the deal was brought to market there was no explicit guarantee this money would be used to service debt, the company has now agreed to place around 200m of this cash straight into an interest coverage account.
“Before there was some ambiguity of how the money could be used. Now there’s no ambiguity around it,” said the banker.
JP Morgan, Goldman Sachs, Credit Suisse and ING are leading the trade. The debt is backing the acquisition of the Dutch firm by a consortium of investors including TDR Capital, ADIA and GIC.
A London group lunch is being held today at 12:30pm and a global conference call at 4pm. (Reporting by Robert Smith, editing by Julian Baker and Helene Durand)