LevFin Insights BDC Portfolio News 10/5/20Posted on October 6, 2020
CHI Overhead Doors aims to extend maturity of loan held by Audax; Quirch Foods to add more term debt
The debt markets ended on a downbeat note for the second straight week, pressured by concerns over the president’s positive coronavirus test and a worrying stream of layoff announcements from corporate America. Nevertheless, a number of issuers commanded solid executions — notably with coordinated loan and bond deals earlier in the week — though three issuers did lift pricing in a sign that investors are gaining more leverage to negotiate deal terms.
Market pricing was little changed on the week at L+472 all-in including floor benefit and L+471 for all single B deals, given that the current market is concentrated in that segment; stripping out add-on deals, the average is L+473. There’s little contrast to the previous week’s readings of L+468 for all deals and L+470/L+472 in the respective single B averages.
Launched loan volume also was more or less in line with the prior week, $7.6 billion from 10 issuers, versus $7.4 billion from 16 issuers the previous week. With opportunistic refinancing increasing to $4.3 billion from $2.4 billion the prior week, net new volume accounted for a lower share of the week’s business, $4.8 billion from $7.1 billion the previous week.
Portfolios in brief: Holds reflect most recent reporting period available
Audax: CHI Overhead Doors (B2/B) — amend/extend
UBS and KKR Capital Markets launched an amend-to-extend for transaction for CHI Overhead Doors that would push maturity out by three years to July 2025. Price talk is L+375 with a 1% floor and a 99.5-99.75 offer price for new money and a 25-50 bps amendment fee for existing lenders. The issuer would reset 101 soft call protection for six months. Commitments are due Thursday, Oct. 8. The issuer last tapped the market in 2017 with a repricing to L+325 with a 1% floor of its then $430.7 million term loan due July 2022, which was previously priced at L+375. Audax Credit BDC holds $625,170 in principal amount of the existing term debt.
OCSI: Frontier Communications (B3/B- [prelim]/BB- [exp]) — DIP/exit
Investors received allocations of the $500 million DIP-to-exit term loan for Frontier Communications (L+475, 1% floor), which was issued at 98.5. J.P. Morgan was left lead on the deal, which priced inside of talk. The issuer concurrently priced $1.15 billion of secured notes. Proceeds refinance Frontier’s 8% first-lien notes due April 2027 and pay related transaction fees and expenses. The Norwalk, Conn.-based telecommunications provider filed for chapter 11 on April 14. Oaktree Strategic Income II holds $2.2M of the company’s 8.5% senior notes due April 2026. The investment was on cash non-accrual status as of June 30.
PTMN: PAE Holding Corp. (B2/B) — refi/M&A
A BofA Securities-led arranger group is circulating price talk of L+450, with a 0.75% floor and a 98.5 OID on the $890 million term loan strip for PAE. The seven-year loan would be split between a $740 million funded tranche and a $150 million delayed-draw component. Proceeds would be used to refinance the issuer’s existing capital structure and to support near-term M&A. The delayed-draw tranche would be available for six months, with usage subject to a 4.25x net first-lien leverage test. Lenders are offered a ticking fee of half the margin kicking in day 46 and rising to the full margin on day 91. The transaction would shift the issuer to an all senior capital structure. Pro forma leverage would run 3.9x based off marketed adjusted EBITDA of about $188 million. BofA, Citizens, Truist, Morgan Stanley and Stifel are arranging the loan. Commitments are due by noon ET Friday, Oct. 9. Portman Ridge Finance Corp. holds $3.3M in principal amount of the company’s 2L term debt due October 2023 (L+950, 1% floor).
AB, MRCC: Quirch Foods (NR) — M&A
Lead arranger RBC Capital Markets launched a $475 million first-lien term loan alongside a $200 million revolver to support Palladium Equity Partners portfolio company Quirch Foods in its acquisition of Colorado Boxed Beef Co. A lender call is scheduled for 10 a.m. ET Tuesday, Oct. 6. Colorado Boxed Beef is a supplier of protein products to national and independent chain grocery stores, foodservice distributors and other customers in large markets across the U.S. Palladium and Quirch signed a definitive agreement on Sept. 12 to acquire the company from Altamont Capital Partners, with the transaction to be financed in part with equity from Palladium and rollover equity from Colorado Boxed Beef management and Altamont. The deal is expected to close later this month. Quirch’s existing debt includes an unrated $163 million first-lien term loan that RBC placed in January 2019 to fund Palladium’s LBO. Pricing at allocation was L+600, but the margin has since stepped down to L+575 due to deleveraging, sources noted. Holders of the existing 1L debt include AB Private Credit Investors with $2.1M in principal amount, Monroe Capital Corp. with $2M and Monroe Capital Income Plus Corp. with $1.2M.
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