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Lowell launches and guides £1.6B bond deal to refinance capital structure

Lowell Financial Services GmbH has unveiled a £1.6 billion, three-part secured bond offering comprising the following tranches, with initial price thoughts:

• Minimum-€500 million of five-year (non-call two) bonds, with IPTs at high-6% to 7% area
• Minimum-£400 million of five-year (non-call two) bonds, with IPTs at high-7% to 8% area
• Minimum-€500 million of 5.5-year (non-call one) floating-rate notes, with IPTs at high-6% to 7% yield (including an OID of 98-98.5)

Goldman Sachs (lead left, B&D) and Credit Suisse are global coordinators and joint bookrunners on the transaction. BNP Paribas, Citi, Deutsche Bank, HSBC, ING, J.P. Morgan, Lloyds, MUFG, NatWest Markets and Nordea are joint bookrunners. No sense of timing or pricing for the deal has yet been given.

Proceeds from the new notes — as well as a €600 million equity contribution from Permira and €190 million of cash on balance sheet — will be used to refinance all the borrower's outstanding bonds, which stack up as follows:

€365 million of 7.5% notes due 2022, callable at par
£565 million of 8.5% notes due 2022, callable at par from Nov. 1
£230 million of 11% unsecured notes due 2023, callable at 102.75 from Nov. 1
€415 million of E+350 notes due 2023, callable at par
€530 million of E+450 notes due 2023, callable at par
SEK1.28 billion of 4.75% notes due 2023, callable at 102.375


(The new deal will also partially repay €305 million of the borrower's RCF, leaving €98 million outstanding).

Proceeds may also be used for general corporate purposes, which could include future debt portfolio purchases, or the repayment or redemption of debt.

Holders of Lowell's 11% notes due 2023 will be particularly pleased about the new deal, given these bonds closed last night at 84.75 and were as low as 79.70 at the start of the month. Many of its secured notes are in a 92-94 context.

Lowell's group adjusted cash EBITDA rose from £299.3 million in 2017 to £512.7 million for the LTM ended June 30, 2020, while its 120-month estimated remaining collections, or ERC, rose from £2.06 billion to £3.50 billion over the same period.

Pro forma net secured leverage is 3.2x, and net total leverage is 3.6x, according to the preliminary offering memorandum. When the company last issued bonds back in early 2018, net secured/total leverage was 4.6x/5.2x.

No indications on ratings have yet been given by the leads. S&P Global Ratings currently rates the secured debt at B+ and the unsecured bonds at B-.

Up to 10% of the new fixed-rate bonds can be redeemed per annum during the non-call period, at 103.

Lowell is the second-largest pan-European credit management company by revenue, group adjusted cash EBITDA, and ERC. Permira owns 63.9% of the group, while Ontario Teachers’ Pension Plan Board owns 27.7% (management owns the rest).