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LevFin Insights BDC Portfolio News 2-10-20

Posted on February 11, 2020

Market hit by crush of loan launches; several FSK-related entities see activity in holdings

In what was yet another downright frenetic week for leveraged loans, the market remained wide open for well-rated and well-regarded borrowers to ink aggressive terms, but the recent burst of allocations and the less frothy secondary levels have provided accounts with leverage to continue to be discerning regarding off-spec and lower-rated transactions.

The recent coronavirus-related volatility aside, the technical landscape has become at least somewhat better balanced, thanks to flurry of jumbo allocations over the past couple of weeks. As reported, the $12.55 billion of net priced volume for the week ended Jan. 31 was the highest total since the week ended Sept. 21, 2018. With jumbo deals such as Arconic Rolled Products ($600 million), Cineworld ($1.932 billion), Elanco Animal Health ($4.235 billion), EyeCare Partners ($925 million) and Gardner Denver ($1.9 billion) among those breaking or expected to break secondary last week, the week’s net tally was close, at $11.73 billion. The combined approximately $24.3 billion of net new money breaking over the past two weeks is roughly in line with the $24.2 billion over the prior 11 weeks combined, according to LFI.

These stats help explain the better balance the secondary loan market has seen over the past several sessions, even if the flex ratio in the primary market remains extremely issuer-friendly: the 22 reverse flexes recorded last week were the most LFI has recorded in a single week since opening its doors in 2016; only two issuers flexed pricing higher.

The surge of allocations has depleted LFI’s net net calendar to a paltry $8 billion, although in the more immediate term, there are other large transactions in market, most notably Zayo Group’s cross-border execution, which represents nearly $2.5 billion of new money as currently structured. Also, TIBCO Software and LifePoint Health are contributing to the new-money tally courtesy of deals at least in part to repay bonds, and also note the loan market’s net issuance has benefited from a string of issuers eliminating “other secured debt” from the capital structure such as Acrisure, Cobham and Elanco Animal Health.

Portfolios in brief: Holds reflect most recent reporting period available

Guggenheim: 24-7 Intouch (B3/B) — add-on

Investors received allocations of a $75 million fungible add-on first-lien term loan for 24-7 Intouch (L+475, 0% floor), which was issued at 96.5. RBC Capital Markets was left lead on the deal, which stepped up pricing on the existing tranche due August 2025 from L+425. The deal refreshed 101 soft call protection for six months. Joint bookrunners included Credit Suisse and TD Securities. The existing first-lien term loan dates to an August 2018 issuance of $245 million, which was put in place alongside a privately arranged $80 million second-lien term loan and a $45 million revolver. Guggenheim Credit Income Fund holds $4M in principal amount of the existing 1L debt.

ICMB, CION: ACProducts (B2/B) — M&A, refi

KKR Capital Markets set talk of L+650 with a 99-99.5 OID on ACProducts‘ term loan B. KCM was sole lead arranger and sole bookrunner on a $1.075 billion term loan due 2025 supporting the American Industrial Partners-backed cabinet maker in its acquisition of Masco Cabinetry. In addition to the term loan, the transaction also includes a $200 million asset-backed revolving credit facility. ACProducts’ existing first- and second-lien term loans will be repaid as part of the transaction. The issuer last year put in place a $400 million first-lien term loan due 2024 (L+550) along with a privately placed a $103 million, 5.5-year second-lien term loan. Holders of the existing 1L debt include Investcorp Credit Management BDC with $9.9M in principal amount and CION Investment Corp. with $4.9M.

AINV, SUNS, ARCC: Alera Group (B3/B) — repricing

J.P. Morgan and BMO Capital Markets launched a repricing of Alera Group‘s $697 million term loan due August 2025, setting talk of L+400 with a 0% floor at par. The issuer is offering six months of 101 soft call protection on the transaction, which would lower pricing from L+450. Commitments were due at noon ET Friday, Feb. 7. Holders of the existing 1L debt include Apollo Investment Corp. with $3M in principal amount and Solar Senior Capital with $5M. Ares Capital holds 2L debt due March 2026 (L+850) valued at a total of $49.2M.

FSK: CEPSA (S&P/F: BB-/BB) — add-on, recap

An HSBC-led arranger group revised price talk to an OID range of 99.75-100 from OID 99.5 on Compañia Española de Petróleos’ (CEPSA) $200 million add on to its October 2026 (L+475, 0% floor) term loan. Commitments are still due by 5 p.m. ET Monday, Feb. 10. Proceeds will be used to fund a portion of the deferred purchase price to Mubadala. The company issued the existing 2026 term loan to back Carlyle Group’s €2.3 billion acquisition of a 35% stake in the Spanish energy company from Mubadala, which continues to own a stake in the business. Leverage will stand at 3.8x, down from 3.9x when the company issued the TLB in June. Terms on the add-on mirror those of the existing term loan due October 2026. Holders of the existing 1L debt include FS KKR Capital Corp. with $2M in principal amount, FS Investment Corp. II with $1.9M, FS Investment Corp. III with $2.2M, FS Investment Corp. IV with $547,000 and Corporate Capital Trust II with $270,000.

NMFC, OXSQ, PTMN: First American Payment Systems (B2/B) — refi

J.P. Morgan set a deadline at 5 p.m. ET on Tuesday, Feb. 18, for the $275 million term loan B for First American Payment Systems. Proceeds will refinance the remaining $189 million outstanding under the issuer’s first-lien term loan due January 2024 along an $80 million second-lien term loan due July 2024 (L+1,050). The new term loan due February 2027 is talked at L+475-500 with a 99 OID and would include six months of 101 soft call protection. The issuer last tapped the market via SunTrust Robinson Humphrey with a repricing of its then-$215 million first-lien term loan to L+475 with a 1% floor, from L+575. New Mountain Finance holds $3.1M in principal amount of the company’s existing 1L debt. Holders of the existing 2L debt include Oxford Square Capital Corp. with $1.5M in principal amount and Portman Ridge Finance Corp. with $1.5M.

Audax, NMFC, PTMN: Idera (B3/B-) — repricing

Jefferies launched a repricing of Idera’s approximately $770 million covenant-lite first-lien term loan due June 2024, seeking to cut the margin to L+400-425, from L+450 currently. The issuer is offering to reset the 101 soft call protection for six months. Commitments are due by noon ET Thursday, Feb. 13. The issuer last tapped the market in August for a $40 million add-on to fund a strategic acquisition along with balance sheet cash. The 101 soft call protection rolled off the existing loan in December. The capital structure also includes a $205 million privately placed second-lien term loan. Audax Credit BDC holds $2.2M of the existing 1L debt. Holders of the 2L debt due June 2027 (L+900) include New Mountain Finance with a total of $32M and Portman Ridge Finance Corp. with $7.5M.

OCSI: Informatica (B2/B-) — refi, GCP

Sole arranger Normura has set price talk on Informatica’s cross-border first- and second-lien loan transactions with its seven-year $1.725 billion U.S. dollar term loan B and $525 million equivalent euro-denominated term loan B offered at L/E+350, with a 0% floor at an OID of 99.5. The five-year $475 million second-lien term loan is set at a fixed rate of 7.5%, with a 99 OID. This return to the market also includes a $150 million revolving credit facility due April 2024, talked at L+325, with a step-down to L+300 if first lien leverage is less or equal to 4.5x. Commitments are due at noon ET Wednesday, Feb. 19. The issuer last tapped the market in April 2019 for a $125 million add-on first-lien term loan that was used along with cash on hand to fund a $388 million dividend to sponsors Permira and CPPIB. The add-on was fungible with the issuer’s existing dollar-denominated term loan due August 2022, which is priced at L+325, with a step to L+300 that would be achieved at B2/B corporate ratings. Oaktree Strategic Income II Inc. holds $4M in principal amount of the existing 1L debt.

FSK: LifePoint Hospitals (B2/B) — refi

A Citi-led arranger group this afternoon launched a $600 million add-on term loan for LifePoint Health, proceeds of which would help redeem the issuer’s $800 million of 8.25% senior secured notes due 2023 and $350 million of 11.5% notes due 2024. The incremental debt is talked at 99.5–99.75 and would be fungible with the borrower’s recently repriced term loan due November 2025, which is priced at L+375, with a 0% floor. The loan includes 101 soft call protection that rolls off in July. Commitments are due by 5 p.m. ET today. LifePoint last month completed a repricing of its $3.515 billion term loan, lowering the margin from L+450. In connection with the repricing, the issuer was slated to repay $400 million of the tranche, reducing outstandings to $3.115 billion. The repricing was issued at par but note the paper was recently quoted at 100.5–101. 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 $9.8M, FS Investment Corp. III with $11.2M, FS Investment Corp. IV with $2.9M and Corporate Capital Trust II with $926,000.

GSO: RCN Grande/Radiate Holdco (B2/B) — repricing

Investors received allocations of RCN Grande/Radiate Holdco’s repriced $299 million term loan (L+300), which was issued at par. J.P Morgan arranged the transaction, which priced in line with talk. The repricing lowered the margin from L+350 and created a single fungible tranche. The company had backed away from a prior plan to reprice the incremental loan and $2.782 billion term loan B to L+275. Blackstone/GSO Secured Lending Fund is an existing holder of the 1L debt with $5M in principal amount.

OCSI, BDVC, NMFC: TIBCO Software (B3/B-/B) — refi

J.P. Morgan launched a $360 million add-on first-lien term loan and a new $650 million eight-year second-lien term loan for TIBCO Software, proceeds of which would be used to refinance the issuer’s $950 million of 11.375% notes due 2021 and pay breakage costs. The add-on to the issuer’s existing first-lien term loan due June 2026 (L+400) is talked at 99.5; the issuer is offering to reset the 101 soft call protection for six months. Guidance on the second-lien is L+775, with a 0% floor, offered at 98.5-99. Commitments are due by 5 p.m. ET Thursday, Feb. 13. Holders of the existing 1L debt include Oaktree Strategic Income Corp. with $8M in principal amount, Oaktree Strategic Income II Inc. with $5M and Business Development Corp. of America with $9.5M. New Mountain Finance holds $15M in principal amount of the company’s 11.375% senior notes due December 2021.

GLAD, GSO, GSBD, TCPC: Zoominfo (B3/B-) — repricing

Morgan Stanley set talk of L+400 with a 0% floor at par on the proposed repricing of Zoominfo‘s $858.5 million first-lien term loan due February 2026. The loan would include a step to L+375 on consummation of a qualified IPO and lenders are offered six months of 101 soft call protection. Commitments are due at noon ET Wednesday, Feb. 12. The company, formerly known as DiscoverOrg, issued the loan due 2026 (L+450) in January 2019, raising $865 million to back the acquisition of Zebra, a market data and sales services software provider. Morgan Stanley is administrative agent. Holders of the existing 1L debt include Gladstone Capital Corp. with $3.3M in principal amount, Blackstone/GSO Secured Lending Fund with $21.5M, Goldman Sachs BDC with $16.1M, Goldman Sachs Middle Market Lending Corp. with $23.6M and Goldman Sachs Private Middle Market Credit Corp. with $25M. Holders of the company’s 2L debt due February 2027 (L+850) include BlackRock TCP Capital Corp. with $15M in principal amount, Blackstone/GSO Secured Lending Fund with $11.3M, Goldman Sachs BDC with $10M, Goldman Sachs Middle Market Lending Corp. with $14.6M and Goldman Sachs Private Middle Market Credit Corp. with $15.4M.

Download LFI BDC Portfolio News 2-10-20 for BDC investment details provided by Advantage Data; click through links to view stories by LFI.

– Thomas Dunford

thomas.dunford@levfininsights.com

212.205.8552

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