The leveraged loan market last week continued to build on trends that became evident two weeks prior, with more issuers winning aggressive terms and pricing, and an environment firming for the renewal of opportunistic business.
Significantly, while last week’s gross launched volume was roughly in line with the prior week’s tally, at $11 billion, opportunistic volume accounted for $4.3 billion, all of it involving repricing. Moreover, net launched volume ebbed to just $4 billion, exacerbating fears that accounts won’t have much new paper in which to invest after the big September rush slows.
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After negligible volume during July and August, September repricing volume has ramped to a respectable $10.3 billion, across 20 issuers, more than 4x last month’s activity. While there are expectations that October will bring more repricings—not to mention other opportunistic activity—there’s cause for optimism that the market isn’t going to slide right back into a vicious cycle of serial spread cutting. For one thing, loan spreads remain wide of their levels earlier in the year, as do CLO liabilities. In addition, arrangers have been able to peel off a few M&A deals every week to feed the machine.
Portfolios in brief: Holds reflect most recent reporting period available
OCSL, OHAI: Allied Universal (B3/B-/B) — M&A
A Credit Suisse-led arranger group set talk of L+425-450 with a 1% floor and a 99 offer price on Allied Universal’s $800 million incremental term loan backing its purchase of U.S. Security Associates, sources said. The loan due July 2022 would include six months of 101 soft call protection. Commitments are due Tuesday, Oct. 16. The arranger group includes Credit Suisse, Barclays, Citi, Deutsche Bank, Morgan Stanley, HSBC, SocGen, ING, Natixis and PNC. The acquisition would also be funded with $210 million of second-lien notes that have been placed privately and $200 million of equity, according to Moody’s. The incremental loan will be coterminous, but not fungible, with the borrower’s existing term loan due 2022 (L+375). Oaktree Specialty Lending Corp. holds $11.9M of the existing 1L debt and $1.1M of 2L debt (L+850, 1% floor) due July 2023, while OHA Investment Corp. holds $1.3M of the latter.
CMFN: AGS (B2/B+) — repricing
Jefferies outlined talk of L+350 with a 1% floor on the proposed repricing of AGS’s $510 million term loan B, sources said. The repriced loan is offered at par and would include six months of 101 soft call protection, along with a ratings-based step-down. The issuer in February repriced its then-$512.6 million B term loan due 2024 to L+425 from L+550 with no change to the 1% floor. Jefferies arranged the transaction, which followed an IPO. The loan is governed by a 6x net first lien leverage test. There’s no change to the covenant. Commitments and consents are due at 11 a.m. ET tomorrow. CM Finance holds $20.4M of the existing 1L debt.
NMFC, PSEC: J.D. Power and Associates (B3/B-/B) — repricing
Credit Suisse set price talk of L+350-375 with a 1% floor offered at par, for the repricing of J.D. Power and Associates’ $541 million covenant-lite first-lien term loan due September 2023, according to sources. Commitments are due Wednesday, Oct. 3, sources said. The issuer is offering to reset six months of 101 soft call protection, sources added. The existing term loan is priced at L+425, with a 1% floor. Holders of the company’s 2L debt (L+850, 1% floor) include New Mountain Finance with $9.3M and Prospect Capital with $20M.
CGBD: NES Global Talent (NA) — add-on, M&A
Credit Suisse launched a $60 million add-on term loan for NES Global Talent. Proceeds finance an acquisition. Terms mirror the existing $215 million term loan B due May 2023, which is priced at L+550 with a 1% floor. The new money is offered at 99, sources said. Commitments are due on Thursday, Oct. 4. The refinancing earlier this year leveraged NES Global at 4.3x, all first-lien. The loan is governed by a total leverage test. The existing 101 soft call protection expires in November. TCG BDC holds $7.8M in principal amount of the existing 1L debt.
BBDC: Cook & Boardman Group (B3/TK) — LBO
A Goldman Sachs-led arranger group circulated price talk of L+550-575 with a 1% floor and a 99 OID on a $212 million first-lien term loan supporting Littlejohn & Co.’s acquisition of Cook & Boardman Group from Ridgemont Equity Partners, sources said. The seven-year term loan would feature 12 months of 101 soft call and would be governed by a net leverage covenant, sources added. The term loan is being put in place alongside a $40 million five-year revolver. Barings BDC, formerly Triangle Capital Corp., holds an equity stake valued at $5.3M.
American Capital, CCT: Vantage Specialty Chemicals (B3/B-) — repricing
Morgan Stanley set price talk of L+350-375, with a 1% floor and a par offer price, for the repricing Vantage Specialty Chemicals’ $517.6 million covenant-lite term loan B due October 2024, according to sources. Commitments are due by noon ET Wednesday, Oct. 3, sources said. The issuer is offering to reset the 101 soft call protection for six months. Vantage issued a $485 million first-lien term loan in October 2017 (L+400, 1% floor), alongside a $150 million second-lien term loan due October 2025 (L+825, 1% floor). The financing backed H.I.G. Capital’s purchase of the special chemicals concern. American Capital Senior Floating Ltd. holds $668,000 in principal amount of the 1L debt and $125,000 of the 2L, while Corporate Capital Trust II $755,000 in principal amount of the 2L.
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