Stada Arzneimittel : Refinancing of SS FRNs; apparently high demand given the material upsizing

Stada offered initially 7NC1 EUR 550m SS FRNs to refinance non-portable SS FRNs and amounts drawn under the RCF and later materially upsized the transaction in a unique move to address the EUR 600m SS FRNs due 2030. Closing of the CapVest/Stada transaction (a very large one for CapVest with reportedly EUR 10bn AuM) is expected for Q1 26. We do not expect regulatory headwinds.
We change our Credit Opinion to Stable (vs. Positive) as Stada left the IPO route. The refinancing is a leverage-neutral transaction. Starting net leverage is at 5.7x. Note the EUR 1.4bn of PIK debt outside the restricted group.
We adopt the following recommendations:
NIDDA EUR 350m 7.000 2030 (prior private placement): Neutral (affirmed). The instrument was privately placed. It has an ISIN and can in theory be traded, we understand. But we adopt a Neutral recommendation in light of the assumed illiquidity.
NIDDA EUR 650m 5.625 2030: Neutral (vs. Buy). The instrument is in line with the market. The instrument can be called at 102.813% by 15 April 2026.
NIDDA EUR 570m FRNs 2030: Buy (affirmed). The bond offers a premium. However, the ECB agenda is the risk there and that Euribor will fall further. The instrument can be called at 100% by 1 May 2026 (the screen price is not too far away).
NIDDA EUR 570m 5.375 2030: Neutral (vs. Buy). Still qualifying for a Neutral recommendation. The instrument can be called at 102.688% by 30 October 2026.
New 7NC1 FRNs: We recommend subscription to the new instrument at a minimum yield of 5% (IPT is on that level at E+300bp). The group of peer bonds denote a 6% yield (mean yield plus small premium) and there is risk that the ECB will follow further rate cuts given the weak European economy and the strong appreciation of the Euro vs. the US Dollar. But Stada was always a darling of the HY market and its ability to record organic growth from product launches coupled with a robust and strong brands portfolio has resulted in a discount to market levels. It qualifies even more for such a discount these days, because Stada has only marginal exposure to the United States (less than 3% in FY 24) with immaterial impact on earnings and as such can work around the tariffs risk many other European Pharma names face now.