By Yoruk Bahceli
LONDON, Nov 15 (IFR) - Verisure is expected to launch its €1.145bn senior unsecured bond on Wednesday, with the deal documentation containing a provision that would allow it to pay a further dividend on top of the jumbo payout the trade itself will finance.
The company had already cleared the way to pay a €1.05bn dividend, using the proceeds and an accompanying €680m term loan, in a consent solicitation approved last week that allows it to temporarily loosen covenants on its outstanding bond.
The terms allow Verisure to pay an additional dividend if leverage is 7.25 times or below for the first 18 months after the bond is issued. The company's opening leverage stands just above that level, at 7.3 times.
"It's hard to envisage a scenario where they significantly delever without then taking more money out ... and take you back to that [opening] leverage," one investor said.
A second investor, who reckoned the company would delever by about a turn in the first 18 months by improving its earnings, said sponsors Hellman & Friedman could take out roughly €500m from the company through the provision.
The investor said he told banks led by Goldman Sachs that his fund would place a smaller order if the provision is not taken out of the documentation.
The leverage requirement to pay a dividend tightens to 6.25 times after the first 18 months.
A banker on the deal said the investor concerns were a "fair representation of the situation".
"I think the reason people get comfortable [with the credit] is because it's a stable and robust company."
He added that the biggest risk was that the company wouldn't keep to a decreased leverage level over the 18 months.
The company is out with a 6NC2 fixed euro and a 6NC2 FRN in Swedish kronor, with the split yet to be determined.
Talk is at 5.75% area on the euro and 575bp area over Stibor on the krona, widening out from the low to mid 5s shown to investors last week.
The widening comes in the context of a sell-off in the high-yield market, with the iBoxx euro liquid high-yield index widening 39bp since the beginning of last week to 2.49% as at Tuesday's close, according to Thomson Reuters data.
The trade is coming to market following a three-day roadshow that commenced on Friday and ended on Tuesday afternoon.
Other banks on the deal are Bank of America Merrill Lynch, Nomura, JP Morgan, Morgan Stanley and Nordea.