(Debtwire) Urbaser PIK debate ensues as private credit competes for bond market issuance – HY Digest
08 Aug 2025 | 15:49 BST
Buysiders surprised by Urbaser shareholder dividend plan via PIK
High yield competes with private credit as direct lending booms
PIK toggle notes are often considered a top-of-market trade given typical instrument volatility through the cycle. But tight spreads helped such notes market this week.
Platinum Equity-owned Spanish environmental infrastructure platform Urbaser’s marketed PIK toggle note offering was not an easy sell. But the deal appears scheduled to price successfully after revised price-talk and documentation changes were released this morning (8 August).
The raft of documentation changes is helping to sweeten the deal. Changes include the ratio-based provision for restricted payments funded from the available amount being limited to the Opco group. Anti short circuit language was also added and the CNI builder basket will no longer be backdated. No-worse-than debt incurrence provisions and the pick-your-poison debt basket have been removed. J. Crew protection has been expanded at the Holdco level, portability has been removed, and the unrestricted subsidiaries investment basket was reduced to 20% from 35% of consolidated EBITDA.
Urbaser’s PIK for a EUR 980m dividend so soon after an Opco deal to fund a previous EUR 1bn dividend was rightly raising eyebrows. The company recently had a solid earnings performance. But there remained some scepticism on true EV/EBITDA multiples for the business while earnings adjustments remain sizeable and cashflows are relatively thin. This meant the fundamental credit story was not hugely appealing even if the PIK toggle note’s potential pricing ultimately looked attractive, according to aDebtwire bond preview published on Tuesday (5 August).
Tapping the syndicated debt market to fund dividend distributions has become increasingly frequent and relevant in the past 12 months, according to Debtwire data.
“The usual tactic of a borrower is it comes to the market, tests water, checks book building, and then returns after a few months. It is not bearable. This method of raising money is very obscure, and misleading for investors (on the first bond),” one buysider said. “The ratios before and after can remain good, with metrics not suffering. But the issue is in the method. I don’t care if it is opco, holdco or positive cashflow. I criticise the method rather than the dividend.”
A second buysider admitted this was a “very cheeky deal” but added it likely works as an investment, noting there is always an initial shock reaction until the notes start trading and then nobody can resist the yield.
The dividend deal appeared just two months after the company in June priced a EUR 1.5bn TLB and EUR 800m senior secured notes offering, with part of the proceeds of those notes used towards a EUR 1bn dividend. Moody’s has since downgraded the Urbaser corporate family rating to B1 from Ba3 while S&P lowered the credit rating to B+ following the PIK issuance announcement.
A third buysider was very disappointed as the company stated it was cautious on leverage and wanted to keep its ratings unchanged at the previous deal in June, but then announced the latest issuance.
“The [potential] 11% coupon means the debt will have grown significantly within five years - it basically will soak up all the equity,” a fourth buysider said. “In a way you are buying the business at around 6x EBITDA (where leverage stands for the PIKs) but for the time being Platinum can still take out money - which it is doing here with the big dividend.”
Citi, BofA, Urbaser and Platinum Equity did not immediately respond to requests for comment.
Urbaser was the main bond issuer marketing this week (see chart below).
Private credit competition
The high yield market faces competition from a burgeoning private credit market. European direct lending reached an all-time high in 2Q25, as both a surge in the number of transactions as well as a handful of large-ticket items pushed direct lending volumes to new heights, according to Debtwire's 1H25 direct lender rankings report.
“Private credit appeals to issuers versus high yield, given high yield constraints on needing an offering memorandum as well as call protection. There has been private credit activity from Italian issuers which can’t do institutional loan issuance as well,” one banker said. “Nordic bond market names have been less appealing to private credit providers due to the riskiness of some of these companies. Private credit is more mature in the US than Europe and it has become a rival versus the syndicated loan market.”
The banker noted there are issuer attractions for private credit of being able to have higher day one leverage and flexibility for delayed drawdowns.
Laboratory work required
There were several movers this week (see chart below).
Spanish auto parts company Antolin announced on Monday that it had closed a EUR 150m syndicated loan agreement. Antolin’s finalisation of the EUR 150m loan is a welcome boost. But any future par refinancing for the Spanish auto parts supplier still appears difficult.
Mutares’ 2029 bonds climbed while its 2027 bonds moved lower. The German holding company on 1 August announced that BaFin has initiated an audit of Mutares’ published annual financial statements as of 31 December 2023.
Mutares will release 1H25 results with an earnings call scheduled for next Tuesday (12 August).
“We recognise BaFin’s announcement and welcome the opportunity to contribute to the further clarification of the facts in the course of the proceedings,” a Mutares spokesperson told Debtwire. “We are confident that the accounting has been carried out properly and that all legal requirements have been met.”
On the downside, French lab group debt including bonds of Biogroup and Cerba moved lower. A press report today noted French lab groups are poised for restructurings after a government-led audit of the sector recommended measures including profit caps. The government report noted “measures must be taken to bring the cost of biology back to a fair price”, including “the introduction of profitability-based regulation”. High yield lab group debt issuers including Biogroup, Cerba and German lab company Synlab were consulted on the report, the press report stated.
In focus
Emeria’s secured notes inched higher this week with a proposed asset sale potentially aiding liquidity. But the French property management services company’s (formerly Foncia) leverage is elevated and an upcoming maturity wall is approaching.
Tereos’ earnings drop was concerning, given the credit has a precedent for bond price volatility. But the France-headquartered sugar beet producer’s guidance that net leverage movements are under control offers relief.
Market participants are considering whether Ritz-Carlton Yacht Collection (RCYC) may need to secure additional financing – and what form that would take – after the luxury cruise line posted weaker-than-anticipated 1Q25 results.
Medical Properties Trust's (MPT) business model of providing tenants with loan support is facing scrutiny, and the company is likely to require equity market funding or disposals to tackle future maturities.
Earnings pressure in European high-yield chemicals means underweighting makes total sense. But several names are worth adding on any hints of an improving cycle.
Synthomer’s CEO Michael Willome did not rule out reviewing the UK specialty chemicals company’s nitrile butadiene rubber (NBR latex) business as a potential divestment candidate.
A group of minority creditors to glass and metal packaging company Ardagh’s holdco PIK notes has tapped White & Case as legal counsel ahead of an 11 August deadline to sign on to a restructuring deal.
A GBP 57m piece of transport company Mobico’s GBP 600m RCF was up for auction with a mid-80s floor price and a deadline of 13 August.
In a wide-ranging Mobico webinar discussion, independent special situations desk Sarria noted Spanish ALSA operations were carrying the company with the UK franchising contract model shift being a margin rather than a revenue issue. While the German operations are suffering, the public focus on Deutsche Bahn’s half year earnings could help. Ultimately, Sarria noted Mobico is a GBP 1.8bn enterprise value business, albeit with debt carrying capacity covering only 83% of senior secured debt (gross), while a sale of ALSA could cover the entire debt stack. Perpetual noteholders could ask for cash to amend and extend and SUNs may accept some leakage if it addressed the perpetual note maturity problem, Sarria stated.
Norway-based automotive supplier Kongsberg Auto, German electronics manufacturer Ceconomy, and UK modular space and storage solutions provider Modulaire, among others, will release their quarterly reports next week.
by Adam Samoon and David Orbay-Graves