LevFin Insights BDC Portfolio News 1/11/21Posted on January 11, 2021
Protective Industrial Products, Truck Hero launch LBO loans to take out BDC-held credits
The loan and high-yield markets picked up right where they left off in late December, with arrangers and issuers in the driver’s seat last week to negotiate deal terms. While high-yield posted the busiest first week of January with $7.88 billion of deals, the supply in loans simply wasn’t close enough to meet investor demand. Secondary prices moved higher across the board, and those deals in market are being met with ravenous demand with a pair of early movers tightening, including a print at par.
After closing out 2020 at 95.73% of par, the highest since Feb. 21, the average bid price of the Credit Suisse Leveraged Loan Index advanced anew during the opening week of 2021, finishing Thursday at 96.45 amid a strong market tone continuing into Friday.
The average discounted spread to a three-year-maturity, DM3YR, of Index loans tightened another 16 basis points last week to L+470 as of Thursday’s reading, from L+486 at year-end. With a new influx of B3 risk hitting the market, average new-issue spreads were unchanged to marginally higher. The all-in average spread for all deals (including floor benefit) was unchanged from the end of December reading at L+488, while the single B reading ticked higher to L+504 from L+500. Excluding add-ons, the single B move was more pronounced at L+504 versus L+494 in December.
Portfolios in brief: Holds reflect most recent reporting period available
OCSI, ARCC: eResearch Technolgoy (B3/B-) — add-on, M&A
Accounts received allocations of the add-on term loan for eResearch Technology (L+450, 1% floor), which was issued at par. Goldman Sachs was left lead on the transaction, which priced tight to talk. Of the $750 million fungible loan, $250 million was privately placed. Proceeds support the acquisition of Bioclinica. The issuer is a global provider of software-enabled clinical research solutions to major pharmaceutical, biopharmaceutical and contract research organizations. In a 2019 recapitalization, Astorg purchased an equity stake alongside current owners Nordic Capital, Novo A/S and management. Oaktree Strategic Income Corp. and Oaktree Strategic Income II Inc. each holds roughly $4M in principal amount of the existing 1L debt. Ares Capital Corp. holds $19.9M of the company’s 2L debt due February 2028 (L+800) together with an equity stake valued at $3.5M.
GBDC: Protective Industrial Products (B3/B-) — LBO
Joint lead arrangers Antares Capital, Citizens Bank, and Bank of Ireland set a Jan. 21 commitment deadline on the $510 million of first-lien credit facilities backing Odyssey Investment Partners’ acquisition of Protective Industrial Products from Audax Private Equity. The term loan is talked at L+425 with a 0.75% floor at 99 and includes six months of 101 soft call protection. Financing includes a $75 million five-year revolver and a $435 million seven-year covenant-lite first-lien term loan. Note that a $160 million second-lien term loan is being placed privately. The RC is governed by a springing 7.6x net first-lien leverage test when usage exceeds 35%. Holders of the company’s existing 1L debt due January 2024 (L+450) include Golub Capital BDC with $993K in principal amount and Golub Capital BDC 3 with $2.8M.
OCSI OCSL, OFS, Audax, Hancock Park, NexPoint: Truck Hero (B3/B-) — LBO
A Jefferies-led arrange group launched the $1.75 billion first-lien financing backing the acquisition of Truck Hero by a consortium led by L Catterton and its affiliates. The deal includes a $200 million five-year asset-based revolver and a $1.55 billion seven-year term loan B. Financing for the transaction also includes $550 million of unsecured debt. The term loan will carry six months of 101 soft call protection. The underwriters are Jefferies and BofA Securities, which originally provided the financing, along with Credit Suisse, KKR Capital Markets and Stifel. Commitments will be due at 3 p.m. ET Jan. 20. Holders of the company’s existing 1L financing due April 2024 (L+375) include Oaktree Strategic Income Corp. with $5.7M in principal amount and Hancock Park Corporate Income Inc. with $15,867. Holders of the existing 2L debt due April 2025 (L+825) include Oaktree Specialty Lending Corp. with $21.5M in principal amount, OFS Capital with $7M, Audax Credit BDC with $1.8M, Hancock Park Corporate Income with $1.9M and NexPoint Capital with $1.7M. – Thomas Dunford
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