Verisure AS has tightened price talk on its €2.42 billion-equivalent, three-tranche bond offering, leaving the financing package as follows:
• €1.15 billion of six-year (non-call two) secured fixed-rate notes at 3.25%-3.50%, following initial price thoughts of 3.50%-3.75%
• Euro-denominated, eight-year (non-call three) unsecured fixed-rate notes at 5.25%-5.50%, following IPTs of 5.50%-5.75%
• Swedish krona-denominated, eight-year (non-call three) unsecured floating-rate notes at S+575-600 basis points
• €2 billion, seven-year term loan still guided at E+350-375, 0%, 99.5-99.75, having been tightened from E+375-400, 0%, 99-99.5 previously (the yield to maturity is 3.59%-3.89%, in from 3.89%-4.24%)
• €800 million, 5.5-year term loan (same as term loan B1-F) is being repriced to E+350, 0%, 99.75, from E+400, equating to a yield to maturity of 3.6% (that term loan softened to 100/100.625, from 100.250/100.875, when news of the new €2 billion term loan broke).
Books on the bonds will close at 10 a.m. London time on Jan. 15. J.P. Morgan is physical bookrunner and B&D for the secured bonds, and Goldman Sachs is physical bookrunner and B&D for the unsecured bonds. Nordea is also a physical bookrunner for the Swedish krona bonds.
BofA Securities, Deutsche Bank, Morgan Stanley and Nomura are joint global coordinators across all tranches, as are Goldman Sachs for the secured bonds, and J.P. Morgan for the unsecured bonds. Barclays, BNP Paribas, Caixa, Citi, Credit Agricole CIB, Credit Suisse, Nordea and Santander are joint bookrunners.
On Jan. 13 commitments on the loans were accelerated to today (Jan. 14), from Jan. 19.
Proceeds from the new bonds and new €2 billion term loan will be used to finance a €1.6 billion dividend, repay the borrower's €1.49 billion term loan B1E due 2022, and repay its 2023 unsecured notes that comprise roughly €1 billion of 5.75% bonds and SEK1.65 billion (€160 million-equivalent) of S+575 notes. The euro notes are callable at 101.438, and the FRNs at 101.
Clearly the debt raise is going well, and investors readily admit that the firm has utility-like qualities, a proven track-record of deleveraging that stems from strong and stable growth, high cash flow generation, and lower customer churn. Some concerns have been raised over further apparent covenant erosion, but these investors know the leads face a wall of demand, thereby making pushback futile.
The company has been a frequent issuer in recent years, often using the market to relever following a dividend distribution. Indeed, according to publicly released figures at LCD, following this new issue the company will have taken out €3 billion in dividends since the start of 2017. According to the current preliminary offering memorandum, net secured leverage (taken as the last two quarters annualized) is 5.5x, and net total leverage is 7x. These have frequently been the rough leverage multiples when the company has issued for the last five years.
The company has regularly grown EBITDA. Back in 2015, pro forma adjusted EBITDA was €400.3 million, rising to €580 million during its 2017 bond issues, to €661.5 million for its 2018 bond issuance, and then to €740.8 million when it issued last year. The measure has risen further since, to €833.7 million for the last two quarters annualized, according to the latest preliminary offering memorandum.
Rising EBITDA has been driven by rising customer numbers, with the firm adding more than one million subscribers since 2017, and up to 3.6 million subscribers for the last two quarters annualized. It is this strong and steady growth, low churn and defensive qualities that see it perform well during crises, and allied with its cash generation (it has generated between €520 million and €701 million of cash from operating activities per year since at least 2017), such qualities have ensured many in the market flock to its high-yield deals, and balance out investor dislike for frequent dividend payments and releveraging.
Meanwhile on Jan. 13, the company announced it had successfully completed a consent solicitation announced on Jan. 7 for its €200 million of FRNs due 2025 and €500 million of 3.5% secured notes due 2023. The solicitation amends the definition of IFRS to IFRS 15/16 for covenant-calculation purposes and amends the ratio-based restricted payment permission provided the consolidated senior secured net leverage ratio does not exceed 5.5x to 1.0x on a pro forma basis (from 5.25x to 1x). Accounts that consented are offered a fee of 25 bps, and the requisite consent threshold was 50% plus 1. Leads comment that this will align these bonds with the existing indenture of the company's 2026 bonds and its new senior facilities agreement.
Verisure is backed by Hellman & Friedman, which first invested in the firm in 2011 before taking majority control in 2015. Verisure is a provider of monitored fire and intrusion alarms, and is the largest provider of monitored alarm and security services to residential customers. It was previously known as Securitas Direct AB.
