LevFin Insights BDC Portfolio News 4/12/21Posted on April 12, 2021
HighTower Holding refinances; existing debtholders include Audax, BCSF, Morgan Stanley and TCPC
M&A activity was met with healthy demand across the institutional loan and high-yield markets last week, with bond volume swelling and upsized loan deals reflecting both an improvement in new-issue sentiment after a messy end to March and a decisively firmer tone in the broader secondary market.
To be sure, the market remains open for opportunistic business—particularly refinancings to address upcoming maturities and dividend deals—but M&A/LBO deals edged out opportunistic transactions last week as large underwrites for Jazz Pharmaceuticals, Kissner Group, QUIKRETE and Signature Aviation were peeled off the forward calendar, with more underwritten deals said to be in the queue in the coming weeks. M&A business represented 50.4% of the $12.9 billion of launched volume last week. Overall, with repricing activity coming at a much lower speed, the pace is far less blistering than earlier in the year.
Portfolios in brief: Holds reflect most recent reporting period available
BDVC: Frontier Communications (B3/B-/BB-) — repricing
Investors received allocations of Frontier Communications’ upsized and repriced $1.475 billion DIP-to-exit term loan strip (L+375, 0.75% floor) that was issued at 99. J.P. Morgan was left lead on the deal, which priced at the tight end of guidance. The issuer is lowering pricing from L+475 with a 1% floor, while adding a $225 million delayed-draw term loan for GCP that will fund on the telecom concern’s exit from chapter 11. Business Development Corp. of America holds roughly $19M in principal amount of the company’s 1L debt and $1.3M of the company’s 5% senior secured notes due May 2028.
Audax, BCSF, Morgan Stanley, TCPC: HighTower Holding (B3/B-) — refinancing
J.P Morgan outlined guidance of L+400-425 with a 0.75% floor and a 99 offer price on the $750 million financing for HighTower Holding. The deal includes a $600 million funded seven-year TLB and a $150 million delayed-draw term loan that will be available for 18 months and includes ticking fees of 50% of the margin for days 61-120 post allocation, rising to the full margin on day 121. The loan will include six months of 101 soft call protection. Note that HighTower plans an additional $300 million of unsecured debt, according to sources. Proceeds along with new sponsor equity, will refinance the existing capital structure and fund general corporate purposes including M&A activity. In all, net debt would increase by $130 million, according to Moody’s. Commitments will be due by 5 p.m. ET Thursday, April 15. Holders of the company’s 1L debt due January 2025 (L+500) include Audax Credit BDC with $1.3M in principal amount, Bain Capital Specialty Finance with $40.9M and Morgan Stanley Direct Lending Fund with $12.6M. Holders of the company’s 2L debt due January 2026 (L+875) include Bain Capital Specialty Finance with a combined $27.5M in principal amount and Morgan Stanley Direct Lending Fund with $5M.
GBDC: Midwest Veterinary Partners (TBD/TBD) — refinancing, M&A
Jefferies and Golub Capital launched refinancing for Midwest Veterinary Partners, setting a lender call 1 p.m. ET Tuesday, April 13. The issuer is putting in place a $20 million revolver and $340 million funded first-lien term loan, while a $75 million delayed-draw first-lien term loan and a $90 million eight-year second-lien term loan have been placed privately. The seven-year first-lien term loan will include six months of 101 soft call protection, and the delayed-draw loan will be available for 18 months. Proceeds will be used to refinance MVP’s existing debt and place cash on the balance sheet to fund near-term letter of intent pipeline. The issuer was previously financed via a Golub unitranche, sources noted. The current loan due 2025 is priced at L+575 with a 1% floor, according to SEC filings. Golub Capital BDC holds a combined $27.4M of the unitranche debt plus equity stakes valued at a combined $95,000. Golub Capital BDC 3 holds a combined $12.3M of the unitranche debt plus equity stakes valued at a combined $43,000.
Audax: OB Hospitalist Group (TBD/TBD) — add-on, dividend recap
Antares outlined price talk of L+425 with a 1% floor and a 99.27 OID on the $100 million first-lien add-on for OB Hospitalist Group. Existing holders are offered a 12.5 bps consent fee. The incremental debt will be fungible with the existing $191.8 million first-lien term loan, sources said. Roughly $17 million of incremental second-lien debt was preplaced. As previously reported, proceeds will support a shareholder dividend. Accounts are told to expect B3/B ratings. Commitments are due Wednesday, April 14. Audax Credit BDC holds $2.3M of the company’s 1L debt due August 2024 (L+400).
Audax, FSK, NMFC, OCSI: OEConnection (B3/B-) — add-on, M&A
Antares Capital launched a $75 million add-on first-lien term loan for OEConnection to finance its acquisition of Project Horizon, a Web-based provider of inventory management. An additional $75 million delayed-draw term loan has been preplaced. Price talk is L+400 with a 0% floor and a 98.79 offer price. Commitments are due April 13. Pro forma for the increase, the issuer’s funded first-lien term loan due September 2026 (L+400, 0% floor) would grow to $530 million. The loan was put in place in 2019 to support Genstar Capital’s acquisition of a majority stake in the company. Antares Capital, Golub Capital and Capital One were joint lead arrangers on the transaction, while KKR Capital Markets was left lead on a $185 million second-lien term loan that was clubbed up privately with KKR Credit as the lead investor. Leverage at the time was 5.2x/7.5x. Holders of the existing 1L debt include Audax Credit BDC with $1.6M in principal amount, Oaktree Strategic Income Corp. with $8.4M and Oaktree Strategic Income II with $9.4M. Holders of the 2L debt due September 2027 (L+825) include FS KKR Capital Corp. with $34.1M in principal amount, FS KKR Capital Corp. II with $42.9M and New Mountain Finance with $12M.
FSK: Sound United (B2/B) — refinancing
BofA Securities and KKR Capital Markets today set talk of L+475-500 with a 0.75% floor and a 99 OID on the $380 million term loan for Sound United. The seven-year loan would include six months of 101 soft call protection. Proceeds would be used to refinance the issuer’s capital structure and to repay a recent equity investment that backed the Bowers & Wilkins acquisition late last year. Commitments are due by noon ET Wednesday, April 21. Issuance is technically at DEI Sales. FS KKR holds $15M of the company’s existing 1L debt due December 2023 (L+700), $21.8M of the company’s 13.5% PIK notes due June 2024 and an equity stake valued at $29.3M.
GECC: SubCom (B1/B) — dividend recap
A Goldman Sachs-led arranger group today set price talk of L+475-500 with a 0.75% floor and a 99 OID on the $730 million first-lien term loan for SubCom. In addition, the loan would include a 25 bps step-down at 3.05x net first-lien leverage. The six-year loan would amortize at 5% per year and carry six months of 101 soft call protection. Commitments are due by 5 p.m. ET Monday, April 19. Proceeds would be used to fund a shareholder dividend. Goldman Sachs is joined by Citi, Barclays, Credit Suisse, Jefferies, Morgan Stanley and MUFG. Great Elm Capital Corp. holds $10M in unfunded revolver debt.
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