Merlin Deal Marks First Use of State Cash for Bond Payment in EU
2020-04-27 12:44:02.883 GMT

By Irene García Pérez
(Bloomberg) — Covid-19 spread into European bond documents
last week after Merlin Entertainments launched a debt sale
allowing it to use government-backed loans to repay a chunk of
its borrowing.
The Blackstone-backed theme park group issued 500 million
euro ($542 million) in senior-secured notes on Friday with a
clause that permits the repayment of 40% of the bonds using
proceeds from Covid-19-related state support.
While some borrowers have included this so-called equity
claw in recent issuances in the U.S., Merlin became the first in
Europe to include the provision. As more governments introduce
financial measures to support businesses amid the economic
crisis, others will likely follow suit, according to Kirsten
Heenan, an analyst at Covenant Review.
“You’d assume these new bonds are to ensure liquidity or
working capital for some Covid-related purpose,” Heenan said.
“They would have this optional redemption in the bonds if they
get government assistance.”
The clause in the Merlin deal offered even greater latitude
for the company than those put forward by their U.S.
counterparts, with recent issuers such as Cliffs, AMC and Adient
writing in a 35% claw, analysts from data provider 9fin wrote in
a note to clients on Friday.
Merlin was just the third borrower to tap the euro-
denominated high-yield market, following security firm Verisure
and Netflix, after an eight week hiatus.
“We believe that the euro high-yield market should be
inspired by Merlin and U.S. transactions including the same
mechanism,” SpreadResearch analyst Mateo Salcedo wrote in a note
to clients on Friday.