PHOENIX Pharmahandel GmbH & Co. KG has decided to postpone its planned €300 million offering of five-year senior unsecured bonds due to "market conditions." The German pharmaceutical group plans to reengage investors next year, according to an announcement sent by lead managers today.
The deal is the second transaction in European high-yield to be delayed as a result of Friday's market sell-off following the discovery of a new COVID-19 variant of concern, called omicron. On Nov. 26, Italian packaging group Reno de Medici was forced to delay pricing of its planned €445 million, five-year (non-call one year) offering of floating-rate notes, with this borrower now planning to price the deal early this week, according to a message sent by lead managers.
Although European bourses have this morning reduced some of Friday's equity losses, bond markets still suggest a risk-off tone, with 10-year Bund yields up roughly two basis points from Friday's rise. Credit remains under pressure too, with the iTraxx Europe Crossover at 290 this morning, 22 bps wide of Friday's open.
One banker involved in the Phoenix Pharma transaction said the "market is simply too weak right now" for the deal to be executed.
Phoenix held a series of fixed-income investor last week via BNP Paribas, Credit Agricole CIB, Deutsche Bank, Helaba and UniCredit. Proceeds from the offering were to refinance part of the €1 billion bridge facility which financed the acquisition of the European operations of U.S. peer McKesson, as well as the acquisition of a 45% remaining minority stake of its Dutch subsidiary Brocacef.
S&P Global Ratings in July placed the company's BB+ rating on credit watch with negative implications following the announcement of the debt-funding acquisition, and last week said it expected the borrower's new senior unsecured bonds to be consistent with this rating.
Ratings expects adjusted debt to EBITDA to rise above 5x following the closing of the acquisition, which is expected in 2022. The cancellation of the bridge facility will "improve Phoenix's debt-maturity profile," noted Ratings, while adding that the negative outlook reflects "uncertainty about the closing of Phoenix's acquisition of McKesson's continental European assets and the final terms of the transaction."
Investors last week were positive on the name. One investor with a position in the company's unsecured 2.375% unsecured notes due August 2025 — which were placed in August 2020 — described Phoenix as a "very stable business with a strong shareholder behind it," and said the company's decision to suspend dividend payments until S&P Global Ratings has removed its negative outlook was an additional positive for debt investors.
Phoenix Pharma is an integrated healthcare provider in Europe operating in the pharmaceutical wholesale, retail and services segments. The business is fully owned by the Merckle family. "The acquisition of McKesson's European operations makes sense and the business is majority wholesale, so should be stable," the same investor said.
In its July report, Ratings said the company's wholesale and retail divisions contributed significantly to the S&P Global Ratings-adjusted EBITDA of €653.7 million achieved for the 2021 fiscal year.
Phoenix Pharma's outstanding €400 million of 2.375% 2025 notes, which were upsized from an expected €300 million during the bookbuild, closed at 102.630 for a 1.584% yield prior to the announcement of the new bond on Nov. 23, and closed on Nov. 26 at 102.204 yielding 1.708%, according to S&P Global Market Intelligence data.
The notes were to be issued under standalone documentation through issuing subsidiary PHOENIX PIB Dutch Finance BV.