LevFin Insights BDC Portfolio News 1-13-20Posted on January 14, 2020
Avantor, Kindred At Home, LifePoint join repricing wave; LBO to take out debt at First Advantage
The new year opened as expected with arrangers launching a slate of underwritten M&A/LBO deals off the forward calendar as well as a fresh crop of repricings. Unlike late 2019, when repricing activity was heavily skewed toward higher-rated credits—85% of repricing volume was generated by issuers rated B1/B+ or higher in the fourth quarter—the recent rally in the secondary opened the door for single-B issuers to seek spread reductions. The M&A/LBO deals that were first out of the gate, unsurprisingly, are quickly drawing a crowd, with certain deals benefiting from pre-marketing.
Over in high-yield, it was the biggest start to a year on recent record, with $8.4 billion surpassing by huge measure $1.5 billion last year and by a good chunk $7.4 billion two years ago.
As discussed in the final weekly report of 2019, arrangers are planning to launch many of the underwritten deals from the forward calendar in the coming weeks, but thus far, last week’s launches haven’t yet brought to the market much by way of new money. For starters, last week’s $18.8 billion of launched volume includes $12.6 billion of repricings alone.
Portfolios in brief: Holds reflect most recent reporting period available
OCSL, OCSI, BDVC: Autodata (B3/B-/B) — add-on, M&A
Investors received allocations of the $75 million add-on term loan (L+350) for J.D. Power/Autodata, which was issued at par. RBC Capital Markets was left lead on the transaction, which priced tight to talk. Proceeds will support an acquisition. Thoma Bravo in December closed its acquisition of J.D. Power and merged the target with its portfolio company Autodata. The issuer is a global consumer intelligence, data and analytics company focused on the automotive and other industries. Holders of the existing 1L debt include Oaktree Specialty Lending Corp. with $7M in principal amount, Oaktree Strategic Income Corp. with $2.8M and Oaktree Strategic Income II Inc. with $2.8M. Holders of the 2L debt due May 2027 (L+800) include Oaktree Specialty Lending Corp. with $3.75M, Oaktree Strategic Income Corp. with $1.5M, Oaktree Strategic Income II Inc. with $1.5M and Business Development Corp. of America with $1.85M.
BBDC, OCSL, OCSI, FSK, MCC, Sierra: Avantor Performance Materials (B1/B+/B+) — repricing
Goldman Sachs set price talk of L+250 with a 1% floor and a 99.875–100 offer price on the dollar-denominated component of Avantor’s proposed cross-border repricing. The current margin is L+300 and, like the existing loan, the repriced loan would include a 25 bps step-down at a half-turn inside net first-lien leverage. The euro tranche is talked at E+275, with a 0% floor, also offered at 99.875–100, versus the current margin of E+325. The euro tranche also includes a 25 bps step-down at a half turn inside of closing net first-lien leverage. The issuer is offering to reset the 101 soft call protection for six months and is also proposing modifications to the soft call language. Commitments are due by Tuesday, Jan. 21. Barings BDC holds $5.73M in principal amount of the existing 1L debt. Holders of the company’s 9% senior note due October 2025 is Oaktree Specialty Lending Corp. with $3M in principal amount, Oaktree Strategic Income II Inc. with $1M, FS Investment Corp. II with $25M, FS Investment Corp. III with $52.5M and FS Investment Corp. IV with $7.5M. Medley Capital Corp. and Sierra Income Corp. hold equity stakes valued at $13.85M and $27.45M, respectively.
Audax: First Advantage (B2/B) — LBO
A BofA Securities-led arranger group set talk of L+400-425 with a 0% floor and a 99 offer price on the $620 million, seven-year first-lien term loan backing Silver Lake’s acquisition of First Advantage. Investors are offered six months of 101 soft call protection. Commitments are due by noon ET Tuesday, Jan. 21. The financing also includes $195 million of privately placed second-lien debt, sources noted. The arranger group also includes J.P. Morgan, Barclays, Jefferies, RBC Capital Markets, Credit Suisse, Citizens, HSBC, KKR Capital Markets and Stifel. The transaction will leverage First Advantage at 4.4x first-lien and 5.7x total. The $75 million revolver, which won’t be drawn at close is subject to a 7.75x springing net first-lien leverage test if utilization exceeds 35%. Commitments are due Thursday, Jan. 23. Audax Credit BDC holds $2M in principal amount of the company’s 1L debt due June 2022 (L+525).
Audax: Flexera Software (B2/B-) — add-on, M&A, refi
Investors received allocations of the $210 million add-on for Flexera Software (L+350), which was issued at 99.75. Jefferies was left lead on the deal, which priced tight to original talk with a $150 million upsize. The original $60 million backs an acquisition and the $150 million of proceeds from the upsize will refinance the issuer’s second-lien term loan (L+725). Flexera, which sells software and services that enable software publishers and device makers to install, enforce and deploy software licenses, is controlled by Ontario Teachers’ Pension Plan, with TA Associates as a minority investor. Audax Credit BDC holds $1.97M in principal amount of the company’s existing 1L debt.
OFS: Kindred At Home (B1/B) — repricing
J.P. Morgan launched a repricing of Kindred At Home’s $2.541 billion term loan B. The issuer is proposing to take pricing on the term loan due July 2025 to L+325 with a 0% floor. The repriced loan is offered at 99.75-100 and would include six months of 101 soft call protection, sources noted. Current pricing is L+375 with a 0% floor. Commitments are due Thursday, Jan. 16. The business was formed in 2018 via the merger of Kindred Healthcare’s home health-care business and Curo Health Service by a joint venture of Humana, TPG Capital and Welsh Carson Anderson & Stowe. OFS Capital holds $3M in principal amount of the company’s existing 1L debt.
FSK: LifePoint Hospitals (B2/B) — repricing
Citi launched a repricing for LifePoint Hospitals, setting price talk of L+400 with a 0% floor and a par offer price. The current margin is L+450. Commitments are due by 5 p.m. ET Wednesday, Jan. 15. In connection with the proposed repricing, the issuer plans to repay $400 million, or about 11.4%, of the covenant-lite term loan due November 2025, reducing outstandings to $3.115 billion. The 101 soft call protection rolled off the loan in November; the issuer is offering to reset the 101 soft call for six months in connection with the repricing. Of note, for the first six months following the proposed repricing, the MFN protection would be based on the original pricing. As reported, the 2018-vintage term loan cleared the market with 50 bps of MFN protection for life, versus a 12-month sunset on 75 bps as originally proposed. Holders of the company’s 9.75% senior note due December 2026 include FS KKR Capital Corp. with $8.4M in principal amount, FS Investment Corp. II with $9.79M, FS Investment Corp. III with $11.2M, FS Investment Corp. IV with $2.86M and Corporate Capital Trust II with $926,000.
Audax, Guggenheim, FSK, PSEC: SMG (B1/B+) — add-on, repayment
A Jefferies-led arranger group set talk of L+275-300 with a 99.5 offer price on the $190 million add-on to Stadium Management Group’s term loan B due January 2025 that will be used to repay the issuer’s second-lien term loan. At the tight end of talk, the transaction would represent a repricing, since the extant loan is currently priced at L+300 with a 0% floor after stepping down from L+325 when leverage was reduced below 4.75x leverage. The existing step would be removed as part of the transaction. There’s no fee on the extant loan, but the issuer will reset 101 soft call protection for six months. Arrangers on the deal are Jefferies, Nomura, BofA Securities, Goldman Sachs and Macquarie. Commitments are due Wednesday, Jan. 15. Onex Corp. in early 2018 acquired the worldwide entertainment and convention venue management concern from American Capital; the issuer subsequently merged with AEG Facilities in a deleveraging transaction. Onex and Anshutz Entertainment Group each hold a 50% stake in the merged company, now known as ASM Global. Holders of the existing 1L debt include Audax Credit BDC with $1.98M in principal amount and Guggenheim Credit Income Fund with $2.36M. Holders of the company’s 2L debt due January 2026 (L+700) include FS KKR Capital Corp. with $1.3M in principal amount, FS Investment Corp. II with $3.64M, FS Investment Corp. III with $942,000, Corporate Capital Trust II with $230,000, Guggenheim Credit Income Fund with $2.4M and Prospect Capital with $7.5M. – Thomas Dunford
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