Sobi's US$8bn acquisition, one of the largest potential buyouts in the European leveraged finance market, has dropped out of the pipeline after buyers Advent International and Singapore wealth fund GIC failed to reach the 90% share threshold needed for the deal's approval.
Barclays, Goldman Sachs, RBC and UBS had been leading the debt financing backing the Swedish pharmaceutical's buyout, which given the enterprise value, was expected to total around US$5bn according to bankers. It was set to comprise a mixture of leveraged loans and high-yield bonds, denominated in US dollars and euros.
"Since the acceptance level condition has not been fulfilled, Agnafit Bidco hereby withdraws the offer," Agnafit Bidco, Advent and GIC's vehicle for the takeover, said in a statement published on Friday.
Europe's leveraged finance bankers are now facing a much quieter December than expected, after leads on Morrisons' highly anticipated £6.6bn leveraged financing backing its buyout by Clayton Dubilier & Rice decided to shelve execution of the deal until 2022. Sobi's financing package had also been pegged for a pre-Christmas take-out.
However, bankers say that T-Mobile Netherlands, another large bond buyout deal in the pipeline, still has a window to come before year-end - depending on market conditions.
T-Mobile was forced to split the execution of the loan and bond components of its €4.45bn leveraged buyout after numbers were not ready in time to be included in the offering memorandum for the high-yield bond component of the takeout.
Leads Morgan Stanley (sole physical), Barclays and Deutsche Bank landed a €2.4bn seven-year term loan B in November, but are still waiting to syndicate a high-yield bond, now expected to be around €1bn after the loan was upsized from €2bn.
"The market is not shut," said a banker familiar with the deal. "Next week is a legitimate potential marketing week for issuers to be out there. Borrowers are taking it day by day in terms of whether the market is sufficiently stable to go. But it's really down to the individual issuer whether it wants to be done and dusted before year-end, or whether they're willing to bet that January will be better."
Europe's leveraged finance market is now set to see a busy start to 2022, with bankers saying that several of their deals have now been pushed from a November/December timing to the first quarter. With the new Covid-19 variant Omicron now spreading worldwide, the sellside is trying to avoid overloading investors in January, and are spreading out deals over the first quarter.
Stick or twist?
Still, the big question hanging over the market going into next year is how governments and central banks will respond to the global spread of Omicron, a new and more infectious variant of Covid-19, which has the potential to evade the protection given by vaccines.
Before Omicron reared its head, most lenders had been looking to get risk off their balance sheets before year-end, ahead of the prospect of further market uncertainty in 2022 as global central banks start changing tack in their monetary policy.
Underwriters had wanted to pull the trigger on Morrisons as early as November - or, failing that, before mid-December. But bankers said they would only do so if the pricing made sense.
That looked less likely as a combination of rising rates, supply chain snarls and inflationary risks meant that secured bonds sold by the UK supermarket's closest comparable, Asda, started to trade well under par. This meant that leads were facing a tight squeeze to get the transaction across the line under the level at which yields are capped. The Omicron variant meant that leads decided to delay the deal.
Bankers are now hoping that January will not bring further surprises. The expectation is, with investors recharged and ready to put fresh allocations to work, Morrisons will be an easier sell. The financing package is still the largest in the near-term leveraged buyout pipeline.
"I think the fact that they've decided to [delay] it says they feel ok about it. I'm not overly concerned about it," said a syndicate head of the decision. "Obviously people are mindful about what their balance sheets look like at year-end but to put it another way, if you're looking at another six weeks of exposure on something you've already carried for a few months it's not that significant."