Diminishing appetite and higher fees amongst banks to underwrite debt deals for their clients is resulting in private equity giants such as Apollo Global Management Inc. sidestepping banks and tapping investors directly for their acquisition needs.
Banks arranging the 350 million euro ($349 million) high-yield bond sale for Apollo-owned Lottomatica SpA, including Barclays Plc and Deutsche Bank AG, are leading it on a so-called best efforts basis, according to people familiar with the matter. In other words, they’re helping to raise the financing from investors without taking any of the risk on their own balance sheets.
The deal, which is earmarked to pre-fund expected and near-term acquisitions, is a transaction that could have typically been underwritten by banks a year ago, when rates were low and appetite for higher risk debt was buoyant. The Italian lotto company launched a deal directly into the market this week that priced with an attractive yield of around 9.75%. At that price it accounts for a premium of around 2% versus the company’s existing bonds and investor demand of more than 1 billion euros resulted in the price narrowing.
Read more: BNN Bloomberg
