CeramTec updates terms on €1.945B loan, bond buyout package

CeramTec GmbH is out with revised terms on its €1.945 billion buyout debt financing, increasing the term loan portion at the expense of the unsecured bond while updating pricing on both.

Today's update leaves the deal split as follows:

* €1.48 billion seven-year term loan upsized from €1.43 billion, guided at E+375-400 with a 0% floor at 99.50, versus E+400-425 at launch.
* €465 million eight-year (non-call three) unsecured bond downsized from €515 million with price talk of 5.25%-5.5%.

Updated talk on the loan suggests a yield of 3.89%-4.15%. Replies on the loan are now due by noon U.K. time tomorrow, when books on the bond also close. Morgan Stanley is left lead and B&D for the bond offering. Bank of America, Nomura, MUFG, Deutsche Bank and UBS are additional joint bookrunners. BofA Securities is left lead on the loan alongside joint bookrunners Morgan Stanley, Nomura, MUFG, Deutsche Bank and UBS.

Ratings are confirmed at B/B3 (issuer), B/B2 (loan) with a 3 recovery rating, and CCC+/Caa2 (unsecured bond). The outlook is stable from both.

The package will support the takeover of the medical implants group by BC Partners and CPPIB. The sponsors, via buyout vehicle CTEC II GmbH, agreed terms to acquire CeramTec in August 2021 for an enterprise value of roughly €3.8 billion in a deal the new owners said would support the medical technology platform and expand the group via strategic M&A.

BC European Capital X and co-investors sold the stake, with BCP now holding its share through BC Partners Fund XI. Previous shareholders PSP Investments and Ontario Teachers exited their investment as part of the deal, with CPP Investments investing €800 million of equity, according to a statement.

CeramTec has a good following in loans, having been a feature in the market since at least 2013 when Cinven bought the company from Rockwood Holdings. Its existing debt pile dates from a €970 million E+300 and $175 million term loan financing from BCP's buyout of the group in 2017, which was last revisited in December 2020 via a €175 million fungible add-on priced at a ratchet-based E+250 with a 0% floor offered at 97. The 2017 buyout was also supported by €406 million of senior notes due 2025 and a €1.04 billion equity check.

The previous loan generally traded well to move in line with the market based on what was a tight margin. The new deal is understood to come with a cashless roll, although investor sources say there is no guarantee on allocation. Net leverage this time around starts at 5.2x through the secured debt and 7.1x total based on third-quarter 2021 EBITDA of €276 million, according to a company presentation. During syndication, investors agreed that these figures were full but pointed out that the company has demonstrated its ability to operate under these multiples, having been cash-generative for more than a decade. Indeed, total net leverage at the time of the 2017 buyout was 7.3x. Leverage does constrain ratings, source noted, though the latest acquisition will be supported by roughly €1.88 billion of sponsor equity.

The company's move to focus on medical ceramics and away from industrial also supports the stability of the business, sources noted. The medical area was affected by COVID-19 as elective surgeries were postponed, but both the industrial and medical segments have since recovered well, sources added. Ratings said CeramTec has seen a strong recovery from the pandemic, drawing attention to a 22% increase in sales for the first nine months of 2021, driven by strong demand from the Chinese market.

CeramTec is a medical technology platform and provider of high-performance ceramics for medical implants and other industrial uses. It has 21 production sites and more than 3,500 employees across 11 countries.