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LevFin Insights BDC Portfolio News 11/8/21

Posted on November 8, 2021

Amid bifurcated loan market, M&A and repricings drive activity in credits held by several vehicles

Last week offered a tale of two loan markets as heathy investor skepticism continued to push some deals wider at the margin, while many familiar or well-rated credits won advantageous terms amid a favorable technical landscape. High-yield new issuance maintained its recent run despite a mixed reception of some challenging M&A deals.

And there’s more M&A yet to come as loan arrangers are now engaged in one of the last big M&A pushes before year-end, with M&A activity accounting for $12.4 billion of last week’s $16.9 billion of launched deals from 24 issuers. However, issuers continued to take advantage of a welcoming market, launching $4.5 billion of opportunistic transactions.

The secondary market, already at elevated levels, was treading water last week, though a $239 million OWIC emerged as Friday morning’s business, a change of pace from the flurry of BWIC activity in October. (A $415 million BWIC did emerge Friday for Monday’s business, however.) The average bid price of the Credit Suisse Leveraged Loan Index closed out Thursday at 98.57% of par, essentially unchanged from where it opened November, at 98.56.

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Portfolios in brief: Holds reflect most recent reporting period available

BCRED, OCSL, Steele Creek, AINV, CION, ORCC, OXSQ NMFC, FSK: Access CIG (B3/B) — M&A

A Jefferies-led arranger group launched a $75 million add-on term loan for Access CIG, guided with a 99.27 OID. Proceeds would provide balance sheet cash to fund M&A. The incremental debt would be fungible with the term loan due February 2025 (L+375, 0% floor), increasing the tranche size to about $1.024 billion. The issuer is offering to reset the 101 soft call protection for six months. Commitments are due by noon ET Monday, Nov. 15. The company also seeks an amendment to extend the maturity of its revolving credit facility to Nov. 28, 2024. The additional arrangers are Macquarie, Nomura and Golub Capital. Holders of the existing 1L debt include Blackstone Private Credit Fund with $19.1M in principal amount, Oaktree Specialty Lending Corp. with $5.4M, Oaktree Strategic Income II with $7.4M and Steele Creek Capital Corp. with $499K. Holders of the company’s 2L debt due February 2026 (L+775, 0% floor) include Apollo Investment Corp. with $15.9M in principal amount, CION Investment Corp. with $17.3M, Oaktree Specialty Lending Corp. with $15M, Owl Rock Capital Corp. with $58.8M, Owl Rock Capital Corp. II with $24.6M, Oxford Square Capital Corp. with $16.8M, NMFC Senior Loan Program I LLC with $863K and Credit Opportunities Partners JV LLC with $2.5M.

Palmer Square, BCRED, BDVC: Acrisure (B3/B) — M&A

J.P. Morgan and BMO Capital Markets launched a $600 million incremental term loan for Acrisure. Proceeds would fund acquisitions under letter of intent and future acquisitions. The loan is talked at L+425-450 with a 0.50% floor and a 99 OID. It would be coterminous, but not fungible, with the borrower’s existing term loans due February 2027. Lenders are offered six months of 101 soft call protection. Commitments are due by noon ET Wednesday, Nov. 10. The issuer last tapped the market in July for a $500 million incremental term loan (L+375, 0.50% floor). Proceeds, along with a $500 million issue of 6% notes due 2029, were earmarked to fund acquisitions under letters of intent and future acquisitions. The issuer also has in place a term loan due 2027 (L+350, 0% floor). The originally $3.175 billion term loan was syndicated in early 2020 to refinance debt and fund M&A, and the issuer early this year tacked on another $700 million to that tranche refinance secured notes. The 50 bps of MFN protection has lapsed per its 12-month sunset provision. Holders of the term debt due 2027 include Palmer Square Capital BDC with $5.9M in principal amount, Blackstone Private Credit Fund with $2M and Business Development Corp. of America with $19.6M.

SCP, SUNS, Hancock Park, OFS: Baymark Health Services (NR/NR) — M&A

Capital One launched a $350 million package of incremental first- and second-lien facilities for Baymark Health Services, a portfolio company of Webster Equity Partners. As a complement to recent equity contributions, the $275 million first-lien delayed-draw term loan and the $75 million second-lien delayed-draw term loan will support a strong pipeline of near-term acquisitions. Baymark refinanced its debt in June with $690 million of new senior secured credit facilities, the first-lien term loan having priced at L+500 and the second-lien loan at L+850, with OIDs of 99 and 98.5, respectively. Launch pricing and OID on the incremental is commensurate with existing tranches. Holders of the 1L debt include SCP Private Credit Income BDC with $6.9M in principal amount, SLR HC BDC with $1.8M and SLR Senior Investment Corp. with $5.4M. Holders of the funded 2L debt include Hancock Park Corporate Income with $1.3M and OFS Capital with $5M.

Steele Creek: Compassus (B2/B) — Repricing

A BofA Securities-led arranger group set price talk of L+375-400 with a 0.50% floor at par for the repricing of Compassus’ $542 million term loan B due 2026. The transaction would reduce pricing from L+425 with a 0.75% floor. Commitments are due by 5 p.m. ET Wednesday, Nov. 10. The originally $550 million upsized term loan was syndicated in February to refinance subordinated notes due 2028 and fund a cash dividend and/or future mergers and acquisitions. BofA Securities is administrative agent. The borrower is offering to reset six months of 101 soft call protection on the repriced loan. Cashless rolls are offered for existing investors. Steele Creek Capital Corp. holds $995K of the company’s 1L debt.

Barings, SIRR, FCRD: Golden West Packaging (B2/B) — Refi, M&A

Citizens Bank outlined price talk of L+500 with a 0.75% floor and a 99.5 OID on the $290 million term loan B for Golden West Packaging Group. The six-year covenant-lite term loan will carry 101 soft call protection for six months. Commitments are due Thursday, Nov. 18. Proceeds from the transaction will refinance existing debt and finance a tuck-in acquisition. Citizens in 2018 led a $70 million add-on term loan to the issuer’s prior $125 million first-lien term loan due 2023. Holders of the term debt due June 2023 (L+525, 1% floor) include Sierra Income Corp. with $1.3M and First Eagle Logan JV LLC with $4.3M. Holders of the term debt due June 2023 (L+575, 1% floor) include Barings Private Credit Corp. with $2.3M and Sierra Senior Loan Strategy JV I LLC with $3.8M.

Terra: KKR Real Estate Finance Trust (Ba3/BB-) — Repricing

Investors received allocations of KKR Real Estate Finance Trust’s upsized and repriced $348 million term loan (L+350, 0.5% floor), which was issued at par. J.P. Morgan was left lead on the deal, which priced tight to guidance. Proceeds add $50 million for GCP and reprice existing exposure down from L+475 with a 1% floor. Terra Income Fund 6 holds an equity stake valued at $1.9M.

Audax: MW Industries (B3/B-) — M&A

Accounts received allocations of a $95 million nonfungible incremental loan for MW Industries (L+425, 0.50% floor), which was issued at 99. RBC Capital Markets arranged the deal, which priced in line with talk. Proceeds fund two acquisitions and place about $10 million of cash on the balance sheet, according to Moody’s, which upgraded the issuer last week to B3 from Caa1. Concurrently, the issuer is extending the maturity of its revolver by two years, to 2024, Moody’s added. Audax Credit BDC holds $2M of the company’s 1L debt due September 2024 (L+375, 0% floor).

Guggenheim, Hancock Park, OFS, ARCC, NMFC: Pelican Products (B3/B) — LBO

A BofA Securities-led arranger group set price talk of L+425-450, with a 0.50% floor and a 99 OID on the $525 million first-lien term loan backing Platinum Equity’s purchase of Pelican Products from Behrman Capital. The seven-year TLB will include six months of 101 soft call protection. Commitments are due by 11 a.m. ET Tuesday, Nov. 16. The issuer also plans a $200 million privately placed second-lien term loan. Arrangers include BofA, Credit Suisse, Morgan Stanley, Houlihan Lokey, Ares and Goldman Sachs. Holders of the company’s 1L debt due September 2024 (L+350, 1% floor) include Guggenheim Credit Income Fund with $3.9M in principal amount and NMFC Senior Loan Program I LLC with $4.9M. Holders of the 2L debt due May 2026 (L+775, 1% floor) include Hancock Park Corporate Income with $2.1M in principal amount, OFS Capital with $6.2M and Ares Capital Corp. with $27.3M.

BCRED: TRC Cos. (B2/B) — LBO

A UBS-led arranger group set talk of L+375 with a 0.5% floor and a 99.5 offer price on the first-lien term loan tranche of the $845 million first- and second-lien financing backing Warburg Pincus’ acquisition of TRC Cos. Second-lien talk is L+650-675 with a 0.5% floor at 99. The financing is split between a $635 million first-lien term loan and a $210 million second-lien term loan. The first-lien tranche carries six months of 101 soft call protection, while the second-lien tranche carries 102, 101 hard call protection. Commitments are due Wednesday, Nov. 17. Blackstone Private Credit Fund holds $13M in principal amount of the company’s term debt due June 2024 (L+350, 1% floor).

OFS, Steele Creek: United Natural Foods (Ba3/B+) — Repricing

Investors received allocations of the repriced $844 million term loan for United Natural Foods (L+325, 0% floor), which was issued at par. Credit Suisse was left lead on the deal, which priced at the wide end of talk. Via the transaction, the issuer is lowering the margin on the loan from L+350. Holders of the company’s 1L debt due October 2025 include OFS Capital with $283K and Steele Creek Capital Corp. with $788K.

Palmer Square, Steele Creek: Watlow Electric (B2/B) — Repricing

Investors received allocations of Watlow Electric’s repriced $512.425 million term loan B (L+375, 0.5% floor), which was issued at par. BMO Capital Markets was left lead on the deal, which priced at the wide end of guidance and lowers the current L+400 margin. Holders of the company’s 1L debt due March 2028 include Palmer Square Capital BDC with $2.1M in principal amount and Steele Creek Capital BDC with $349K. – Thomas Dunford

Download LFI BDC Portfolio News 11-8-21 for BDC investment details provided by Advantage Data; click through links to view stories by LFI.

thomas.dunford@levfininsights.com

212.205.8552

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