Cerved Group SpA has set terms as follows for its €1.4 billion, two-part secured bond deal backing the takeover of the Italian financial data group by ION:
*€1.05 billion of seven-year (non-call one) floating-rate notes at E+525, with a 0% floor offered 99.5.
*€350 million of seven-year (non-call three) fixed-rate notes at 6%.
Price talk was offered earlier in line with initial price thoughts given at 5.75%-6.00% for the fixed notes and 5.25%-5.50% for the FRNs. Books are closed, with pricing expected to follow via sole global coordinator J.P. Morgan.
The deal comes after ION, via its buyout vehicle Castor, agreed to terms in September 2021 to acquire the Milan-listed group for an enterprise value of €2.5 billion. Investors had previously indicated a yield in the 6% area prior to announcement of IPTs, given the recent spike in high-yield bond yields, which have accelerated after last week’s ECB meetings.
The transaction will also refinance €579 million of existing Cerved debt and translates into leverage of 4.6x based on adjusted revenue and EBITDA of €498 million and €280 million, respectively, for the 12 months ended September 2021. The takeover will be supported by a €1.24 billion equity contribution from ION.
Without adjustments, market sources say leverage might be closer to 6x. Company EBITDA figures include €72 million of estimated unrealised cost synergies with respect to personnel costs and operating improvements when Cerved is integrated into ION Group. Moody's, meanwhile, puts opening leverage at 7.8x on a Moody's-adjusted basis.
ION Group is a capital markets data and content provider which operated across four investment platforms. Its ION Analytics unit, which operates Acuris and Dealogic, recently shelved plans for an $850 million-equivalent, two-part offering of eight-year senior secured bonds across dollars and euros due to market volatility.
Cerved corporate and issue ratings have been confirmed at B/B3/B and B/B3/B+, respectively, with stable, positive and stable outlooks. S&P Global Ratings expects revenue to increase by roughly 6% to 9% for 2021-2022 thanks to a rebound in corporate activity following the pandemic.
The main appeal of the business is for fixed income investor are recurring revenue and strong margins, with its key limitation being limited geographical scope and high leverage, market sources say. Cerved operates almost exclusively in its domestic market, with 95% of revenue generated in Italy in 2020. But its products are nevertheless essential to the infrastructure of Italian finance, with Cerved having a relationship with more than 95% of Italian domestic banks, according to S&P Global Ratings.
Moody's also highlights its exposure to the "troubled and gradually consolidating Italian banking sector and a certain degree of supplier concentration."
Cerved listed on the Milan stock exchange in 2014 and was previously a CVC portfolio company. CVC tapped the bond market in 2013 to fund its acquisition of Cerved from Bain Capital and Clessidra, at the time paying €1.3 billion for the company. The deal was one of the first to make use of legislation put in place in October 2012 that allows non-listed Italian companies to issue bonds and eligible for a favorable withholding tax regime. The law has prompted a huge increase in Italian high-yield bond issuance, with last year seeing record supply from Italian names amid elevated buyout activity.
For the latest deal, both bond tranches include a 40% equity claw, and the fixed-rate tranche will include a 10% special call at 103 during the non-call period. Deutsche Bank, Goldman Sachs and UniCredit are additional joint bookrunners on the deal.
