Download: LFI BDC Portfolio News 9-10-18
As promised, loan arrangers rolled out a big September calendar of M&A deals brimming with new money seeking to take advantage of the late-August lull and a favorable funds flow picture following the busiest month for CLO issuance since March 2015. High-yield, too, kicked back into high gear, driven in part by coordinated cross-border deals for some of the same issuers currently being reviewed by loan accounts, while restructurings drove some of last week’s lively secondary action.
Loan investors are kicking the tires on a trio of large M&A deals that will set the tone for the market in the coming weeks not only for the other transactions already launched but also for those to come later this month. Traders, too, are awaiting clearing levels on these jumbo deals—which are being talked wide of where single-B executions printed earlier in the year—as well as to see how the market absorbs the supply once these deals allocate.
Arrangers launched a whopping 36 transactions last week, for $24.1 billion of total institutional volume and $20.1 billion of net new money—both tallies the most since the post-Labor Day onslaught a year ago. Moreover, the $19.2 billion of M&A deals is the highest weekly level tracked in the two years by LFI. Notably, Refinitiv’s $5.5 billion U.S. dollar term loan is the largest new-money deal since SS&C, while AkzoNobel Specialty Chemicals’ dollar tranche is also an all-new-money deal at $3.9 billion.
Portfolios in brief: Holds reflect most recent reporting period available
MAIN: Container Store Group (B2/B) — repricing
J.P. Morgan held a lender call Tuesday, Sept. 4, to roll out a two-year extension and repricing of The Container Store’s $292.5 million term loan, according to sources. Ahead of the call, the arranger circulated price talk of L+500, with a 1% floor and a 99 OID; the five-year loan would include 12 months of 101 soft call protection. The issuer’s existing term loan matures in August 2021 and is priced at L+700, with a 1% floor. The 101 soft call protection rolled off the loan in August. Commitments are due by noon ET Wednesday, Sept. 12. Main Street Capital Corp. holds $6.8M in the existing 1L debt due August 2021.
Audax, Cion, KCAP: Flexera Software (B2/B-) — add-on
Jefferies has set a lender call on Wednesday, Sept. 12, for Flexera Software as the issuer seeks an $85 million add-on to its first-lien term loan, sources said. Flexera sells software and services that enable software publishers and device makers to install, enforce and deploy software licenses and was last in the market January 2018 to refinance existing debt alongside TA Associates’ acquisition of a minority stake in the business. Ontario Teachers’ Pension Plan remains the majority owner. The existing covenant-lite transaction included a $550 million seven-year first-lien term loan (L+325, 1% floor) and a $125 million eight-year second-lien term loan (L+725, 1% floor). That transaction leveraged Flexera at 5.6x first-lien and 6.9x total. Audax Credit BDC holds $2M in existing 1L debt, and holders of the 2L debt include Cion Investment Corp. with $3.5M and KCAP Financial with $100,000.
AINV, Guggenheim, OHAI, Owl Rock: Hayward Industries (B3/B) — add-on, M&A, refi
Investors received allocations of Hayward Industries’ $150 million add-on term loan (L+350, 0% floor), which broke to a 100.125–100.625 market, from issuance at 99.75, according to sources. Bank of America Merrill Lynch was left lead on the loan, which was upsized and priced tight to talk. Proceeds will be used to provide permanent financing for the acquisition of Paramount Pool & Spa Systems and to pay down a portion of Hayward’s privately placed second-lien term loan. Holders of the company’s existing 2L debt (L+825, 0% floor) due August 2025 include Apollo Investment Corp. with $25M, Guggenheim Credit Income Fund with $6M, OHA Investment Corp. with $1.3M and Owl Rock Capital with a combined $79M in principal amount across two funds.
ACSF, Audax, NMFC, OCSL, Triangle: Navicure (B3/B-) — add-on, M&A
Antares Capital set price talk of 99.5 on the $108 million incremental term loan for Navicure, according to sources. The add-on will be fungible with the existing $433 million covenant-lite first-lien term loan due November 2024, which is priced at L+375 with a 1% floor, sources said. That will increase the total loan amount to $541 million. Commitments are due by Thursday, Sept. 13. Proceeds will fund an acquisition. Navicure was last in the market in October 2017 with an M&A financing package comprising what was originally a $435 million first-lien term loan as well as a $185 million second-lien tranche (L+750, 1% floor) due October 2025 and a $50 million revolver due November 2022 to back the company’s $670 million merger with ZirMed. Holders of the existing 1L debt include American Capital Senior Floating with $2M and Audax Credit BDC with $3.5M, while holders of the 2L debt include American Capital Senior Floating with $500,000, New Mountain Finance with $31.5M, Oaktree Specialty Lending Corp. with $14.5M and Triangle Capital Corp. with $6M.
PFLT: Output Services Group (B2/B) — add-on, M&A
SunTrust Robinson Humphrey launched a $50 million add-on first lien term loan and a $50 million delayed-draw term loan for Output Services Group. Proceeds will be used for the company’s acquisition pipeline, according to sources. The company is seeking an amendment alongside the incremental debt, sources said. OSG tapped market in March, refinancing via a $292.5 million, seven-year first-lien term loan strip (L+425, 1% floor), along with a $52.5 million, privately placed second-lien (L+850, 1% floor). Leverage at time was roughly 4.5x first-lien and 5.6x total, according to LFI. The loan is governed by a net total leverage test. PennantPark Floating Rate Capital holds $6.6M in existing 1L debt, together with a portion of unfunded debt. – Thomas Dunford
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