Banks Sell €7.45 Billion of Debt for CD&R Sanofi Unit Buyout

(Bloomberg) — Banks including Goldman Sachs Group Inc. and Citigroup Inc. have wrapped up a €7.45 billion ($8.1 billion) sale of leveraged loans and high-yield bonds to finance Clayton Dubilier & Rice’s purchase of a stake in Sanofi SA’s consumer health division.

The debt package for the unit, which is called Opella, was one of the most hotly anticipated financing deals to come to market this year in Europe and the US. It included €5.2 billion-equivalent of leveraged loans denominated in euros and dollars, as well as €1.25 billion and $1.1 billion portions of fixed-rate bonds.

Although recent volatility in markets led the loan portion of the package to be downsized from €5.45 billion-equivalent, overall demand helped bankers price the obligations at the tighter end of guidance. 

The dollar and euro loans sold at a respective 3.25 and 3.5 percentage points over their benchmarks and issued slightly below face value, according to a person familiar with the matter who asked not to be identified. Meanwhile, the euro fixed-rate bonds priced at 5.5%, and the dollar segment at 6.5%, in line with guidance, according to a separate person familiar with the matter.

The sale came at a turbulent time in financial markets as US President Donald Trump’s tariff threats have triggered volatility and economic worries on both sides of the Atlantic. In recent weeks, companies in both Europe and the US have shelved plans to tap the riskiest corner of the loan market.

On Monday, Bloomberg reported that a group of banks including Citigroup Inc. and JPMorgan Chase & Co. may be forced to self-fund a debt package to finance Canadian auto parts maker ABC Technologies Holdings Inc.’s purchase of TI Fluid Systems Plc. A $900 million leveraged loan has not yet attracted enough demand from investors and a $1.325 billion junk bond sale hasn’t launched, amid concern that tariffs imposed by the Trump administration will affect the company’s business.

To sweeten the Opella deal, the issuer made concessions to investors on documentation, including safeguards known by the names of the companies that first deployed them: J Crew, Chewy and Serta. These blockers, as they’re known, make it harder to push through debt restructurings that strip lenders of claims to assets. 

The borrower also removed what’s known as the high-watermark clause that allows private equity owners to use the highest level of the company’s earnings to calculate dividends or to raise further debt.

The inclusion of the J Crew-style blockers was optional in Opella, and only needed to be included if investors asked for it, Bloomberg previously reported.

In-Person 

The Opella deal was also notable because it was one of the few in Europe to assemble investors in person in recent years, according to people familiar with the market. Historically, in-person meetings were commonplace for leveraged loans and junk bonds, but the pandemic halted that and made video calls the main marketing route.

In general, roadshows are more expensive to put on, typically costing anywhere from €50,000 to €100,000 in Europe and the USA, according to people familiar with the matter. However, these meetings could encourage bigger orders and possibly tighter pricing, one person said. 

A group of 22 lenders, including Goldman Sachs and Citigroup, faced an agonizing wait to sell the debt. The banks extended an upfront commitment to CD&R last year so the firm could buy part of Sanofi’s consumer arm. But they had to keep the debt on their balance sheets until at least late March because of a rule on timely financials that prevents underwriters from approaching investors without recent-enough figures.

The fact the financing got done is expected to encourage more deals to follow, because it shows the appetite in the market and the capacity available.

Wall Street lenders have been working on at least $38 billion worth of bonds and loans for buyouts in dollars and euros, as the leveraged buyout market tentatively kicks back into gear, offering some relief to investment bankers after a moribund period for dealmaking.

Global coordinators on Opella also included Morgan Stanley, Barclays Plc, Societe Generale SA, HSBC Holdings Plc and BNP Paribas SA.

–With assistance from Eleanor Duncan, Kevin Kingsbury and Rachel Graf.

(Adds details of ABC Technologies Holdings deal in sixth paragraph)

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