By Claire Ruckin
LONDON, Jan 31 (Reuters) - Banks have given up some fees on a 310m leveraged loan financing backing UK flower and vegetable supplier Flamingo's merger with rose producer Afriflora, banking sources said.
Credit Suisse, Investec and Jefferies are leading the financing that comprises a 280m seven-year term loan B and a 30m six-year revolving credit facility.
The deal was altered significantly in a bid to make it more attractive to investors after the loan faced some difficulties during syndication. Investors are cherry-picking larger or better perceived credits in the market amid a flurry of new issuance in January.
Banks have had to pay up to offer soft-call protection of 102 for 12 months, from an original level of 101 soft-call for six months, the sources said.
Soft-call protection gives investors comfort that a borrower can not refinance or reprice a loan within the protection period, without paying a premium to do so.
However, the banks are not paying for other document changes or the hefty 96 OID and 575bp over Euribor interest margin, as they are just within the flex terms agreed with the sponsor.
The flex terms were more generous on this financing than conventional deals in Europe's leveraged loan market to take account of a number of issues including sector and the fact that Afriflora sources its products from its 500 hectares of farmland in Ethiopia, the sources said.
The term loan, which now also includes a leverage covenant, was launch as a covenant-lite term loan guided to pay 500bp over Euribor, at 99 OID.
Lenders have until Thursday to commit to the deal, from an original deadline of January 29 and the changes are enticing more investors into the financing, including both new investors and investors increasing their previous orders of commitments, the sources said.
Finding yield in Europe's leveraged loan market has proven tricky amid an overall pricing compression as demand continues to outweigh supply.
"At these yields there will be more investors at play," a syndicate head said.
However, whether the deal will sell in its entirety remains unclear and the banks could be left holding some of the paper, the sources said.
Sun European Partners agreed to buy Afriflora, alongside founders the Barnhoorn family, from KKR late last year. Afriflora produces over 1.1bn roses a year, cultivated from its farmland in Ethiopia.
Moody's assigned Flamingo a B2 corporate rating earlier this month, citing positive free cash flow at the business due to reduced capex requirements following years of notable investment.
The ratings agency forecast Flamingo's adjusted net leverage at 4.5 times for 2017 year-end, also noting some 10m of cash on balance sheet.
Sun previously bought Finlays Fresh produce in 2015, subsequently rebranding it Flamingo.
Flamingo is the second largest supplier of flowers and vegetables in the UK, according to banking sources.
It is issuing the debt through Zara UK Midco Limited.
(Editing by Christopher Mangham)
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