LBO France uses high yield for recap

LBO France, a Paris-based buyout firm, has refinanced portfolio company Labeyrie with a €275 million high yield bond issuance.

The refinancing of the French food business, which produces salmon and foie gras, took place last week and enabled LBO France to return a dividend of €60 million to LPs, partner Thomas Boulman told Private Debt Investor sister publication PEI. 

As well as the dividend, it allowed LBO France to tidy up the company's capital structure, repaying the company's bank facilities and expensive convertible bonds. Fitch Ratings said it expected the company to “benefit from comfortable liquidity” following the refinancing. “It [is now] underpinned by an adequate amount of short-term facilities to fund working capital needs, which include a €35 million revolving credit facility and an €80 million factoring line allowing cheap receivables financing,” Fitch said in a report. 

Demand for the high yield bond issuance equated to about €4.6 billion, approximately 15x higher than the issuance, he said. The bond, which was arranged by BNP Paribas, was rated 'B' and priced with a 5.625 percent coupon, Boulman said.

“It refinances the old structure of the leveraged buyout including the senior debt and the different mezzanine tranches. It’s a seven year financing at quite a low fixed rate and gives the company more visibility as far as financing is concerned,” he added. “It’s a good company. We knew we would get an interesting price, but 5.625 is lower than we expected so we are very happy.”

This is the second time in recent months LBO France has turned to the high yield bond market in order to refinance a portfolio company. A few months ago, private hospital group Le Groupe Médi-Partenaires issued a €385 million high yield bond enabling LBO France to pay out a €80 million dividend.

“Due to regulations, banks have limited amounts to lend to the leveraged buyout world. But there’s a lot of money in the market [and investors are] ready to buy bonds due to the low interest rate environment. That’s why the high yield market has developed in the last three years and we are taking advantage of it,” he said, adding that LBO France will do more high yield bond refinancings if opportunities arise.

LBO France invested in Labeyrie in January 2012, when it acquired a 33 percent stake using its White Knight VIII fund, which is fully invested. The firm will be keen to return money to investors as it is currently in market attempting to collect €1 billion for its successor fund, White Knight IX. A number of LP commitments are understood to have been made already. It is expected that the firm, which declined to comment on fundraising, will hold a €300 million first close before the summer.