DIY Chain Keeps ‘Aggressive’ Terms on Upsized Debt After Rally
2020-09-18 08:29:12.584 GMT
By Irene García Pérez and Marianna Aragao
(Bloomberg) — Dutch DIY retailer Maxeda’s recovery took
another step forward this week, after it upsized its refinancing
deal and maintained conditions in its debt contract highly
favorable to the company.
The firm sold 420 million euros ($496 million) of senior
secured fixed notes this week, upsized by 20 million euros from
the original offering, as it replaces costlier debt sold in
2017.
As well as locking in a cheaper price, Maxeda kept a
covenant, or condition in the debt contract, that analysts
consider atypically beneficial to the firm. The covenant allows
the company to transfer assets to subsidiaries and divert funds
for investment into dividend payments for shareholders.
“It’s a very aggressive term, clearly innovative and off-
market when it came out in the original deal in 2017,” said
Caitlin Carey, a legal analyst at Covenant Review, a credit
research firm. “Things have moved on since then, have become
more aggressive across the board, but this is a feature that is
still at the very aggressive end.”

Sneaking In

While still unusual in Europe, this feature is “sneaking
into” more European high-yield deals, including those of
Thyssenkrupp Elevators, Kantar Group, Bite and United Group BV,
analysts at 9fin, a research firm, wrote in a note to clients
this week.
A spokesperson for Maxeda declined to comment.
Maxeda was able to keep the clause for the new debt because
of strong investor demand on the back of impressive second
quarter earnings. Moody’s Investors Service praised the
borrower’s improved cash flow generation as it joined S&P Global
Ratings in saying earlier this week it would review Maxeda for a
ratings upgrade.
“These will be remembered as the iconic notes of the
Covid-19 crisis as the DIY retailer managed to refinance at a
lower coupon a bond which was once trading below 50 at the heart
of the crisis,” Spread Research analysts including Benjamin
Sabahi wrote in a letter to clients on Thursday.
Maxeda’s new notes pay a 5.875% coupon, compared to 6.125%
interest paid by the original notes due 2022.
The successful refinancing comes less than six months after
the company’s credit rating was downgraded to seven steps below
investment grade by both Moody’s and S&P.