Orc Group, a Swedish financial technology company owned by Nordic Capital, has placed a five-year €60 million senior secured high-yield bond.
“The offering was largely oversubscribed, so much so that we had to close it before the end of the road show,” Mark Bulmer, partner at Nordic, told Private Equity International.
The proceeds will be used to refinance loans arranged at the beginning of the year, when Nordic de-listed the company in a deal valuing it at around €225 million. Bulmer declined to discuss the amount or terms of the original financing package.
Deleveraging the portfolio was not the prime motivation behind the move, according to Bulmer. Rather, Nordic wanted to recycle liquidity towards growing parts of Orc’s business. Bulmer explained that this involved organic growth as well as future acquisitions, in a hint that despite divestments this year, Orc could be considering attractive targets in the near future. In November Nordic sold off Neonet, a former arm of Orc which had been run independently since March.
Orc’s successful placement has a wider resonance for the industry, Bulmer said. “For many companies, bonds are an interesting complement to conventional bank financing.”
While the European high yield bond market could still take a couple of years to fully mature, the signs are promising after a bumper year for issuance. Bulmer expects bonds to play a more prominent role in private equity relatively soon: they represent a more straightforward, flexible solution to access liquidity than loans, he said. The widespread use of incurrence-based covenants in the high-yield market, more business friendly than the maintenance-based provisions usually associated with leveraged loans, is also perceived a distinct advantage.
The equity used for the Orc deal was drawn from Nordic’s Fund VII, which closed on €4.3 billion in 2008. The firm is currently raising its Fund VIII, having reduced its target in October, from €4 billion to between €3 billion and €3.5 billion, due to adverse market conditions.