Multiversity Adds Investor Protections to €1.1 Billion Bond Sale

Abhinav Ramnarayan and Amedeo Goria, Bloomberg News

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(Bloomberg) -- Junk borrowers Multiversity SpA, Motel One GmbH and La Doria SpA tweaked the terms of their planned bond sales on Thursday to appeal to investors unsettled by recent turmoil in the high-yield market.

The trio of firms made various document changes, with all of them adding a so-called J Crew blocker, according to people familiar with the matter who asked not to be identified because they’re not authorized to speak about it. The clause aims to prohibit the transfer of assets away from existing lenders’ legal claims.

With a series of high-profile European high-yield firms running into trouble in recent months, investors are fretting that the erosion of legal safeguards during the easy money era would come back to bite them.

Altice France SA recently warned its creditors that they will have to take part in “discounted transactions” to help the company reduce its debt levels. Heavily indebted packaging maker Ardagh, meanwhile, has struck a new-money deal with Apollo, that effectively bypasses existing creditors.

“The troubles we have been seeing in the high yield market have been about the loose covenant packages of recent years,” said Sunita Kara, a high yield portfolio manager at Aviva Investors. She was not referring in particular to the three companies who changed their document terms on Thursday.

Document Changes

Alongside the J Crew blocker, the document changes to Multiversity and Motel One’s bond offerings also include protections around restricted payments — such as limits on the company’s ability to pay dividends — and curbs other payment allowances based on leverage levels.

La Doria also removed portability, a covenant that typically gives shareholders more options when selling a controlling stake in the business, for example.

Multiversity set slightly tighter price levels for a €1.1 billion ($1.2 billion) bond sale, split evenly between floating and fixed-rate notes.

The bond sale is part of owner CVC Capital Partners’s move to transfer Multiversity to a continuation fund and add debt to its balance sheet, a plan that was dubbed as “aggressive” by S&P Global Ratings due to the increase in the firm’s debt-to-earnings ratio. The ratings agency downgraded Multiversity this week hours after the deal was announced.

MotelOne is in the process of marketing a €500 million seven-year bond, while La Doria is selling a €525 million five-year note.

(Adds Motel One details, quote, further background)