Capsugel EUR 7NC2: IPT 6.00–6.25% vs FV ~6.40% — Negative NIC at the Mid

29 Apr

Written By M N

Summary. LSF12 Pillar (Capsugel) launches min EUR 500m 7NC2 senior secured at 6.00–6.25% IPT to fund Lone Star's $3bn carve-out from Lonza, with Lonza rolling 40%. Triangulating against Cheplapharm bonds (B) and Action TLBs (B+/BB-) puts B+ 7Y EUR senior secured fair value at ~6.30–6.50% mid. IPT prints ~25bp through FV at the midpoint; only the 6.25% wide end offers concession. JBs leaning hard on the Lonza rollover narrative to squeeze the print.

Deal Terms

Field Detail Issuer LSF12 Pillar Investments (US), Inc. Format 144A / RegS, senior secured Ratings B1 / B+ Size Min EUR 500m Tenor 7NC2 (50 / 25 / par) UoP Acquisition financing for Capsugel/CHI carve-out from Lonza Active JBs GS (B&D), Jefferies, BNPP, UBS Passives BBVA, ING, IMI, RBI, SocGen, UniCredit, StanChart IPT 6.00–6.25%

EUR 7Y MS reference: 2.99%. IPT mid 6.125% = z+314.

Comp Set — Where B+ EUR Senior Secured Trades

Comp Rating Instrument Tenor Mid YTM Z-spread Verisure BB+ Bond '30 4.0Y 4.76% +188 Action / Peer B+ / BB- TLB '32 (DM) 6.5Y 4.83% +343 Action / Peer B+ / BB- Bond-equivalent* 7Y ~6.40% +340–365 Cheplapharm B Bond '32 5.8Y 6.69% +375 Cheplapharm B 7Y extrap 7Y ~6.70% +370

* Loans typically print 25–50bp tight to pari bond equivalents (fixed-rate duration, covenant, recovery).

The B+ rung clusters at z+340–365 / yield ~6.30–6.55%, sitting modestly inside Cheplapharm's B curve and well wide of Verisure's BB+ benchmark.

Fair Value vs IPT

Metric Yield Z-spread FV mid (B+ triangulation) 6.30–6.50% +330–355 FV bid-side 6.40–6.60% +340–365 IPT wide 6.25% +326 IPT mid 6.125% +314 IPT tight 6.00% +301 Implied NIC at IPT mid −15 to −35bp (through FV) Implied NIC at IPT wide −5 to +10bp (flat)

This is materially below the 25–35bp concession typical for a debut LBO secured. Drivers of the squeeze:

Lonza 40% strategic rollover — quasi-anchor read-across
Capsule oligopoly (Capsugel / ACG / Qualicaps) — quality kicker vs commodity B+ LBOs
Heavy syndicate (4 active + 7 passive) — distribution muscle plus early book read

Print Path

Stage Level Notes IPT 6.00–6.25% Already through FV mid Guidance 5.875–6.00% Some accounts likely push back Realistic print 6.00% area Sponsor concession token Aggressive print 5.875% Requires Lonza narrative + 5x cover Tail risk 5.75% Inside loan curve; difficult to defend

Position

Bid 6.25% wide end firm; pass at 6.00% or inside.
5.875% leaves zero margin vs the Action loan curve once converted bond-equivalent.
If allocations are squeezed, wait for the break: target 99.50–99.75 in the grey rather than chase primary at par. Loan curve gravity suggests 1–2pts of give-back is plausible in the first 1–2 weeks.
Pari trade ideas: switch into Capsugel from Cheplapharm only if it cheapens to 6.05%+ on the break — otherwise stay in the higher-yielding B-rated paper.

M N