TMD Friction raises €350M with high-yield bond debut
What's the deal? TMD Friction Group, a portfolio company of private equity firm AEQUITA, has issued its first high-yield bond worth €350M. The 8.250% senior secured notes, issued under New York law (144A/Reg S), mature in 2031. The transaction also included a €35M super senior revolving credit facility.
Latham & Watkins advised TMD Friction on the deal, with a team led by debt capital markets partners Alexander Lentz and Rüdiger Malaun.
Why now? The inaugural bond issuance signals AEQUITA's push to establish a capital markets presence for TMD Friction, a German brake components manufacturer. High-yield markets have seen renewed activity as companies seek to lock in financing terms amid shifting interest rate expectations.
What could go wrong? An 8.250% coupon is steep. If TMD Friction's revenues falter or the broader automotive parts market softens, servicing that debt could become a burden. High-yield bonds carry default risk by definition — and leveraged portfolio companies face extra scrutiny when economic conditions tighten.
The signal: PE-backed industrial companies are tapping public debt markets to diversify their funding sources beyond traditional bank lending. The combination of a high-yield bond with a revolving credit facility is a classic capital structure play — giving the company both long-term fixed financing and short-term liquidity flexibility. Expect more European mid-market names to follow this playbook as private equity sponsors look to optimise their portfolio companies' balance sheets.
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