LevFin Insights BDC Portfolio News 2/24/2020Posted on February 26, 2020
Amid M&A slowdown, focus narrows to opportunistic activity; repricings include Cast & Crew, Verra Mobility
New-issue loan and bond activity slowed as expected during the holiday-abbreviated week from the recent breakneck pace, particularly with arrangers having recently clearing out a good portion of the underwritten M&A calendar. Attention in loans and bonds was concentrated on opportunistic business. A pair of industry conferences this week are likely to put a damper on new-issue activity, though earnings will remain a focus with another string of leveraged credits due to report in the coming days.
Last week’s launched loan volume of $15 billion from 15 issuers is somewhat misleading; repricing activity accounts for $9.7 billion of that sum, more than half of it from a single issuer, Bausch Health Companies.
The technical landscape suggests more opportunistic business could be in the cards. Veeam Software ($1.25 billion) and Zayo Group, which represents approximately $3 billion of net new money pro forma for the repayment of the company’s existing loans, accounted for the vast majority of the week’s expected $4.5 billion of net priced volume, a notable drop-off from the prior three weeks, which averaged nearly $10.8 billion.
In addition to the slowdown of new-money issuance that has helped bolster cash balances, NVA Holdings last week repaid its roughly $1.65 billion institutional loan, which has long been in the repayments pipeline following last year’s announcement that JAB agreed to acquire the business from Ares Management.
What’s more, there’s little by way of new money left in market following the recent slew of large M&A/LBO deals. The largest new-money deal in market is PPD’s refinancing effort, which entails the refinancing of approximately $1 billion of bonds in addition to its roughly $3.1 billion term loan. LFI’s “net net” calendar, which strips out all pending repayments from visible supply, contracted to a mere $4.5 billion, down from $22 billion at the beginning of January and its lowest level in over two months.
Portfolios in brief: Holds reflect most recent reporting period available
PNNT, SUNS, BCSF, FSK: Advantage Sales & Marketing (B3/B-) — refi
BofA Securities outlined talk of L/E+475 with a 99 offer price on Advantage Sales & Marketing’s cross-border refinancing. Investors are offered six months of 101 soft call protection. Commitments will be due at noon ET Thursday, Feb. 27. As noted earlier, the $1.825 billion six-year cross-border deal will address its upcoming maturities and is set to include a $1.525 billion U.S. dollar term loan B and a $300 million-equivalent euro term loan. The issuer is facing a July 23, 2021, maturity on $2.5 billion first-lien term debt amid industry headwinds that have spurred debt restructurings at Acosta Sales & Marketing, Catalina Marketing and Crossmark. BofA also stepped forward with secured and unsecured notes as part of the issuer’s loan and bond refinancing of its first- and second-lien term loans. The issuer is shopping $345 million of 6.5-year (non-call three) secured notes and $800 million of seven-year (non-call three) unsecured notes. Both series include an equity clawback for up to 40% of issue during the non-call period. The notes will be 144-A for life. Holders of the company’s existing 1L debt due July 2021 (L+325) include PennantPark Investment with $10.6M in principal amount, PennantPark Floating Rate Capital with $11.3M, Solar Senior Capital with $4.9M, Bain Capital Specialty Finance with $11.6M, FS KKR Capital Corp. with $16.9M, FS Investment Corp. II with $15.3M, FS Investment Corp. III with $16.7M, and Corporate Capital Trust II with $2.8M. Holders of the 2L debt due July 2022 (L+650) include Solar Senior Capital with $8M, FS KKR Capital Corp. with $3.9M, FS Investment Corp. II with $2.3M, FS Investment Corp. III with $4.4M and Corporate Capital Trust II with $542,000.
OHAI: Aptean (B3/B-) — M&A
Investors received allocations of Aptean’s $100 million add-on term loan (L+425), which was issued at par. Golub Capital arranged the financing, which priced at the tight end of talk following an upsize from $75 million. Proceeds will be used to fund an acquisition and to put cash on the company’s balance sheet. Aptean, an Atlanta-based provider of industry-specific software applications, is controlled by TA Associates and Vista Equity Partners. OHA Investment Corp. holds $1.4M in principal amount of the company’s 2L debt due April 2027 (L+850).
TCW: AVI-SPL (B2/B) — M&A
An arranger group led by BofA Securities set talk of L+475 with a 1% floor and a 99 offer price on the $370 million term loan B for AVI-SPL. The seven-year term loan would include six months of 101 soft call protection. Commitments are due by noon ET Friday, Feb. 28. The deal backs the merger of H.I.G Capital-backed AVI-SPL and Marlin Equity-controlled Whitlock. The merged company, which will retain the AVI-SPL name, will have Marlin Equity Partners as majority owner and H.I.G Capital holding a minority stake. The issuer, technically, is A&V MidCo. TCW Direct Lending VII holds $29.3M in principal amount of the company’s existing 1L debt due April 2021 (L+587.5).
BBDC: Bausch Health Cos. (B3/B+/B) — refi
Barclays and Citi set talk of L+225 with a 0% floor and a 99.5-99.75 offer price on the $5.144 billion seven-year B term loan for Bausch Health Companies. Investors are offered six months of 101 soft call protection. The deadline for existing investors, including cashless rolls, is noon ET Tuesday, Feb. 25, while new lender commitments are due at noon ET Thursday, Feb. 27. The TLB is part of a broader refinancing effort for the pharmaceutical concern targeting both its $3.869 billion term loan due June 2025 and $1.275 billion term loan due November 2025 as well as $1.25 billion of 6.5% secured notes due 2022 and $2 billion of 7% secured notes due 2024. The call protection on the former steps down to 101.625 next month, from 103.25 currently. The issuer is also seeking to put in place $3.25 billion of secured debt securities, according to a company statement. Barings BDC holds $4.7M in principal amount of the company’s existing 1L debt due May 2025 (L+300).
OCSI, Audax: Cast & Crew (B3/B) — repricing, M&A
Cast & Crew‘s upsized and repriced $934 million first-lien term loan (L+375) was issued at par. Goldman Sachs was left lead on the deal, which entails a $175 million add-on to fund the acquisition of Media Services and a repricing of its existing $759 million term loan from L+400. The add-on cleared tight to talk with a $50 million upsize and the repricing printed in line with guidance. EQT-controlled Cast & Crew provides payroll services to the media industry. Holders of the existing 1L debt include Oaktree Strategic Income Corp. with $4.9M in principal amount, Oaktree Strategic Income II Inc. with $4M and Barings BDC with $2.5M.
BBDC, GECC: Duff & Phelps (B3/B) — LBO
A Goldman Sachs-led group launched the cross-border financing for the $4.2 billion purchase of Duff & Phelps by an investor consortium helmed by Stone Point Capital and Further Global, setting a lender meeting at 9 a.m. ET Tuesday, Feb. 25. The financing includes a $200 million revolver and $1.55 billion of cross-border institutional term debt including a €300 million tranche. There’s another $450 million in unsecured debt. The arranger group includes GS, UBS, BofA Securities, Morgan Stanley, Stone Point Capital, KKR Capital Markets, CapitalOne and Credit Suisse. Barings BDC holds $13.2M in principal amount of the company’s existing 1L debt due February 2025 (L+325), while Great Elm Capital holds $335,000 of funded revolver debt and $4.7M of unfunded revolver debt.
ARCC, FLEX, PSEC, Audax, OXSQ, NMFC, OCSI: HelpSystems (B3/B) — add-on, M&A
Accounts received allocations of HelpSystems‘ $60 million add-on term loan (L+475), which was issued at 99.75. The loan, which priced at the tight end of talk, is fungible with the existing first-lien term loan due November 2026. Proceeds are being used to support an acquisition. HelpSystems is a provider of IT operations management and monitoring, cybersecurity and business intelligence software. Holders of the existing 1L debt include Ares Capital with $26.2M in principal amount, TP Flexible Income Fund with $1.5M and Prospect Capital with $8.5M. Prospect Capital holds $17.5M in principal amount of 2L debt due November 2027 (L+800).
OCSI, BBDC, FSK: HUB International (B3/B) — add-on, GCP
HUB International privately placed a $150 million fungible add-on to its L+300 covenant-lite term loan due April 2025 via administrative agent Morgan Stanley. Proceeds will be available for general corporate purposes, including potential future acquisitions. The Hellman & Friedman-controlled insurance broker last tapped the syndicated loan market in October for a $1.27 billion B-2 term loan due April 2025 (L+400), proceeds of which were used to refinance revolver borrowings, support acquisitions under letters of intent and fund a $650 million shareholder distribution. Holders of the existing 1L debt include Oaktree Strategic Income II with $4M in principal amount and Barings BDC with $10.3M. Holders of the company’s 7% notes due May 2026 include FS KKR Capital Corp. with $3.7M in principal amount, FS Investment Corp. II with $3.5M, FS Investment Corp. III with $4M, FS Investment Corp. IV with $1M and Corporate Capital Trust II with $359,000.
BDVC: Kissner Milling (B3/B) — LBO
A Morgan Stanley-led arranger group set talk of L+450 with a 0% floor and a 99-99.5 offer range on the $900 million first-lien term loan backing Stone Canyon Industries’ acquisition of Kissner Group Holdings, a pure-play producer and supplier of salt in North America. Note the seven-year term loan includes two 25 bps step-downs at 0.5x and 1x inside closing date net first-lien leverage. Investors are offered six months of 101 soft call protection. Commitments are due at noon ET Wednesday, March 4. Business Development Corp. of America holds $11.3M in principal amount of the company’s existing 8.375% notes due December 2022.
BDVC: PetVet Care Centers (B3/B) — add-on, M&A
Accounts received allocations of the $100 million add-on incremental term loan for PetVet Care Centers (L+325), which priced at 98.8. Jefferies was left lead on the deal, which priced in line with talk but with a $25 million upsize. Proceeds will be used to place cash on the balance sheet to fund near-term acquisitions. The operator of national veterinary hospitals is controlled by KKR. Business Development Corp. of America holds $3.5M in principal amount of the company’s existing 2L debt due February 2026 (L+625).
FSK: Plastipak (B1/B+) — add-on, refi
Accounts received allocations of the $165 million add-on term loan for Plastipak (L+250), which was issued at 99.01. Wells Fargo arranged the deal, which priced at the wide end of talk. Proceeds will repay revolver outstanding after fully redeeming Goldman Sachs’ remaining interest in the business for $143 million. Plastipak designs and manufactures rigid plastic containers for the food, beverage and consumer products industries. The company is controlled by the Young family. Holders of the company’s existing 6.25% notes due October 2025 include FS KKR Capital Corp. with $1M in principal amount, FS Investment Corp. II with $974,000, FS Investment Corp. III with $1.1M and FS Investment Corp. IV with $266,000.
Audax: Tecomet (B3/B) — add-on, div recap
Jefferies, Antares and KKR Capital Markets set a 99.5 offer price on the $135 million fungible add-on to Tecomet’s term loan due May 2024 to fund a shareholder distribution. The existing roughly $557 million TLB is priced at L+350. Commitments are due by noon ET Tuesday, Feb. 25. The originally $540 million first-lien term loan was issued in March 2017, along with a $225 million second-lien term loan that was placed privately, backing Charlesbank Capital Partners’ acquisition of the business from Genstar Capital. In May 2018, the company added an additional $21 million to the TLB at a 99.75 OID. Audax Credit BDC holds $4M in principal amount of the existing 1L debt.
OCSI: Verra Mobility (B2/B+) — repricing
Investors received allocations of Verra Mobility’s repriced $894 million term loan (L+325), which was issued at par. BofA Securities was left lead on the deal, which priced at the tight end of guidance. Via the transaction, the issuer is reducing pricing from L+375. Verra Mobility (Nasdaq: VRRM) is a provider of transportation technology including road safety cameras and toll and violations management solutions in North America. Oaktree Strategic Income Corp. holds $5M in principal amount of the existing 1L debt.
ORCC, CCAP, Audax: Vistage Worldwide (B2/B) — add-on, refi
Macquarie and SunTrust Robinson Humphrey set a 99.5 offer price on the $50 million add-on to Vistage Worldwide’s first-lien term loan due 2025 (L+400, 1% floor). Proceeds will be used to partially redeem the issuer’s existing second-lien term loan (L+800) at par. The originally $100 million second-lien term has been repaid down to $80 million via free cash flow. Net total leverage has been reduced to 4.9x from 6.3x at the time of the 2018 LBO. Commitments will be due Friday, Feb. 28. Holders of the company’s existing 1L debt include Crescent Capital BDC with $8.5M in principal amount and Audax Credit BDC with $2M. Holders of the existing 2L debt include Owl Rock Capital Corp. with $34.6M in principal amount and Owl Rock Capital Corp. II with $5.2M.
FLEX: Wirepath Home Systems (B3/B) — incremental, M&A
UBS, SunTrust Robinson Humphrey and BMO Capital Markets set an OID of 95–96 on the $290 million incremental term loan for Wirepath Home Systems, doing business as SnapAV. The loan due August 2024 is priced at L+475 and is covered by 101 soft call protection that runs through July 31, 2020. Commitments are due Tuesday, March 3. The loan funded over the summer to back the company’s $680 million acquisition of Control4. It originally launched to market as a $390 million incremental first-lien term loan, which was ultimately shelved, but with the relaunch this year, it was recut into a $290 million first-lien term loan and a $100 million second-lien tranche (L+475). TP Flexible Income Fund holds $488,822 of the existing 1L debt. – Thomas Dunford
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