Download: LFI BDC Portfolio News 9-17-18
The big three LBO deals that kicked off the post-Labor Day rush have all drawn significant oversubscription from loan investors, driven not only by strong market conditions but also nagging concerns among investors that volume will ease once the current calendar is put to bed. The solid response to these large transactions suggests that most of the deals in market will find firm footing and that arrangers will begin testing tighter pricing levels than the relatively conservative efforts represented by this first batch of September business.
Two of those commanded attention in high-yield, of course, but five other transactions printed amid the positive bias—most notably a highly successful Pacific Drilling sale despite the company yet having to exit bankruptcy. Bias was positive throughout high-yield, even as U.S. Treasury rates surged with short rates hitting fresh decade highs.
The loan market was abuzz with chatter about the building book sizes of the three marquee deals—Refinitiv, AkzoNobel and Web.com—though at this point, accounts have yet to realize any meaningful allocations. With the end-of-summer slowdown, allocated volume has been paltry in recent weeks: During the four weeks ended Sept. 14, $6.26 billion of loans representing $4.58 billion of net new money allocated, for an average of just over $1 billion a week, versus the year-to-date average of $5.41 billion.
Portfolios in brief: Holds reflect most recent reporting period available
BDVC: Blount International (B1/B) — repricing
Barclays has proposed repricing Blount International’s $627 million term loan B to L+375, from L+425, with no change to the 1% floor, sources said. The repricing is offered at par, while Blount will reset 101 soft call protection for six months. As noted, Blount is also seeking consent to allow for a one-time $50 million dividend that would be paid from cash on hand, sources said. There’s no amendment fee on offer. Commitments and consents are due at noon ET Friday, Sept. 21. The originally $630 million covenant-lite term loan due April 2023 ( L+425, 1% floor) was put in place roughly a year ago to refinance debt and fund a $135 million payout to owners American Securities and P2 Capital Partners, which took the company private in 2016. The 101 soft call protection rolled off in April. Business Development Corp. of America holds $12.5M of the existing TLB debt.
BDVC: Contura Energy (B2/B-) — refi, M&A
A Jefferies-led arranger group set talk of L+400 with a 0% floor and a 99.5 offer price on the $600 million first-lien term loan for Contura Energy, according to sources. The seven-year loan would carry six months of 101 soft call protection, sources added. In connection with the closing of Contura’s proposed merger with Alpha Natural Resources Holdings, the new loan would refinance the combined company’s balance sheet, sources noted. Commitments are due Tuesday, Sept. 25. Jefferies is left lead, joined by Citi, Credit Suisse, BMO Capital Markets and UBS. Contura was last in the loan market in September 2017, inking an amendment to approve a $150 million shareholder dividend using balance sheet cash. Lenders were offered a 25 bps consent fee and a $10 million paydown. Business Development Corp. of America holds $7.4M in 1L debt (L+500, 0%) due March 2024.
Crescent, CĪON, HMS, MAIN: Paris Presents (B3/B-) — M&A
Jefferies, BNP Paribas and Antares Capital set price talk of L+500 with a 0% floor and a 99 OID on the $260 million first-lien term loan backing Paris Presents in its acquisition by Yellow Wood Partners portfolio company Freeman Beauty, according to sources. The seven-year first-lien is being put in place alongside an $85 million eight-year second-lien term loan, which is being talked at L+900 with a 0% floor and a 98.5 OID, and a $25 million five-year revolver. Commitments are due Tuesday, Sept. 25. The first-lien would feature six months of 101 soft call protection, with 102/101 hard call protection for the second-lien. The loans will be governed by a total leverage covenant. Holders of Paris Presents’s existing debt include Crescent Capital BDC holds $1.6M in 1L (L+500, 1% floor) due December 2020 and roughly $500,000 in 2L (L+875, 1% floor) due December 2021; CĪON Investment Corp. with $11M in 1L and $7M in 2L; HMS Income Fund with $10M in 2L; and Main Street Capital Corp. with $4.5M in 2L.
KCAP, Audax, GARS, PSEC: PlayPower (B3/B) — M&A
Société Générale as sole lead arranger set an offer price of par on a $28 million incremental term loan for PlayPower, sources said. Terms would be fungible with the existing $258.4 million of first-lien term debt (L+475, 1% floor) due June 2021. Commitments are due today. Société Générale is also administrative agent on the financing. Proceeds support the acquisition of PLAYTIME, a provider of design, manufacture, supply, installation and maintenance of playground equipment and indoor play systems. The company’s capital structure as of January 2017 included a $44 million second-lien (L+875, 1% floor) due June 2022 and a $30 million revolver, according to Moody’s and S&P. The issuer and its first-lien debt are rated B3/B, with a 3 recovery rating from S&P. Holders of the existing PlayPower debt include KCAP Financial with $990,000 in 1L; Audax Credit BDC with $1.96M in 1L and $1M in 2L; Garrison Capital with $952,000 in 1L; and Prospect Capital Corp. with $11M in 2L.
SUNS: Quorum Software (B3/B-/B) — LBO
Credit Suisse and Macquarie Capital accelerated the commitment deadline for Quorum Software’s $230 million first-lien term loan by two days to noon ET today, according to sources. There was no change to price talk of L+450 with a 0% floor at 99.5, sources added. The seven-year covenant-lite term loan will include six months of 101 soft call protection. It supports Thoma Bravo’s acquisition of Quorum Software from Silver Lake. A $100 million second-lien term loan is being privately placed, sources noted. Solar Senior Capital holds $9.3M in existing 1L debt (L+475, 1% floor) due August 2021.
ARCC, Bain, Audax, CSWC: Restaurant Technologies (B2/B-) — LBO
A Goldman Sachs-led arranger group outlined talk of L+350-375 with a 0% floor and a 99.5 offer price on the first-lien tranche of their $500 million first- and second-lien financing backing the sponsor-to-sponsor buyout of Restaurant Technologies, sources said. Second-lien talk is L+700-725 with a 0% floor at 99. The financing is split between a $375 million, seven-year first-lien term loan and a $125 million eight-year second-lien term loan. The first-lien loan would carry six months of 101 soft call protection, while the second-lien tranche would include 102, 101 hard call premiums, sources added. Goldman Sachs, RBC Capital Markets, Credit Suisse, KeyBanc Capital Markets and Antares Capital are arranging the deal. RBC will be administrative agent. Commitments are due at noon ET Friday, Sept. 21, sources said. Holders of the company’s existing debt include Ares Capital Corp. with $1.3M in 1L revolver borrowings due November 2021; Bain Capital Specialty Finance with $5.2M in 1L debt (L+475, 1% floor) due November 2022 and $1.7M in 2L debt (L+875, 1% floor) due November 2023; Audax Credit BDC with $3.1M in 2L; and Capital Southwest Corp. with $3.5M in 2L.
BDVC, FS Energy: Traverse Midstream Partners (B1/B+) — add-on
Accounts received allocations of Traverse Midstream’s $150 million add-on term loan (L+400, 1% floor), which broke to a 100.625–101 market from issuance at 99.75, according to sources. J.P. Morgan was left lead on the deal, which priced tight to talk. Proceeds from the new loan will be used to fund remaining capital commitments to the Rover Pipeline. The Energy & Minerals Group-controlled Traverse owns a 35% joint venture interest in the Rover Pipeline and a 25% joint venture interest in the Ohio River System. Holders of the existing 1L debt include Business Development Corp. of America with $6.3M and FS Energy & Power Fund with $74.7M.
ABDC: Tunnel Hill Partners (B2/TBD) — LBO
An arranger group led by Bank of America Merrill Lynch set price talk of L+350-375 with a 0% floor and a 99.5 OID on the $275 million term loan B supporting Macquarie’s acquisition of Tunnel Hill Partners and its City Carting Northeast subsidiary from American Infrastructure MLP Funds and other holders, sources said. Commitments are due by noon ET Monday, Oct. 1, sources added. The seven-year covenant-lite TLB would include six months of 101 soft call protection. Alcentra Capital Corp. holds an equity stake valued at $1M. – Thomas Dunford
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