In February 2014, when UK petrochemicals business Ineos was looking to redeem €1.032 billion 7.875% bonds due in 2016, it turned to the booming European high-yield market, selling €1.035 billion bonds in euros and dollars in a trade that attracted a combined order book of €7.8 billion.
Fast forward a year to March and the firm is now looking to redeem senior secured bonds due in 2019, but has taken a very different tack.
It has mandated five banks – Bank of America Merrill Lynch, Barclays, Citi, JPMorgan and Morgan Stanley – to arrange a €750 million term loan to take out the bonds. The firm is looking for loans in euros and US dollars, and held a lender call on Tuesday. Pricing of around Libor plus 350 basis points with an original issue discount of 99 has been suggested.
Europe’s great disintermediation is stalling. Yield-hungry institutional investors are driving demand for loans at the riskier end of the credit spectrum. Banks, pumped with ECB-printed liquidity and desperate to put their capital to work, are getting off the fence. It could be music to Mario Draghi’s ears. But is a sudden turn away from the bond markets, at increasingly aggressive lending rates, what Europe really needs?