Avantor repricing to narrow yield on debt held by BDVC, OCSI, OCSL, FSK
High-yield took center stage last week as investors shrugged off outflows and cozied up to a busy new-issue calendar bolstered by falling U.S. Treasury yields that helped support an attractive refinancing window, which drew big names such as HCA, Sirius XM Radio, Vistra Energy and even Intelsat. New-issue loans, on the other hand, were mixed as bifurcated market conditions that have existed for much of the year are coming into sharper focus.
While the sentiment in the loan secondary improved last week after closing out the prior Friday on a downbeat note, the asset class didn’t enjoy the same bounce as high-yield and equities, what with the increasing likelihood of a rate cut potentially deepening outflows from loan mutual funds. The average bid price of the Credit Suisse ended Thursday at 97.04% of par, up seven bps from the June 1 opening price of 96.97. By comparison, the average price of the ICE BofAML U.S. HY Index increased by 63 bps over the same three-day period, to 97.52, while the S&P 500 advanced about 3.6%, closing Thursday at 2,843.49.
While one week is hardly a trend, loan mutual funds that report weekly to Lipper FMI reported a net $1.47 billion outflow for the week ended June 5, the largest redemption since the first week of January. The withdrawal this past week had a solid chunk of ETF influence, at 54% of the outflow, after 23% the prior week and none the week before that.
Portfolios in brief: Holds reflect most recent reporting period available
Download: LFI BDC Portfolio News 6-10-19
BDVC, OCSI, OCSL, FSK: Avantor Performance Materials (B1/B+/B+) — repricing
Goldman Sachs set price talk of L+300-325, with a 1% floor and a par offer price, on the dollar-denominated component of Avantor’s repricing request. Guidance on the euro tranche is E+325-350, with a 0% floor, offered at par. The existing loans due November 2024 are currently priced at L+375 with a 1% floor and E+375 with a 0% floor. The issuer is offering to reset the 101 soft call protection on the loan for six months. Commitments are due by Friday, June 7. As reported, Avantor last month completed its IPO and concurrent offering of preferred shares, repaying $1.024 billion of the dollar term loan and $582 million-equivalent of the euro tranche with a portion of the proceeds, SEC filings show. Following the paydown, there are $810 million and €418 million outstanding, respectively. The company now trades on the New York Stock Exchange under the symbol AVTR with an approximate market capitalization of $9.9 billion. Oaktree Strategic Income Corp. holds $12.7M in principal amount of the company’s existing 1L debt, while holders of the company’s 9% senior notes due 2025 include Business Development Corp. of America with $13M, Oaktree Specialty Lending Corp. with $3M, Oaktree Strategic Income II Inc. with $1M and FS Investment Corp. II with $20M, FS Investment Corp. III with $52.5M and FS Investment Corp. IV with $12.5M.
ARCC: Compuware (B1/B) — div recap
Jefferies set talk of L+400 with a 0% floor and a 99.25-99.5 offer price on Compuware’s $230 million add-on first-lien term loan that funds a dividend. Pricing on the existing first-lien term loan due August 2025 will move up from L+350, and the issuer will reset the loan’s 101 soft call protection for six months. Existing lenders are offered a 10 bps amendment fee. Amendment consents are due at 3 p.m. ET on Monday, June 10, while new money commitments are due at 3 p.m ET on Tuesday, June 11. The originally $475 million loan was syndicated in August to refinance debt at the holding company in connection with the spinoff of the Dynatrace application performance management software business. Ares Capital Corp. holds equity stakes valued at a combined $2.9M.
TP Flexible Income Fund: Hexion (NA) — chapter 11 exit
An arranger group led by J.P. Morgan set talk of L+350-375 with a 0% floor and a 99 offer price on the $600 million U.S. dollar tranche of Hexion’s $1.2 billion cross-border exit term loan. The euros are talked at E+375-400 with a 0% floor at 99. The seven-year deal is equally divided between dollar- and euro-denominated tranches with six months of 101 soft call protection. Proceeds will refinance the issuer’s debtor-in-possession loans, fund restructuring plan payments, and fund fees and expenses related to Hexion’s emergence from chapter 11. The plan confirmation hearing is set for June 24. The arranger group also includes Credit Suisse, Goldman Sachs, Citi, Barclays and Deutsche Bank. U.S. dollar commitments are due at noon ET on Tuesday, June 25, with a 5 p.m. BST deadline for euro commitments. TP Flexible Income Fund lists $550M in principal of the company’s prepetition 6.625% senior notes due 2020 among its holdings.
Audax, OCSL, OCSI, TP Flexible Income Fund, PFLT: McAfee (B2/B) — add-on/div recap/GCP
A Bank of America Merrill Lynch-led arranger group firmed the OID on the $300 million add-on term loan for McAfee at 99.25, the tight end of the initial 99-99.25, range. Terms would mirror those of the borrower’s existing covenant-lite first-lien term loan due September 2024, which is priced at L+375, with a 0% floor. The euro component of the cross-border transaction was upsized by the equivalent of $100 million, to €355 million ($400 million). The deal is expected to clear in line with talk of E+350, with a 0% floor, offered at 99.5. The issuer is offering to reset the 101 soft call protection for six months. Proceeds would be used to fund a shareholder dividend and for general corporate purposes. The issuer is also seeking an adjoining amendment request. BAML, Barclays, Citi, Deutsche Bank, Goldman Sachs, J.P. Morgan, Mizuho, Morgan Stanley, RBC Capital Markets and UBS are arranging the deal; TPG is a co-manager. Holders of the existing 1L term debt include Audax Credit BDC with $2.9M in principal amount, Oaktree Specialty Lending Corp. with $11M, Oaktree Strategic Income Corp. with $8.2M Oaktree Strategic Income II Inc. with $4.9M and TP Flexible Income Fund with $243,504. Holders of the company’s 2L debt due September 2025 (L+850) include Oaktree Specialty Lending Corp. with $7.3M, PennantPark Floating Rate Capital with $2.3M and TP Flexible Income Fund with $458,333.
AB Private Credit Investors: Nuvei (TBD/TBD) — M&A
BMO Capital Markets launched an $894 million financing to back Nuvei’s acquisition of SafeCharge International. The financing includes a $619 million first-lien term loan, a $225 million second-lien term and a $50 million revolving credit facility. Montreal-based payments technology company Nuvei agreed to acquire U.K.-based payments services firm SafeCharge for $5.55 per share in cash, or about $889 million, the two companies announced on May 22. The acquisition is expected to close in the third quarter. Note that Nuvei in September completed a club deal consisting of a $225 million first-lien term loan B due 2025 (L+450) and a $65 million delayed draw term loan, for which BMO is the administrative agent. Nuvei, formerly known as Pivotal Payments, is a provider of fully supported payment solutions for ISOs, ISVs, payment facilitators, developers and eCommerce platforms. The company is controlled by Novacap and Caisse de dépôt et placement du Quebec, which invested in the company in 2017, valuing it at $430 million. AB Private Credit Investors holds $669,193 in principal amount of 1L debt under an initial U.S. TL commitment (P+350, 1% floor), $1M under an initial Canadian TL commitment (P+350, 1% floor) and $328,884 under a delayed-draw TL (L+450, 1% floor).
Audax: Unifrax (B3/B-) — incremental, M&A
Morgan Stanley and Stifel set talk of L+375-400 with a 0% floor and a 97.5 offer price on Unifrax’s $120 million incremental term loan. Proceeds back an acquisition. The loan due December 2025 includes six months of 101 soft call protection. Commitments are due on Tuesday, June 11. For reference, the existing first-lien term loan due December 2025 (L+375) was quoted 97.5-98.25 on June 3. The issuer’s existing loans—an originally $600 million first-lien term loan, a €310 million first-lien term loan and a $250 million second-lien term loan due December 2025 (L+850)—were syndicated late last year to back Clearlake Capital’s acquisition of the business from American Securities. The buyout levered the issuer at 4.75x through the first-lien debt and 6x total, LFI reported at the time. The loan includes 50 bps of MFN protection for life, with no carve-outs. Audax Credit BDC holds $2M in principal amount of the existing 1L debt.
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thomas.dunford@levfininsights.com
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