La Trobe Senior Secured Term Loan | 8.4% Forecast YTM

August 2024

By Matthew Macreadie

Investors will be familiar with one of our top picks in the Secured Term Loan market issued in 2023 from La Trobe.

The Borrower is a newly incorporated special purpose entity formed by Brookfield in May 2022 to acquire La Trobe for a cash purchase price of A$1,468m, of which $400m was financed by the Loan, implying a loan to value ratio of 27% and a debt to EBITDA ratio of 1.7x FY22 EBITDA.

The Loan is guaranteed by La Trobe and has first ranking security over La Trobe’s assets and business at the La Trobe parent company level.

Our initial assessment of value for investors remains:
1. Superior returns when compared to equivalent credits in the bond market.
2. Superior investor protections via stringent covenants driven by a syndicate of banks lending from their balance sheet.
3. Strong capital protections via senior secured structure.

Due to the small number of investors holding the notes (bank syndicate and small private credit funds) and strong relative value, we have found it difficult to acquire the deal for investors in the secondary loan market, however, today we can offer a small parcel of up to A$1m to our investors in parcels of A$50,000 minimum face value.

Pricing

Structure and convenant summary

Comparable issuers in the bond market are Liberty Financial, Judo Bank and Heartland Bank. A summary of their structure is:

Senior Unsecured
Covenants of:
- Coupon increases for rating downgrades
- Negative pledge
- Cross default provisions
- Change of control protections

Relative Value

Please contact your IAM Relationship Manager for more information or to obtain the credit opinion.

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