Offer price talk on the €250 million fungible add-on to Modulaire Group’s E+450 term loan due December 2028 is out at 97-97.5, with commitments due by noon London time on Feb. 15. BofA Securities and Goldman Sachs are leading a group as joint physical bookrunners.
Guidance suggests a yield of 5.05%-5.14%, and comes after the deal was presented on a call on Feb. 7. Proceeds are earmarked — along with roughly €124 million of cash — to refinance a €185 million holdco payment-in-kind facility held outside the restricted group, to repay a partially drawn revolver and support signed M&A.
The deal increases a term loan allocated in October 2021 to support Brookfield's $5 billion buyout of the U.K.-based modular leasing company that was also backed by a €750 million offering of seven-year secured notes, £250 million of sterling secured notes and €435 million of eight-year unsecured notes.
Launch came on the same day that Modulaire delivered an upbeat full-year 2021 results update. The firm reported a 17% year-over-year increase in revenue to €1.42 billion with organic revenues up by 7%. Reported underlying EBITDA, including M&A, was up 32% year-over-year to €460 million, while EBITDA margins stood at 32%. Pro forma run-rate EBITDA came in at €516 million, versus €471 million in June when Brookfield bought the business.
In secondary, the firm's bonds initially fell on Feb. 7 in what was another difficult day for the market, and as traders reacted to the firm’s increased debt loan that was seen as an effective dividend relatively soon after buyout. In all, the deal takes leverage to 4.8x/5.7x (secured/total) from 4.1x/5.1x at present, according to the company update.
This softness saw the bonds fall by 2-2.5 points, though they have subsequently retraced some of their losses amid more stable markets, with the group's 4.75% euro-denominated bond bid at 95 earlier today, which is up roughly half a point from yesterday. The 6.75% euro unsecured bonds, meanwhile, are bid at 92.1 for a yield of 8.28%, according to Tradeweb prices.
The borrower's loans also reacted, and the week has brought clear evidence of buyers switching out of loans and buying bond pairs. Loans also had a tough day on on Feb. 7 and the term loan B fell from a rough 99.375/99.875 market at the end of last week to as far as a 97.75-bid. It has since stabilized and is now marked in a rough 98.125 /98.875 market
London-based Modulaire Group designs, manufactures, leases, maintains and sells prefabricated modular space, secure portable storage and remote workforce accommodation management products, including portable cabins, modular buildings, secure storage, portable toilets, temporary kitchens and temporary fencing.
Ratings are affirmed at B/B2/B (corporate) and B/B2/B+ (issue) with a 3 recovery rating and stable outlook on all. The loan comes with an annual environmental, social and governance margin ratchet of +/- 7.5 basis points. Morgan Stanley is also a joint bookrunner on the deal.
