The agencies give a junk bond rating to the educational institution, which the Swedish fund will load with up to 760 million in debt contributed by three banks.
The Swedish venture capital manager EQTthrough one of its funds infrastructurehas already outlined the financial design of the purchase of a majority of the capital of the European Universitya transaction announced in April but which could taker to close until Octoberwhen regulatory authorizations are obtained.
The agreement involves the delivery of 1,675 million euros for 64% from the private education company to its current owner, the British fund Allow me, that will retain a 35%. Other 1% is in the hands of managers of the company. The expenses and commissions for the operation amount to 40 million euros.
In addition, EQT plans to refinance and expand the current debt of Europa University Education Group (name of the company that owns the institution), for which it has requested two loans for a total of 760 million euros.
One of them is a secured loan of 675 million, due in 2031and the rest 85 million correspond to a line of available and renewable liquidity up to 2030.
The banks Deutsche Bank, BNP Paribas and Santander They lead this financing, which will serve to replace the university’s current debt. Until the end of last year, the liabilities of this educational company amounted to 480 million eurosbut it has been increased to 625 million to facilitate the payment of two consecutive dividends to Permira.
The company created by EQT to carry out the acquisition and take on the debt is Cervantes Bidco, with headquarters in Spain and headquarters in Luxembourg. In turn, this structure depends on EQT Infrastructure VIvehicle of the Scandinavian manager that captured 21,000 million euros of institutional investors at the close of its fundraising process, in 2023.
With the purchase of the European University, this fund has already committed around one third of its capital.
Rating agencies S&P and Moody’s have been awarded a rating of B and B2respectively, to Cervantes Bidco, which implies being in junk bond category (with risk of non-payment). By requesting the note for the vehicle debt, EQT seems to anticipate that in the future will divide and distribute the main credit among other financial entities and investors.
The agencies warn of the high debt ratio that the European University will have after the EQT operation, since it will multiply its annual gross operating profit (ebitda) expected in 2024 by 6.5 times.
S&P anticipates that this training center will obtain a negative operating cash flow of 67 million eurosas a consequence of the high investments in growth, linked above all to the construction of a new campus in Malaga.
But starting in 2025, agency analysts expect a rapid deleveraging thanks to business growth. S&P expects the European University’s revenue to be at 407 million in 2024 (compared to 344 in 2023) and 485 million in 2025year in which it could reach 54,200 students (46,000 now). Moody’s estimates an EBITDA of 130 million in 2024 and 157 million in 2025.
