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LevFin Insights BDC Portfolio News 12/13/21

Posted on December 13, 2021

Refinancings join the fray as M&A continues to prevail among holdings

With the tone improving considerably as investors shook off concerns about the new coronavirus variant, the new-issue high-yield market reopened. Deal flow was $6.63 billion, the most in three weeks, and total return was nearing 1%, the most for any week since the last week of August. Loan arrangers, too, were quick to capitalize on the better sentiment, rolling out a series of easily digestible add-on loans and tightening pricing on some transactions that arguably launched at conservative levels the previous week.

Though prices leveled off as the week came to a close, the Credit Suisse Leveraged Loan Index gained 20 bps, closing out Thursday at 98.36% of par, up 20 bps from the Dec. 3 close of 98.16. At 98.36, the average bid price is only seven bps below where it was prior to Thanksgiving, before the omicron concerns rattled markets globally.

While new loans kept coming, cleanup was paramount as the holiday shutdown looms.

Allocated volume jumped to $15.5 billion gross and $11.5 billion net from 28 deals, with several add-ons in the mix. By contrast, allocated volume the previous week was a paltry $1.7 billion gross and $1.5 billion net of associated repayments, due in large part to the fact that arrangers cleared out the lion’s share of the calendar ahead of Thanksgiving.

Following the flurry of late-week allocations, LFI is still tracking 28 deals in market for $10.4 billion gross/$8.2 billion net, most, if not all of which, should be wrapped up this week. Note the public total likely understates the case, however, with arrangers quietly syndicating a string of incremental loans in recent days, such as Berlin Packaging, Kodiak Building and Material Handling, and more said to be working.

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Portfolios in brief: Holds reflect most recent reporting period available

BCRED: Baldwin Risk Partners (B2/B) — Refinancing, M&A, GCP

Investors received allocations of Baldwin Risk Partners’ $350 million add-on term loan (L+350, 0.50% floor), which was issuance at 98.8. J.P. Morgan was left lead on the deal, which priced in line with talk and upsized by $100 million. Proceeds repay RC borrowings, fund acquisitions and place cash on the balance sheet. Nasdaq-listed Baldwin Risk Partners is an insurance distribution platform offering commercial and personal insurance products. Blackstone Private Credit Fund holds $6.7M in principal amount of the existing 1L debt.

PTMN, BCRED, OCSL, OXSQ, Steele Creek, Palmer Square: ConvergeOne (B3/B-) — M&A

Deutsche Bank launched a $150 million incremental term loan for ConvergeOne backing current and future M&A. Terms mirror those of the existing term loan due January 2026 (L+500, 0% floor), and the new money was offered at 97.75-98. Commitments were due at 3 p.m. ET Friday, Dec. 10. CVC acquired the business in 2019 backed by a $960 million first-lien term loan (L+500, 0% floor) that was issued at 96 and a $275 million second-lien tranche (L+850, 0% floor) that priced at 94. Deutsche Bank is administrative agent the first-lien loan and UBS is agent on the second-lien term loan. Holders of the existing 1L debt include Portman Ridge Finance Corp. holds $2.2M in principal amount, Blackstone Private Credit Fund with $31.8M, Oaktree Specialty Lending Corp. with $7M, Oxford Square Capital Corp. with $5.4M, Steele Creek Capital Corp. with $1.5M and Palmer Square Capital BDC with $6M. Oxford Square also holds $15M of the 2L debt.

BCRED, NMFC, FCRD, Audax: DiversiTech (B3/B-) — LBO

An RBC Capital Markets-led arranger group accelerated the deadline on DiversiTech’s first- and second-lien loan deal to 5 p.m. ET Tuesday, Dec. 14, from Thursday Dec. 16. Proceeds back Partners Group’s acquisition of a majority stake in the company from Permira. As before, the first-lien term loan strip is talked at L+375-400 with a 0.50% floor, offered at 99-99.5. Talk on the second-lien is L+650-675 with a 0.50% floor and a 99 OID. The deal will include a $100 million revolver, a $725 million seven-year funded first-lien term loan, a $150 million delayed-draw first-lien term loan and a $240 million eight-year second-lien term loan. The $1.32 billion of equity comprises 58% of capitalization. Holders of the company’s 1L debt due December 2024 (L+325, 1% floor) include Audax Credit BDC with $1.4M in principal amount and Blackstone Private Credit Fund with $7.9M. Holders of the 2L debt due June 2025 (L+750, 1% floor) include Audax Credit BDC with $500K, New Mountain Finance Corp. with a combined $19.5M and First Eagle Logan JV LLC with $2M.

BCRED, BKCC, TCPC, Stone Point: Ensono (B3/B-) — M&A

Left lead KKR Capital Markets set a 99-99.5 offer range on the $75 million fungible add-on TLB for Ensono that will back acquisitions. KKR earlier this year acquired Ensono from Charlesbank Capital Partners and M/C Partners backed by a $748 million first-lien term loan due 2028 (L+400, 0.75% floor) and a privately placed $250 million second-lien term loan due 2029 (L+800). Morgan Stanley was left lead and administrative agent on the deal, which priced within guidance and was upsized by $25 million to reduce the equity check. Commitments on the add-on loan are due at 5 p.m. ET Wednesday, Dec. 15. Blackstone Private Credit Fund holds $34.3M in principal amount of the existing 1L debt. Holders of the existing 2L debt include Stone Point Capital Credit with $11.3M, BlackRock Capital Investment Corp. with $5M, BlackRock Direct Lending Corp. with $3M and BlackRock TCP Capital Corp. with $15M.

PNNT: Fairbanks Morse Defense (B3/B) — Refinancing, M&A

Jefferies launched $280 million of fungible first- and second-lien add-on term loans for Fairbanks Morse Defense, proceeds of which would be used to fund an acquisition and repay borrowings against its ABL revolver. The transaction is split between a $240 million add-on to its first-lien term loan due June 2028 (L+475, 0.75% floor) and a $40 million tack-on to its second-lien term loan due June 2029 (L+825, 0.75% floor). The first-lien is talked at 99-99.5 and the second-lien at 98.5-99. PennantPark Investment Corp. holds $3.5M of the existing 1L debt.

BCRED: Kodiak Building Partners (B1/B-) — Dividend

Investors received allocations of Kodiak Building Partners’ $210 million add-on term loan (L+325, 0.75% floor), which was issued at 98.56. RBC Capital Markets was left lead on the deal, which funds a dividend. Court Square Capital-backed Kodiak Building Partners is a national building products distribution platform, offering a comprehensive portfolio of building products and materials, as well as value-added fabrication and assembly services. Blackstone Private Credit Fund holds $7.4M in principal amount of the existing 1L debt. 

BKCC, TCPC, Palmer Square: MetroNet (B3/B-) — Refinancing

Accounts received allocations of the $125 million add-on term loan for MetroNet (L+375, 0.75% floor), which was issued at 99.75. Goldman Sachs was left lead on the deal, which priced at the tight end of talk. Proceeds will be used to repay revolver borrowings. MetroNet, which is controlled by Oak Hill and KKR, is a provider of high-speed broadband, video and voice services over a fiber-to-the-premises network, serving residential and commercial customers throughout the Midwest. Palmer Square Capital BDC holds $5M of the existing 1L debt. Holders of the company’s 2L debt due June 2029 (L+700, 0.75% floor) include BlackRock Direct Lending Corp. with a combined $1.7M, BlackRock Capital Investment Corp. with $4.3M and BlackRock TCP Capital Corp. with $12.3M.

Audax: Mister Car Wash (B2/B) — M&A

Jefferies last night launched a $290 million add-on term loan for Mister Car Wash, proceeds of which would be used to fund the company’s acquisition of Clean Streak Ventures. The arrangers are circulating price talk of 99.01-99.25. The incremental debt would be fungible with the borrower’s existing term loan due May 2026, which is priced at L+300 with a 0% floor and a step up to L+325 at 4.25x net first-lien leverage. Commitments are due by 2 p.m. ET Tuesday, Dec. 14. Audax Credit BDC holds $1.5M in principal amount of the existing 1L debt.

BCRED, Palmer Square: National Mentor (B3/B) — M&A

Goldman Sachs set a 98.56 offer price on the $200 million add-on first-lien term loan for Sevita, the former National Mentor/Civitas, which funds the issuer’s acquisition pipeline. The loan will be fungible with Sevita’s first-lien term loan due March 2028 (L+375, 0.75% floor) with 101 soft call protection reset for six months. Commitments are due at noon ET Wednesday, Dec. 15. Separately, Madison Dearborn Partners is acquiring a 25% stake in Sevita, joining Centerbridge and Vistria Reinvestment, having previously controlled the company from 2001 to 2006, S&P noted. Centerbridge is rolling its interest into a new continuation fund. Holders of the existing 1L debt include Blackstone Private Credit Fund with $21.9M in principal amount and Palmer Square Capital BDC holds a combined $6.2M

BCRED, ARCC, BDVC, NMFC, ORCC, Palmer Square, Franklin BSP: RealPage (B3/B) — M&A

Ahead of today’s 5 p.m. ET commitment deadline, UBS, Credit Suisse and Goldman Sachs this morning tightened the OID on the $260 million add-on term loan for RealPage to 99.375 from original guidance of 99. The incremental debt would be fungible with the borrower’s covenant-lite term loan due April 2028, which is priced at L+325 with a 0.50% floor and a step to L+300 at 4.6x net first-lien leverage. Proceeds would support its acquisition of HomeWiseDocs. Holders of the existing 1L debt include Palmer Square Capital BDC with $5M in principal amount, Blackstone Private Credit Fund with $3.9M and NMFC Senior Loan Program IV LLC with $5M. Holders of the company’s 2L debt due April 2029 (L+650, 0.75% floor) include Ares Capital Corp. with $84.1M in principal amount, Business Development Corp. of America with $13.5M, Franklin BSP Capital with $5.4M, New Mountain Finance Corp. with $25M, New Mountain Guardian III BDC with $19.3M, NMF SLF I Inc. with $14.3M, Owl Rock Capital Corp. with $34.5M, Owl Rock Capital Corp. II with $6.5M, Owl Rock Capital Corp. III with $6.5M, Owl Rock Core Income Corp. with $2.5M and Owl Rock Technology Finance Corp. with $52.5M.

NMFC: Tosca Services (B2/B) — Refinancing

A Credit Suisse-led arranger group accelerated the deadline on Tosca Services’ $75 million add-on term loan to noon ET today from 5 p.m. on Tuesday, Dec. 14. The add-on, offered at 99, would be fungible with the borrower’s existing loan due August 2027 (L+350, 0.75% floor). Proceeds will repay the outstanding amount under the company’s asset-based revolver. The issuer is offering to reset the 101 soft call protection for six months. New Mountain Finance Corp. holds $3M in principal amount of the existing 1L debt.

Audax: AIT Worldwide Logistics (B3/B) — Refinancing

A Barclays-led arranger group accelerated the commitment deadline for WCG Clinical’s $200 million add-on first-lien term loan by two days to 5 p.m. ET today. There was no change to price talk of 99-99.5. The facility will be fungible with the borrower’s existing term loan due January 2027, which is priced at L+400 with a 1% floor. Proceeds will be used to repay outstanding revolver borrowings and fund cash to the balance sheet. WCG last tapped the loan market in June with a $200 million add-on term loan to fund an acquisition. Barclays is administrative agent. Audax Credit BDC holds $988K in principal amount of the existing 1L debt.

OFS: Yahoo (B2/B/BB-) — GCP

Accounts received allocations of the $300 million add-on term loan transaction for Yahoo (L+550, 0.75% floor), which was issued at 99.5. RBC Capital Markets was left lead on the two-part financing, which priced at the tight end of talk. Proceeds will go to the WholeCo balance sheet to support general corporate purposes. The issuer formerly known as Verizon Media comprises technology and media brands including Yahoo and AOL. Apollo Global Management acquired the company for $5 billion in September; Verizon retained a 10% stake in the business. OFS Capital Corp. holds $2.5M in principal amount of the existing 1L debt.

Download LFI BDC Portfolio News 12-13-21 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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