Golub plans private party for Parts Town; Deal is latest large-cap to forgo wider distribution

Posted by Kelly Thompson, Direct Lending Deals on Oct 18, 2019 2:15:23 PM
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Parts Town is coming to market next week via Golub Capital with a $788 million unitranche financing to back the add-on acquisition of Heritage Foodservice Group. The lender meeting, however, isn’t taking place in a fancy midtown hotel auditorium that can seat hundreds of investors. Instead, Golub is hosting a small group of invites to sell down only about half the deal.

It’s the latest example of how private executions for larger companies like Parts Town continue to chip away at the traditional syndicated channel. Integrity Marketing went the same route in August.

Finance companies began applying this typically middle-market, club-style strategy for larger issuers in 2016 with Qlik Technologies. Qlik’s success was followed by more large-scale private executions, with lenders taking on bigger holds thanks to a stream of capital flowing into direct lending. 

The club distribution allows Parts Town to bypass the ratings process, which would have been a must to hit a wider CLO-filled base of investors. 

Additionally, a fully underwritten financing held by select lenders can command at least one covenant — in this case a total net leverage test. That’s better than the standard covenant-lite package across the broadly syndicated market, which has long been nicknamed the “senior secured bond market” for the dominance of cov-lite loans. 

Pricing on the Parts Town unitranche is L+550 with a 99 issue price, according to sources. Proceeds support the Heritage purchase and the refinancing of existing debt. Parts Town is rolling an undrawn $75 million ABL facility via Citizens Bank.

Golub is hosting the lender meeting at its offices on Wednesday, Oct. 23. 

Berkshire Partners acquired Parts Town in 2016. The initial LBO financing also was a unitranche arranged by Golub. 

The name then flipped to Jefferies in 2017, where Jefferies refinanced the unitranche into a covenant-lite first-/second-lien structure at L+400/L+800 on issuer ratings of B-/B3. 

Parts Town distributes OEM foodservice equipment parts. Heritage provides replacement parts for commercial and institutional kitchen equipment. —Kelly Thompson

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Direct Lending Deals is a new publication that lifts the curtain on private credit by giving investors and originators the latest news and analysis on terms & trends in the direct lending market. DL Deals focuses on sponsor-driven transactions, the main engine of deal flow. We tap into 20-year relationships to go deeper in market, and cover all segments of direct lending including structures, fundraising, BDCs and people shaping the market. Website launching later this month. www.dldeals.com


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Topics: Loans, Middle Market, BDC, First Lien, debt, business development company, Non-accruals, portfolio, Direct Lending, syndicated, underperformers, Direct Lending Deals

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