LevFin Insights BDC Portfolio News 2/22/22Posted on February 23, 2022
Teneo seeks add-on, SOFR shift for existing TL; several vehicles list the credit among holdings
Activity in the new-issue loan market slowed last week, with investors striking a more cautious tone amid a rocky Monday session to start last week and bonds becalmed with a combination of outflows, equity volatility, uncertainty on the global stage and quarterly reporting.
New loan activity trailed off, reaching only $7.1 billion for the week across 11 transactions, and $5 billion on a net basis. With market conditions judged to be unwelcoming, opportunistic activity eased to $2.2 billion, while issuers that needed funds for M&A pushed ahead to the tune of $4.9 billion. Although M&A accounted for much of last week’s paltry launched volume, there’s a near-universal acknowledgement among sellsiders of the pending air pocket for new M&A-related launches stemming from a late-2021 slowdown in deal formulation that’s also evident in the lack of a large volume of new acquisition and buyout announcements.
Also notable in last week’s mix of launch activity was the absence of repricing activity given the shakier market despite solid technical underpinnings.
Portfolios in brief: Holds reflect most recent reporting period available
SIRR: Callaway Golf (B1/B+) – Refi, GCP
A BofA Securities-led arranger group set price talk of S+325 with a 0.50% floor and a 99-99.5 OID on the $950 million covenant-lite term loan B for Callaway Golf Co. The loan would include a CSA of 10/15/25 bps for one-month, three-month and six-month SOFR. The seven-year loan would include six months of 101 soft call protection. Commitments are due by noon ET on Friday, Feb. 25. Proceeds would be used to refinance the $784 million outstanding under the existing term loans issued at Callaway Golf and TopGolf and revolver borrowings, as well as place cash on the balance sheet for general corporate purposes. Pro forma leverage would run 3.7x through the secured debt and 4.3x on a total basis, according to a lender presentation filed with the SEC. Net leverage would run 3.1x. Callaway’s existing term loan due January 2026 (L+450, 0% floor) was syndicated in late 2018 to fund the company’s acquisition of Jack Wolfskin. Sierra Senior Loan Strategy JV I holds $1.5M of the existing loan.
BC Partners, OFS, Guggenheim, PFLT, FCRD: Teneo (B2/B) – Refi, M&A
Goldman Sachs set price talk of S+525 with a 1% floor and a 98.5-99 on the $80 million add-on first-lien term loan for Teneo. The incremental debt, which will be used to repay revolver borrowings and fund future M&A, will be fungible with the borrower’s existing term loan due July 2025, which is being migrated over to SOFR-based pricing via a negative consent amendment. The existing first-lien loan is currently priced at L+525, with the same 1% floor. The loan would include a CSA of 10 bps/15 bps/25 bps for one-month, three-month and six-month SOFR, respectively. Also as part of the transaction, the issuer is refreshing the incremental debt capacity under its free-and-clear basket. Commitments are due by noon ET tomorrow, Feb. 23. Holders of the existing first-lien debt include BC Partners Lending Corp. ($2M), OFS Capital ($1.4M), Guggenheim Credit Income Fund ($1.7M), PennantPark Floating Rate Capital ($5.9M) and First Eagle Logan JV ($3.2M).
Audax: Ashfield + Huntsworth/UDG Healthcare (B2/B) –M&A, GCP
A J.P. Morgan-led arranger group launched a $200 million add-on to Ashfield + Huntsworth’s U.S. dollar term loan due 2028 that will back its acquisition of Research Partnership, satisfy tax liabilities and fund general corporate purposes for the issuer, formerly UDG Healthcare. The loan would be fungible with the issuer’s $1.011 billion term loan due 2028 (L+425, 0.5% floor) and is offered at 99-99.5. The loan’s 101 soft call protection expires in August. Arrangers on the transaction include agent J.P. Morgan, NatWest, ING, Bank of Ireland, Barclays, Jefferies and RBC Capital Markets. Commitments are due at 5 p.m. ET today. Proceeds of the dollar loan, along with a €690 million first-lien term loan (E+400, 0% floor) and a £330 million preplaced eight-year second-lien loan backed Clayton Dubilier & Rice’s acquisition last year of UDG and merger with its Huntsworth and Ashfield portfolio companies, leveraging the combined business at 5.7x first-lien and 6.7x total. Audax Credit BDC Holds $1M of the existing first-lien debt.
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