Stada Arzneimittel : Focus Emission

Stada (B2/B+/B+), the German generics and OTC pharmaceutical, undertakes to issue a 7NC3 EUR 485m secured bond (B2/B+/BB-) and an 8NC3 EUR 340m unsecured bond (Caa1/B-/B-). The transaction will be used to refinance a portion of the bridge financing set up to finance Cinven and Bain Capital's public offer on Stada's capital. Following this transaction which had been extended until 1 September and securities purchases on the market, the two sponsors hold a 65% stake in Stada. They are planning to launch a second offer to own at least 75% of the capital and establish a domination agreement that will enable them to gain access to all of Stada's profits. Subject to holding all of Stada's capital, total net debt will amount to EUR 2.8bn including a 7Y bank loan of EUR 1.95bn and the two new bonds (without counting a EUR 400m 6Y revolver). The EUR 485m secured bond will rank equally with the bank facilities, sharing the same collateral and guarantors. The EUR 340m unsecured bond will benefit from second-lien pledges over the same assets.Recommendation: Subscribe at 3.75% for the secured (in line with the upper range of the price talk; despite the lack of premium on the term loan B) and at 4.75% for the unsecured (compared with a price talk of 5.25% which implies a substantial 150-175bp margin differential with the secured) >