Victoria sets IPT on €350M high-yield bond deal

Victoria PLC has set initial price thoughts on its €350 million offering of secured notes due August 2026 (non-call two), at 4% area. Final pricing is expected on Feb. 24 via global coordinators Credit Suisse (B&D) and HSBC and joint bookrunners ING and NatWest.

Proceeds will be used for general corporate purposes, which may include acquisition funding and refinancing of existing debt, as well as the partial redemption and tender offer of the company's €500 million of 5.25% secured notes due 2024.

Banks have guided corporate ratings of BB-/B1/BB- by S&P Global, Moody's and Fitch, with expected issue ratings at BB-/B1/BB.

The tender offer launched today and expires at 4 p.m. on March 2, with settlement expected on March 5. The purchase price will be 104, and the redemption date is March 9, according to regulatory filings from the company. Victoria intends to redeem 10% of the notes at the special redemption price of 103, according to the offering memorandum.

The 5.25% notes were issued in July 2019, sized at €330 million, and then upsized by €170 million in January 2020 via an add-on. They are not yet out of their call period, with the first call date due in July 2021. On Feb. 22, the notes closed at 103.67, with a yield to worst of 2.486%, according to S&P Global Market Intelligence.

Victoria is the largest carpet manufacturer in the U.K., with a roughly 14% market share, and the second-largest carpet manufacturer in Australia, with a roughly 14% market share. At the time of the €330 million bond placing, investor feedback pointed to the company's strong market share, decent and predictable cash flow generation that should support deleveraging, and low leverage. Concerns were that despite the company offering some insulation to an economic downturn — given refurbishments can be delayed but not avoided — it is still linked to consumer discretionary spending. For the 52 weeks ended March 30, 2019, the company generated £96.1 million of underlying EBITDA. A year later, this number increased to £118.1 million, according to the offering memorandum.

For the 53 weeks ended Oct. 3, 2020 (and as adjusted for the offering), Victoria's adjusted net senior debt would have been £301.7 million on a consolidated basis, and the ratio of adjusted net senior debt to pre-IFRS 16 pro forma EBITDA would have been 2.8x. For the same period, the group generated £673.5 million of pro forma revenue and £120.4 million of pro forma EBITDA (17.9% pro forma EBITDA margin).