M&A drives new debt for names in several portfolios, including recently combined FS KKR Capital
The loan market remained fixated on the primary calendar as $9.4 billion of new loans, all of it M&A- and LBO-related, entered syndication last week. Following the secondary market’s early January rebound, the primary also was off to a solid start last week with a series of oversubscribed transactions, accelerated timing and the return of reverse-flex activity as some new issues started to cement pricing levels well south of the December’s rate spike.
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Meanwhile, the bond market was back to business, with several high-yield deals oversubscribed and trading higher after the biggest week of supply in three months. Broad market conditions remained firm even after the New Year’s rally stalled in bonds and loans last week. Still, a more present high-yield market raises the question: Will issuers take advantage of fixed-income demand to rebalance deals originated as all-loan transactions in the weeks ahead?
At least in loans, the new-issue market’s early 2019 successes have been built largely on the back of existing transactions. A real test of the market will be the expected $13 billion-plus wave of volume that’s expect to emerge starting this week from a series of larger transactions, notably Dun & Bradstreet’s LBO deal, which has been announced for a Jan. 24 meeting and is expected to include a term loan of as much as $3.13 billion. Overall, the calendar remains robust, at $63.4 billion between the $11.9 billion already in market and another $51.5 billion to come. However, subtracting out all potential repayments including those unrelated to new issues, the net-net calendar shrinks to an even more manageable $25.8 billion.
Portfolios in brief: Holds reflect most recent reporting period available
GSBD, TCPC: DiscoverOrg (NR) — M&A
Morgan Stanley, Barclays and Antares Capital circulated price talk for DiscoverOrg's acquisition financing, including talk of L+475-500 with a 0% floor and a 98-98.5 OID for the $825 million first-lien term loan B, according to sources. The $410 million second-lien term loan is talked at L+875-900 with a 0% floor at 98, sources added. The seven-year covenant-lite first-lien term loan would carry six months of 101 soft call protection while the eight-year second-lien covenant-lite loan would include 102, 101 hard call protection, sources noted. Commitments are due by Monday, Jan. 28. Holders of the company’s 2L debt (L+850, 1% floor) due February 2024 include Goldman Sachs BDC with $59.5M in principal amount and BlackRock TCP Capital Corp. with a combined $16.3M.
FSK: FleetPride (B3/B-) — LBO
A Barclays-led group set talk of L+450 with a 0% floor and a 97-98 offer price on the $620 million first-lien term loan backing the acquisition of FleetPride by American Securities from TPG Capital, sources said. In addition to the seven-year first-lien term loan, the deal includes a $225 million eight-year second-lien term loan, which has been placed privately, sources said. The deal also includes a $225 million, five-year ABL revolver. Commitments are due at noon ET Friday, Jan. 25. Arrangers are Barclays, RBC Capital Markets, Jefferies, Citi, and Goldman Sachs. As of Sept. 30, Corporate Capital Trust, which recently completed a merger into FS KKR Capital Corp., held $18,000 of the company’s 2L debt (L+900, 1.25% floor) due May 2023, which was repaid last month when the sponsor-to-sponsor LBO closed.
Ares, FSK, Triton Pacific: Inmar (B2/B) — M&A
A Credit Suisse-led arranger group set price talk of L+400 with a 1% floor and a 98 OID on the $415 million add-on term loan backing Inmar’s planned acquisition of Kroger's digital coupon and digital rebate publishing unit, according to sources. The incremental debt would be fungible with the company’s existing covenant-lite first-lien term loan due May 2024, which is currently priced at L+350 but is being repriced upward to match the coupon on the new loan to allow for fungiblity. The existing loan, which was issued at 99 in 2017, benefits from 50 bps of MFN protection. Lenders are offered six months of 101 soft call protection. Commitments are due by 5 p.m. ET Wednesday, Jan. 30. Credit Suisse, Jefferies, Wells Fargo and Deutsche Bank are arranging the deal. As of Sept. 30, holders of the company’s 2L debt (L+800, 1% floor) due May 2025 included Ares Capital with $28.3M, FS Investment Corp. II (now managed by the combined FS KKR Capital Corp.) with $2.6M and Triton Pacific Investment Corp. with $500,000.
AB Private Credit: Perforce Software (B3/B-) — M&A
An Antares Capital-led arranger group circulated price talk of L+475 with a 1% floor and a 99 OID on the $375 million fungible incremental term loan backing Perforce Software’s acquisition of Rogue Wave Software, according to sources. The spread on the roughly $330 million in existing first-lien debt would increase to L+475 from L+425. The roughly $705 million in pro forma first-lien term debt will have 101 soft call protection for six months, sources added. Commitments are due Thursday, Jan. 31. Ares Capital Management, Varagon Capital Partners and AB Private Credit Investors are joint lead arrangers on the incremental term loan. The first-lien financing is being put in place alongside an $85 million incremental second-lien term loan, which has been privately placed. Pro forma for the transaction, the company’s credit facilities will consist of the $705 million first-lien term loan, a $150 million second-lien term loan and a $50 million revolver. Leverage is expected to be 4.75x/5.75x off of about $150 million of last-12-month EBITDA. AB Private Credit Investors holds $2.89M of the existing 1L term debt and $474,057 of revolver debt by funded par amount.
PSEC, PFLT, MAIN, CSWC: Research Now Group (B2/B) — add-on, M&A
Court Square Capital Partners has directly approached first-lien investors in market research and data businesses Research Now, seeking to place a $210 million add-on loan for an acquisition, according to sources. The sponsor is seeking to layer the new money into what was originally a $700 million first-lien term loan due December 2024 (L+550, 1% floor), sources said. Goldman Sachs is agent on the issuer’s first- and second-lien loans, which backed a late 2017 merger between Court Square-controlled Research Now and HGGC-controlled Survey Sampling. The deal priced well wide of talk along with a slate of revisions to documentation. Financing for the merger also included a $250 million second-lien term loan (L+950). Holders of the existing 1L debt include Prospect Capital with $9.9M. PennantPark Floating Rate Capital with $24.8M and Main Street Capital Corp. with $13.4M. Holders of the 2L debt include Prospect Capital with $50M and Capital Southwest Corp. with $10.5M.
BDVC: US Salt (B2/B) — M&A
Citizens set talk of L+475 and a 98-98.5 offer price on its first-lien term loan for US Salt, sources said. Proceeds will fund an as-yet-undisclosed acquisition and refinance existing debt. The issuer plans a $25 million, five-year revolver; a $285 million, seven-year, covenant-lite, first-lien term loan; and a $127.5 million, eight-year, second-lien term loan, which has been placed privately, sources said. The first-lien term loan would include six months of 101 soft call protections. Commitments are due Jan. 31. Leverage is roughly 4.x2 first-lien and 6.1x total, sources said. Citizens in late 2017 closed $136 million of first-lien facilities to support Kissner Group Holdings’ acquisition of US Salt. Kissner Group Holdings is a portfolio company owned by Metalmark Capital and Silvertree-KMC II LP, a special purpose vehicle led by Silverhawk Capital Partners and Demetree Salt, LLC, according to sources. The financing consisted of a $15 million, five-year revolver; a $115 million, six-year term loan; and a $6 million delayed-draw term loan. The term loan was priced at L+475 with a 1% floor, sources noted. Business Development Corp. of America holds a combined $6.4M of the company’s 1L debt and $12.9M of its 2L debt.
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