With September’s marquee M&A transactions put away, opportunistic activity ramped up further last week in both loans and bonds. The shift in technicals stemming from the lack of a formidable M&A calendar was particularly tangible in the loan market, as heavy investor demand raised the prospect for tight prints and aggressive documentation. Repricings, extensions and dividend recapitalizations were all in the mix, with arrangers using these transactions as a vehicle to effect other issuer-friendly revisions, including covenant stripping.
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High-yield proved to be fairly resilient to the U.S. Treasury sell-off last week, with a modest recovery after some knee-jerk selling out of the gates Thursday morning. Inflections generally come after several negative inputs or more sustained rising rates, and so far other technical support held firm from inflows and relatively low supply.
Meanwhile, loan diversification away from a heavy focus on M&A was well-documented in the numbers, with opportunistic deal flow accounting for $7.1 billion of the $11.3 billion of grossed launched volume last week. As well, the week’s tally included just $2.9 billion of net new money, further exacerbating the search for collateral.
Portfolios in brief: Holds reflect most recent reporting period available.
FSIC: EmployBridge (B2/B-) — repricing
A Credit Suisse-led arranger group set price talk of L+450, with a 1% floor and a par offer price on the repricing of EmployBridge’s $479 million first-lien term loan due April 2025, sources said. The current coupon is L+500, with a 1% floor. The issuer is offering to reset the 101 soft call protection for six months. Commitments are due by noon ET tomorrow. The originally $485 million covenant-lite term loan was syndicated in April, proceeds of which, along with a $125 million preferred stock investment from sponsors Anchorage Capital and Blue Mountain Capital, were used to refinance the staffing company’s existing debt. The April transaction levered the issuer at 3.4x, all senior, sources said at the time. The existing loan amortizes at 5% through April 2020, then at 1% thereafter. The 101 soft call rolls off the existing loan this month. FS Investment Corp. III holds $1.7M of the company’s 1L debt.
Audax, AINV, CCT: Grocery Outlet (B3/B-) — div recap
A Morgan Stanley-led arranger group set price talk on the first- and second-lien dividend recapitalization financing for Grocery Outlet, circulating guidance of L+375, with a 0% floor and a 99.5 OID on the first-lien term loan, according to sources. The second-lien is talked at L+725-750, with a 0% floor, offered at 99. The covenant-lite institutional financing is split between a $725 million, seven-year first-lien term loan and a $150 million, eight second-lien term loan. The issuer is also putting in place a $100 million, five-year revolver. The first-lien would include six months of 101 soft call protection and the second-lien would carry 102, 101 hard call premiums in years one and two, respectively. Proceeds would be used to refinance the issuer’s existing first- and second-lien loans and fund a $137.6 million dividend to sponsor Hellman & Friedman, according to sources. Morgan Stanley, Bank of America Merrill Lynch and Deutsche Bank are arranging the deal; commitments are due by 5 p.m. ET Thursday, Oct. 18. Audax Credit BDC holds $2M of existing 1L debt (L+350, 0% floor) due October 2021. Holders of the existing 2L debt (L+825, 1% floor) due October 2022 include Apollo Investment Corp. with $25M and Corporate Capital Trust with $15M.
American Capital: NFP Corp. (B3/B) — add-on, M&A
Accounts received allocations of NFP Corp.’s $200 million add-on term loan B (L+300, 1% floor), which broke to a 100.125-100.5 market from issuance at 99.875, according to sources. Bank of America Merrill Lynch was left lead on the loan, which priced tight to talk. Proceeds are meant to fund acquisitions, and any proceeds unused by a certain outside date will be used to repay debt. The insurance broker is controlled by Madison Dearborn. American Capital Senior Floating holds $2.5M of the existing 1L debt due January 2024.
Guggenheim, NMFC: ProQuest (B2/B) — repricing
Goldman Sachs and Bank of America Merrill Lynch outlined talk of L+325 with a 0% floor on their proposed repricing of ProQuest's $705 million term loan B, sources said. The repriced loan is offered at 99.75-100 and would include six months of 101 soft call protection. Commitments are due Thursday, Oct. 11. ProQuest was last to market in June 2017 when it repriced its covenant-lite term loan due October 2021 to L+375, with a 1% floor, from L+425. It carried 12 months of 101 soft call protection. Guggenheim Credit Income Fund holds $275,000 in principal amount of 2L debt (L+900, 0% floor) due December 2022, while New Mountain Finance Corp. holds $6M of the 2L debt.
GLAD: Red Ventures (B1/B+) — refinancing, repricing
A Bank of America Merrill Lynch-led arranger group rolled out a repricing of Red Ventures’ $1.635 billion first-lien term due November 2024 alongside a $250 million add-on that would be used to fully repay the issuer’s second-lien term loan, according to sources. The covenant-lite loan, which will total $1.885 billion pro forma for the add-on, is talked at L+300-325, with a 0% floor. Existing lenders would roll their positions at par, with the new money offered at 99.75, sources said. The issuer is offering to reset the 101 soft call protection for six months. The issuer is also seeking a related amendment, sources noted. The existing first-lien term loan is priced at L+400; the 101 soft call protection rolls off early next month. The paper had been quoted around 101.25–101.375 prior to the news of yesterday’s lender call, sources noted. The second-lien term loan is priced at L+800; the call protection steps down to 101 next month, from 102 currently. BAML, Barclays, Fifth Third, PNC, MUFG, Regions, Capital One, J.P. Morgan, Citi and Goldman Sachs are arranging the deal. Commitments are due by noon ET Thursday, Oct. 11. Gladstone Capital Corp. holds $3.3M of the existing 2L debt.
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