Nimble thinkers
From corporate M&A, leveraged buyouts, middle-market lending and everything in between, Credit Suisse is one of the go-to names for private equity sponsors and global companies looking to fund their growth. For its leveraged finance expertise, proximity to the buyside and bespoke funding, Credit Suisse is IFR’s Loan House of the Year.
In November 2000, the US$11.5bn acquisition of Donaldson, Lufkin & Jenrette gave Credit Suisse First Boston (as it was then) a leading presence in junk bonds and merchant banking, as well as a retail online-brokerage business.
Fast-forward 19 years and the DLJ acquisition has proved the catalyst behind Credit Suisse’s build out to become a powerhouse leveraged finance platform. The group has consolidated into one of the top names for private-equity sponsors and middle-market companies looking to fund their growth and a favourite of investors for market intelligence and deals.
“Our investors understand that we’re going to get the best possible execution for our clients,” said Jeff Cohen, head of global credit products at Credit Suisse and a DLJ alum.
Across sponsor-backed loan transactions, middle-market lending, LBO financings, corporate loans and dividend recaps in 2019, Credit Suisse’s market prowess covered the full spectrum of credit.
“We think that our investors appreciate the diversity of options. Some guys are looking to take more risk, but they want it structured it the right way. We put a lot of effort and time into structuring transactions appropriately for the market place,” Cohen said.
Such nimbleness would be impossible without the bank’s constant contact and dialogue with buyside investors, which has historically been one of the Swiss bank’s greatest strengths.
“We feel like we get very high quality feedback from our sales people and investors as to who has pockets available to buy certain things at any given time, because we have spoken to the two or three key investors in that sector eight times on the previous two days on other transactions that we’re trading in the secondary market,” Cohen said.
“That secondary market prowess, proficiency and volume allows us to be sharper and helps us with the underwriting business.”
BROAD ARRAY
Credit Suisse covered a broad array of deals in 2019 from leading headline-grabbing cross-border issues such as the SFr5.4bn-equivalent (US$5.5bn) financing backing the purchase of Nestle’s Skin Health unit to smaller, more bespoke buyouts including a €275m loan for EQT’s acquisition of Maltese mobile operator Melita.
“We want clients to come to us on big transactions, but we are also here for the more bespoke advice. We are best in class for delivery in both scenarios,” said Eduardo Trocha, EMEA loan syndicate head.
Credit Suisse was sellside adviser on Nestle Skin Health and provided a stapled financing, engineering the financing package and demonstrating the bank’s ability to covert M&A mandates to profitable financing opportunities.
Nestle Skin Health had a large and complex first and second-lien structure, denominated in both euros and US dollars for a first-time borrower that demanded a coordinated approach between the US and Europe and a strong distribution capability.
“We engineered the financing package on Nestle and led the US dollar part of it. We were deeply involved in the structuring advice on the junior capital and preferred equity that helped crystalise the second-lien,” Trocha said.
The €275m loan for Melita involved Credit Suisse taking a real view, especially as it was a covenant-lite deal for an approximate €50m Ebitda Malta-based business. Pricing tightened during syndication after strong investor demand.
“We took leadership in pricing and dialogue with the market,” said Mark Walsh, EMEA head of leveraged finance capital markets.
One highlight in the US was being one of eight banks that underwrote a jumbo US$8.2bn debt package in October backing the LBO of fibre-optic cable company Zayo Group.
Credit Suisse also advised other first-time issuers in EMEA, including a €390m loan backing the take-private of Netherlands-based sustainable food provider Wessanen and a €354m loan backing Triton’s acquisition of UK-headquartered pharmaceutical firm Atnahs.
Perhaps one of its boldest moves of 2019 was completing a dual-currency US$1.75bn-equivalent term loan financing for Irish software firm ION Corporates in October, bringing an end to a saga that saw the original deal brought via house bank UBS, which was pulled in May having met opposition from loan investors.
“It involved a lot of hard work and the rebalance of power between the borrower and accounts made it a win-win for both. It is not the biggest or shiniest deal, but it is a great story about what happened in the European leveraged loan market this year,” Walsh said.
The refinancing was a brand new mandate for Credit Suisse, which approached the client and restructured the original failed refinancing after a four-month negotiation process. Credit Suisse reduced leverage, improving ratings and presented less aggressive documentation.
Despite being done on a best-efforts basis, the bank took a real reputational risk and it paid off.
“We recalibrated and resuscitated that deal and brought it back to the market. It happens only a handful of times in a career,” said Geoff Drayson, EMEA head of leveraged finance sales.
Timing was very important in the leveraged loan market in 2019 and Credit Suisse prided itself on bringing deals to market at the right time and providing honest advice to borrowers and investors in a bifurcated market that was tricky to navigate.
MIDDLE-MARKET SUCCESS
Credit Suisse’s middle-market lending effort has become one of its most accomplished franchises.
“It takes a lot more hand-holding and work to sell these deals to investors. When you announce you’re doing Nestle, people are already familiar with the products. When you bring new deals, people need to be educated on what these companies are, what the issues are, and what are the mitigants to these issues,” Cohen said.
The bank’s ability to understand small and medium-sized clients has become ever more important in a changing lending landscape where new entrants such as direct lenders become more attractive sources of financing.
It helps to have a specialised sales force that sells nothing but loans to the buyside, which very few other banks have any more.
“These guys are used to digging into credit stories and being able to answer questions. It is very different if you are one of our larger competitor firms where the guys cover loans and bonds,” Cohen said.
FOCUSSED APPROACH
In Asia, Credit Suisse adopted a niche approach, focusing on event-driven financings and frontier-market borrowings, and employing its balance sheet selectively.
The bank’s performance was particularly noteworthy in Australia where it led a US$486m covenant-lite first-lien term loan in March for private equity giant KKR’s buyout of accounting and business software firm MYOB.
Credit Suisse was also one of the leads on a US$2.85bn loan for Australia's IFM for its acquisition of US pipeline operator Buckeye Partners. A US$2.25bn seven-year term loan B portion in October met with a strong response, making a US$500m bond unnecessary.
Credit Suisse also jointly led a A$660m (US$459m) unitranche loan for the LBO of Australian pet store owner Greencross, which was oversubscribed. And it led an increased US$605m loan backing Apax Partners’ buyout of New Zealand-based online classified operator Trade Me.
The bank was one of seven underwriters on a €2.2bn recourse loan for Chinese sporting giant Anta Sports and its consortium’s takeover of Finland’s Amer Sports. It was sole coordinator on an amendment and extension of Chinese e-commerce giant Alibaba’s US$4bn loan that attracted 30 banks, including eight new lenders.
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