SORENSON PLANS FULL REFI OF DEBT HELD BY FSK, MAIN, HMS, AINV
As the loan pipeline continues to ebb, opportunistic issuers are beginning to wade back in, spurred by bifurcated conditions that are allowing well-regarded repeat issuers to price tight to the broader market. Though the secondary rally stalled out last week, the appreciable improvement in the secondary market following the February rally eases the difficulty of layering in fungible new money at previous years’ more advantageous pricing levels.
Download: LFI BDC Portfolio News 3-11-19
Meanwhile, underwriters continued to whittle away the new-issue pipeline, with the jumbo cross-border JCI Power Solutions loan and bond deals generating heavy demand as they chug away toward likely pricing late this week, and a procession of new-money deals being put to bed, including billion-dollar-plus executions for ConvergeOne and Tallgrass Energy Partners. Arrangers priced transactions representing $6.4 billion of net new money last week, a one-month high, sending LFI’s “net net” calendar to a mere $6.9 billion.
Portfolios in brief: Holds reflect most recent reporting period available
OCSI, GECC, AINV: Aptean (B3/B-) — LBO
Golub Capital launched a $350 million first-lien term loan supporting TA Associates and Vista Equity Partners in their investment inAptean. A lender meeting is scheduled for 10 a.m. ET, Wednesday, March 13. The covenant-lite funded term loan is being put in place alongside $100 million of unfunded first-lien delayed-draw debt, a $150 million funded second-lien term loan and a $50 million revolver. The delayed-draw and second-lien components have been privately placed. Macquarie is also providing financing as part of the transaction. Oaktree Strategic Income Corp. holds $507,000 in principal amount of the company’s existing 1L debt (L+425, 1% floor) due December 2022, while Great Elm Capital Corp. and Apollo Investment Corp. hold $4M and $11.1M, respectively, of 2L debt (L+950, 1% floor) due December 2023.
BCSF: Chromaflo Technologies (B3/B-) — refi
Morgan Stanley, Goldman Sachs, Jefferies and Keybanc circulated price talk of L+425 and a 99 OID for Chromaflo Technologies’ $60 million incremental term loan, which partially refinances its existing second-lien term loan. Commitments are due by noon ET Thursday, March 14. The covenant-lite financing would have six months of 101 soft call protection. The financing would be incremental to what was originally a $356.4 million term loan strip due November 2023 (L+350), a repricing completed in February 2018. Morgan Stanley is administrative agent. A $120 million second-lien term loan (L+800, 1% floor) was completed in 2016 to back Chromaflo’s buyout by American Securities, along with the first-lien facilities that were repriced. Those facilities include a $154.9 million B-1 loan guaranteed by the U.S. entity and a $201.5 million B-2 loan guaranteed by its Dutch entity. Bain Capital Specialty Finance holds a combined $1.2M in principal amount of the existing 1L debt.
OCSI: Citgo Petroleum (B3/B) — GCP
Houlihan Lokey is acting as placement agent on a $1.2 billion incremental term loan for Citgo Petroleum that would be used for general corporate purposes and liquidity. Citgo is the U.S. refinery subsidiary of Venezuela’s state-owned oil company PDVSA. The opco loan due March 2024 is talked at L+450-550 at 99 with six months of 101 soft protection. Covenants would be similar to the issuer’s existing term loan, sources said. Commitments are due on March 15. Citgo’s current $1 billion revolving credit, which isn't utilized, matures later this year. The current $650 million opco term loan TLB due July 2021 is priced at L+350, with a 1% floor. The loan includes MFN protection. Opco debt also includes a $650 million issue of 6.625% secured notes due August 2022. Note that Deutsche Bank is administrative agent on the issuer’s existing loans. Oaktree Strategic Income Corp. holds $6M of the existing 1L debt.
FSK, CCT: Nine West (NR) — chapter 11 exit
Goldman Sachs set a 96-97 offer price on the $325 million first-lien exit term loan for retailer Nine West, while outlining a NC1, 102, 101 call schedule on the five-year term loan. As noted previously, pricing is L+800 with a 1% floor. The exit term loan will amortize at 1.25% per quarter. The loan will be governed by a 5.5x net total leverage test, with step-downs over time. Note the test excludes ABL borrowings. Commitments are due Friday, March 15. In connection with the Feb. 25 confirmation of the retailer’s third amended plan of reorganization, Judge Shelley C. Chapman also authorized the debtors to enter into roughly $512.5 million in total exit financing commitments including the $325 million, five-year exit term loan arranged via Goldman Sachs and also funded in part by Carlson Capital; and $187.5 million of ABL facilities including a five-year $175 million revolver and a $12.5 million first-in, last-out term loan agented and arranged by Wells Fargo Bank, LFI previously reported. Nine West’s prepetition debtholders include FS KKR Capital and Corporate Capital Trust.
Guggenheim, AINV, CĪON: Parts Town (B3/B-) — M&A, refi
Jefferies circulated price talk of L+400 and a 98.85 OID for Parts Town's $30 million incremental term loan. Proceeds fund the acquisition of certain assets of Commercial Appliance Service Inc. and repay ABL borrowings. Commitments are due by 2 p.m. ET, Wednesday, March 13. The incremental loan will have the same Dec. 7, 2024, maturity as the issuer’s existing first-lien term loan. Pro forma first-lien term loan outstandings would increase to $331 million, according to Moody's. The issuer was last in market in July with a $28 million add-on to the existing L+400 term loan to back the acquisition of PartsXpress. The original loan stems from an earlier first- and second-lien refinancing. The deal included an $82.5 million second-lien tranche (L+800, 1% floor). Note that Citizens is administrative agent. The issuer increased its ABL revolver to $75 million in December. Guggenheim Credit Income Fund holds $4.2M of the existing 1L debt and $4.3M of the 2L debt, while Apollo Investment Corp. and CĪON Investment Corp. each hold a $9.4M of the 2L debt.
FSK, MAIN, HMS, AINV: Sorenson Communications (B2/B) — refi
Sorenson Communications revived its planned refinancing with a new $675 million five-year term loan via arrangers Credit Suisse, KKR Capital Markets and Blackstone. A lender call is set for 10 a.m. ET Friday, March 8. The five-year term loan is talked at L+650 with a 0% floor at 95 and includes 101 soft call protection for 12 months. As well, the loan will be governed by a 3x first-lien leverage test and will include 10% annual amortization. At current talk, the loan would yield 11.22% to maturity. Sorenson in November opted not to pursue its loan refinancing, citing market conditions. At the time, the arrangers had been shopping a $950 million term loan at L+600, with a 0% floor and a 97 OID, with 5% amortization. The smaller first-lien term loan will now be supplemented by a PIK second-lien loan, reducing first-lien leverage to 2x. The earlier planned transaction contemplated an all-first-lien transaction leveraged at 2.8x and 2.7x net. Commitments are due Thursday, March 14. Proceeds, along with cash on hand, will 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. FS KKR Capital Corp. holds $29.4M of 1L debt (L+575, 2.25% floor) due April 2020, $19.9M of 9% senior notes due October 2020, $15.1M of 13.875% subordinated notes due October 2021 and equity valued at $38M; FS Investment Corp. II holds $97.7M of 1L debt, $7.1M of senior notes, $5.4M of subordinated notes and equity valued at $36.1M; FS Investment Corp. III holds $4.8M of 1L debt, $11.8M of senior notes and $9M of subordinated notes; Main Street Capital Corp. has $13.1M of senior notes; HMS Income Fund, a nonlisted BDC subadvised by Main Street, has $2.9M of 1L debt; and Apollo Investment Corp. has an equity stake valued at $440,000.
CCT, Triton Pacific: TruGreen (B2/B) — refi
J.P. Morgan launched a $965 million first-lien term loan B for TruGreen to refinance debt and to purchase minority owner Scotts Miracle-Gro’s stake. The seven-year loan is being talked at L+400 with a 99.5 OID with six months of 101 soft call protection. The facility refinances the existing $790 million first-lien term loan B due April 2023, sources said, and pays $234 million to purchase Scotts-Miracle Gro’s stake, recapitalizing the company. The stake is 30%, according to Moody's. Commitments are due by March 12. The issuer was last to market when it completed what was originally an $800 million covenant-lite term loan B (L+400) in October 2017. J.P. Morgan is the administrative agent. Holders of the existing 1L debt include Corporate Capital Trust II with $980,000 and Triton Pacific Investment Corp. with $343,000. – Thomas Dunford
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