LevFin Insights BDC Portfolio News 12-16-19Posted on December 16, 2019
Market heads toward strong close for year; BBDC to lose some yield in repricing of Calpine’s TLB-5
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In a stark contrast to the closing weeks of 2018, both loans and bonds are poised to close out the year on strong footing. With the loan calendar ebbing and a looming holiday from allocations, investors have bid up credits in the secondary and flooded the remaining new issues, notably Cox Media’s LBO loan last week, with a flurry of orders. And December’s busy high-yield market is the polar opposite of last year, when there was no issuance at all for the first time in a decade, not to mention last week’s big gains in heavily oversubscribed new issues and a steady grind higher for the broad secondary space to just over 13% total return in the year to date.
Although arrangers have kept accounts busy with opportunistic transactions, December is poised to yield little by way of new money for the market. Even with sizable new-money deals for Cox Media, Chesapeake Energy and WIRB-Copernicus allocating last week — and only a handful of new-money deals still left in market to price before year-end — December’s net priced volume stood at $9.23 billion as of Friday’s close, putting December on track to be lowest monthly total since last January.
In turn, accounts are chasing paper into year-end, driving up the average bid price of the Credit Suisse Leveraged Loan Index 41 bps over the five days ended Dec. 12, for an impressive month-to-date return of 0.89%. Single-B and triple-C loans are leading the market higher, with 100 bps and 121 bps increases in their average bid prices month to date, respectively, versus 70 bps for the broader CS Index.
Loan issuers continued to press the advantage of an improved market, rolling out $11.4 billion across 10 transactions in what was likely the last gasp of 2019 deal flow. Tellingly, $10.6 billion of these launches were repricings and net new money volume registered an anemic $600 million. Firm market conditions generated eight reverse flexes — largely comprising trimmed OIDs — while the only deal moving wider was already been telegraphed at revised levels for several weeks.
BBDC, FSK: Applied Systems (Caa2/CCC) — incremental, repayment
Investors received allocations of Applied Systems’ $150 million add-on first-lien term loan (L+325), which was issued at 99.25. The issuer also allocated a $60 million add-on to its second-lien term loan (L+700), which was issued at 99.75. Nomura was left lead on the loans, both of which price tight to talk. Proceeds back the $210 million acquisition of Indio, a provider of solutions for the insurance application renewal process. Applied Systems is a global cloud software provider to the property & casualty and benefits insurance industry. Barings BDC holds $9.2M in principal amount of the company’s existing 1L debt. FS KKR Capital’s Corporate Capital Trust II holds $2.6M of the existing 2L debt.
BBDC: Calpine Corp. (Ba3/B+/B+) — repricing
Investors received allocations of Calpine Corp.’s repriced $947.625 million term loan B-9 (L+225), which was issued at par. Credit Suisse arranged the deal, which priced at the tight end of talk. Via the transaction, Calpine is lowering the margin on the covenant-lite loan due April 2026 from L+275. A Credit Suisse-led arranger group subsequently launched a repricing of Calpine’s $1.532 billion B-5 term loan due January 2024, setting price talk of L+225, with a 0% floor and a par offer price, according to sources. The current margin is L+250. Commitments are due by 5 p.m. ET today. The issuer is offering to reset the 101 soft call protection for six months. Barings BDC holds $4.5M in principal amount of the term loan B-5 debt due January 2024.
Audax: GlobalLogic (B2/B+) — add-on, refi
Investors have received allocations of GlobalLogic’s $40 million add-on term loan (L+325), which was issued at par. J.P. Morgan was left lead on the deal, which priced in line with talk. Proceeds of the drive-by add-on repay revolver outstandings that funded a recent acquisition. Audax Credit BDC holds $1.7M in principal amount of the 1L debt due August 2025.
BBDC: NFP Corp. (B3/B) — add-on, M&A
Investors received allocations of NFP Corp.’s $175 million add-on term loan (L+300), which was issued at 99.25. BofA Securities was left lead on the deal, which priced tight to talk. Proceeds back acquisitions. The insurance broker is controlled by Madison Dearborn. Barings BDC holds $8.6M in principal amount of the 1L debt due January 2024.
BDVC, OFS: Refinitiv (B3/B/BB) — repricing
BofA Securities launched a repricing of Refinitiv’s $6.451 billion term loan due October 2025, setting price talk of L+325-350, with no floor and a par offer price. The issuer is offering to reset the 101 soft call protection for six months. Commitments are due by noon ET Tuesday, Dec. 17. The current margin is L+375. The yield-to-call credit was quoted at 101–101.25 prior to yesterday’s announcement of a lender call. As reported, the issuer’s debt is poised to be repaid in connection with the London Stock Exchange Group’s planned acquisition of the company. The deal, announced in August, won LSEG shareholder approval in late November, although closing isn’t expected until the latter half of 2020. Holders of the company’s 1L debt due October 2025 (L+375) include Business Development Corp. of America with $2.9M in principal amount and OFS Capital with $2M.
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