Popular BDC holdings Global Tel Link, Sorenson aim to widen 1L margins; several credits up for add-ons appear in Barings BDC’s portfolio
A deluge of earnings took center stage last week and while results inevitably spurred a number of notable downside movers, the tone in the broader leveraged finance market slowly improved over the course of the week, opening the door for new opportunistic business such as Bausch Health’s latest refinancing effort. Among the week’s biggest earnings-related standouts were Air Methods, Akorn and Revlon.
Although Thanksgiving is fast approaching, creating a natural disruption to new-issue launches and the heavy reporting calendar has riveted investors’ attention, arrangers nevertheless took advantage of the improving broad market tone to roll out 17 transactions last week for $8.7 billion of volume, and $4.8 billion on a net basis as opportunistic deal flow again entered the mix. Deal flow was bolstered by a secondary market that was stable away from the week’s reporters, as well as word of renewed inflows into both the loan and bond asset classes.
Download: LFI BDC Portfolio News 11-13-18
Portfolios in brief: Holds reflect most recent reporting period available
BBDC, NMFC, American Capital, CCT: Applied Systems (B3/B-) — add-on, div recap
A Nomura-led arranger group launched a $210 million add-on first-lien term loan for Applied Systems, proceeds of which would be used to fund a shareholder dividend, according to sources. The incremental debt is talked at 99.5–99.75 and would be fungible with the issuer’s existing first-lien term loan due September 2024, which is currently priced at L+300, with a 1% floor. Note the loan includes a step up to L+325 when net first-lien leverage is above 4.75x. Pro forma for the transaction, net leverage runs 4.9x through the first-lien and 7.3x on a net total basis, sources said, so the spread could step back up to L+325 once the company files its fourth-quarter compliance statement. Commitments were due by noon today. Barings BDC, the former Triangle Capital Corp., holds $9.3M in principal amount of the company’s existing 2L debt (L+325, 1% floor) due September 2024, while holders of the existing 2L debt (L+700, 1% floor) due September 2025 include New Mountain Finance with $4.9M, American Capital Senior Floating with $344,000 and Corporate Capital Trust II with $2.6M.
BBDC: Bausch Health (B2/B/B-) — add-on, refi
A Barclays-led arranger group upsized the add-on term loan for Bausch Health to $1.5 billion, from $750 million, eliminating a planned $750 million issue of senior secured notes, according to sources. In addition, the arrangers bumped up the deadline on the loan by one day, to noon ET tomorrow. There’s no update to price talk, which is 99–99.5, offering a yield to maturity of about 5.8-5.9%. The add-on would be fungible with the issuer’s approximately $4.45 billion term loan due June 2025, which is priced at L+300, with a 0% floor, and is covered by a 101 soft call premium that runs through Dec. 1. It amortizes at 5% per year. As reported, proceeds, along with cash on hand, would be used to fund a tender offer for the issuer’s 7.5% notes due 2021, according to sources. Barclays, J.P. Morgan, Citi, Deutsche Bank, DNB, Goldman Sachs, Morgan Stanley and RBC Capital Markets are arranging the loan. Barings BDC holds $10.4M of the existing term debt.
KCAP, OXSQ, SLRC, SUNS, CION: Global Tel Link (B3/B) — refi
Global Tel Link launched a refinancing via Credit Suisse, holding a lender call at 1 p.m. ET today, sources said. The issuer plans a $940 million covenant-lite first-lien term loan, while a $260 million, second-lien term loan has been pre-placed. Talk on the seven-year first-lien term loan is L+425 with 0% floor at 99.5, sources said. The loan would include six months of 101 soft call protection. The pre-placed second-lien tranche will remain at L+825, sources noted. Commitments are due at noon ET Tuesday, Nov. 20. Holders of the existing 1L debt (L+400, 1.25% floor) due May 2020 include KCAP Financial with $1.5M, Oxford Square Capital Corp. with $3M, Solar Capital with $7.1M and Solar Senior Capital with $3.3M, while holders of the 2L debt (L+825, 1.25% floor) due November 2020 include KCAP with $5M, Oxford Square Capital Corp. with $17M, Solar Capital with $18.5M, Solar Senior Capital with $3M and CION Investment Corp. with $11.5M.
Bain: Hearthside Food Solutions (B3/B-) — add-on, M&A
A Goldman Sachs-led arranger group is circulating price talk of L+350, with a 0% floor and a 99–99.5 OID on the $565 million incremental first-lien term loan backing Hearthside Food Solutions’ planned $1.075 billion acquisition of Greencore USA, according to sources. Lenders are offered six months of 101 soft call protection. Commitments are due by Monday. Nov. 19. The incremental debt would be coterminous with the issuer’s existing first-lien term loan due May 2025 (L+300), which includes 50 bps of MFN protection that runs through May 2020. Bain Capital Specialty Finance holds $10M of the company’s 8.5% senior notes due June 2026.
BDVC: Office Depot (B1/B) — repricing
Goldman Sachs set price talk of L+525-550, with a 1% floor and a par offer price, on the proposed repricing of Office Depot’s B term loan due November 2022, according to sources. Commitments are due by Monday, Nov. 19. The current coupon is L+700, with a 1% floor. The repricing launched as the 102 hard call protection steps down to 101 today. The paper is callable at 101 until Nov. 8, 2019; the call protection would not be altered in connection with the repricing, sources said. The repriced loan will total $500 million, sources said. There was $665 million outstanding under the loan as of Sept. 30 and $925 million of cash and cash equivalents, SEC filings show. Business Development Corp. of America holds $8.6M in principal amount of the existing TLB debt.
GS, GSBD: SMB Shipping Logistics (B3/B-) — add-on, div recap
An Antares Capital-led arranger group set a 99.5 offer price on the $60 million fungible add-on first-lien term loan for SMB Shipping Logistics, according to sources. The add-on first-lien term loan would be fungible with the existing $434 million first-lien loan due February 2024, which is priced at L+400, with a 1% floor, and governed by a net total leverage covenant. Existing first-lien lenders who approve the amendment associated with the transaction will receive a 25 bps amendment fee. Commitments and amendment approvals are due tomorrow. Proceeds, along with those from a $100 million add-on second-lien term loan that is being placed privately, would be used to fund a dividend to sponsor Ridgemont Equity Partners, which has owned the business since 2007. As part of the financing, pricing of the pro forma $225 million of second-lien term debt will be lowered to L+800 from L+875, with no change to the 1% floor. Antares, Deutsche Bank, Citizens and J.P. Morgan are arranging the deal; Antares is administrative agent. Holders of the existing 2L debt include Goldman Sachs BDC with $25M in principal amount, Goldman Sachs Middle Market Lending Corp. with $15M and Goldman Sachs Private Middle Market Credit Corp. with $20M.
BBDC: Solenis (B3/B-) — add-on, M&A
A Bank of America Merrill Lynch-led arranger group set offer prices of 99.25 and 99.5-99.75 on Solenis’s respective U.S. dollar and euro add-on term loans, and is seeking commitments at noon ET on Wednesday, Nov. 14, sources said. The add-on loans represent the second stage of the financing supporting Solenis’s merger with BASF’s paper and water chemicals business. The fungible add-on to the issuer’s cross-border first-lien loan syndicated in June is split between €330 million (E+425, 0.5% floor) and $170 million (L+400, 0% floor) tranches. As reported, Solenis in June syndicated a $1.65 billion cross-border covenant-lite loan package to refinance its existing cross-border term loans ahead of the merger with the BASF unit. The transaction, which was announced May 3, is expected to close no earlier than the end of this year. Solenis’s sponsor, Clayton Dubilier & Rice, will own 51% of the combined company and BASF will own 49%. As finalized, the first step of the financing included a first-lien term loan split between $815 million and €375 million tranches, as well as a $400 million second-lien term loan. Barings BDC has $8M of the existing L+400 debt.
FSIC, MAIN, AINV: Sorenson Communications (B2/B) — refi
Credit Suisse, KKR Capital Markets and Blackstone set price talk of L+600, with a 0% floor and a 97 OID, on the $950 million term loan for Sorenson Communications, according to sources. Proceeds, along with cash on hand, would be used to fully refinance the issuer’s existing debt, which includes $528 million outstanding under its issuer's existing term loan due 2020 (L+575) as well as its $375 million of second-lien notes and $99 million of holdco notes. Leverage will be 2.8x, and 2.7x on a net basis, sources said. The all-first-lien refinancing is structured as a five-year covenant-lite term that would amortize at 5% annually. In addition, the issuer is offering 12 months of 101 soft call protection. Commitments will be due by 5 p.m. ET Wednesday, Nov. 28. Holders of the existing 2L debt include FS Investment Corp. with $90M, FS Investment Corp. II with $98M, FS Investment Corp. III with $4.8M, Main Street Capital Corp. with $13.1M and HMS Income Fund, a non-listed BDC sub-advised by Main Street, with $2.9M. In addition, FS Investment Corp., FS Investment Corp. II and FS Investment Corp. III hold a combined $38.8M of 9% senior notes due October 2020 and $29.5M of 13.875% subordinated notes due October 2021. FS Investment Corp. II also holds an equity stake valued at $36.6M, and Apollo Investment Corp. has equity valued at $493,000.
Guggenheim: Chefs’ Warehouse (B2/B+) — repricing
Jefferies set price talk of L+350, with a 0% floor and a par offer price, on the proposed repricing of Chefs’ Warehouse’s $239.7 million covenant-lite term loan due June 2022, according to sources. The issuer is offering to reset the 101 soft call protection for six months. The current coupon is L+400, with a 1% floor. Commitments are due by noon ET on Thursday, Nov. 15. The issuer was last to market in December 2017, when it completed a repricing that lowered the margin from L+475. The 101 soft call protection rolled off in June. Guggenheim Credit Income Fund holds $3.3M of the existing 1L debt. – Thomas Dunford
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