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LevFin Insights BDC Portfolio News 2-3-20

Posted on February 3, 2020

Refinancings and repricings continue to proliferate; Radiology Partners reduces yield on TL held by PTMN, Audax, SUNS, GBDC

Despite hot market conditions that continue to allow many loan issuers to push through aggressive transactions, particularly where new money is at stake, the market is becoming more discerning amid mounting concerns over the coronavirus threat, and investors notched a number of big wins in recent days. High-yield, too, took on a more cautious air as evidenced by Sprint scaling back plans to as much as triple the size of its $1 billion bond deal last week.

The mild losses in the secondary provided the buyside with leverage to push back against more aggressive deals. With coronavirus fears weighing on equities, the average bid price of the Credit Suisse Leveraged Loan Index ended the day Thursday at 96.70% of par, down 26 bps from the Jan. 24 close. Sentiment improved mid-week after Monday’s weaker session, during which the average bid price fell 19 bps, but closed out on a softer note with equities posting steep losses Friday. In another sign of the shifting sentiment in the secondary, BofA Securities’ Instinct Loans electronic trading platform last week registered $167 million of net selling interest, the most net selling interest since the week of May 24, 2019.

While certain oversubscribed new-issues were trading comfortably above their OIDs—the $2.67 billion first-lien term loan for B1/B+ Froneri (L+225) initially ran up to a 100.375-100.625 context, from issuance at 99.75, before ending the week around 100.25–100.5, and Reynolds Consumer Products’ $2.475 billion term loan due 2026 (L+175) was wrapped around 100.5, from issuance at 99.875—some recently repriced deals were not performing as robustly. A case in point: SS&C Technologies’ $5.2 billion L+175 repricing, which was bid below its par issue price away from the agent during Monday’s rocky session, was still not trading very convincingly by the end of the week, marked at 100–100.25. Indeed, the lackluster performance here didn’t auger well for other jumbo repricings, perhaps most notably TransDigm.

Certain credits with direct concerns related to the coronavirus were more severely punished. American Airlines’ newly inked $1.22 billion term loan due 2027 (L+175) ended the week quoted at 98.75-99, versus issuance at 99.75 on Friday, Jan. 24, though sources point out other airlines were also affected by the news. Away from newly issued loans, another name that suffered losses on the virus news was Travelport: the first-lien term loan due 2025 (L+500), which had perked up at the end of the prior week to a 93.75-94.5 on news of an asset sale to WEX, though by Friday had slid to a 89.75-90.75 market.

Portfolios in brief: Holds reflect most recent reporting period available

TSLX: APX Group/Vivint (B3/B-) — extension, incremental, refi

BofA Securities and Credit Suisse launched an extension of APX/Vivint’s $800 million term loan along with a $525 million incremental term loan that will be used to redeem the issuer’s 8.875% secured notes due 2022, repay revolver borrowings and place cash on the balance sheet. The upsized $1.325 billion term loan would mature in June 2025, for a roughly 1.5-year extension on the existing L+500 loan. TPG Specialty Lending holds $3.8M in principal amount of the 2022 notes.

ARCC: Dynatrace (B1/B) — repricing

Jefferies launched a repricing of Dynatrace’s $521 million first-lien term loan due August 2025, setting price talk of L+225 with a 0% floor and a par offer price. The current margin on the loan is L+275. The issuer is offering to reset the 101 soft call protection for six months. Commitments are due by noon ET Tuesday, Feb. 4. The issuer is launching the repricing on the heels of the release of its fiscal-third quarter results this morning, which showed adjusted EBITDA increased to $39.95 million, up 46.5% from $27.27 million in the year-ago quarter. The company’s shares, which trade on the New York Stock Exchange under the symbol DT, gained roughly 10% on the news, to $31.53. Ares Capital holds an equity stake valued at $17.1M.

GSO, CION, GARS: Kymera International (B2/B) — add-on/M&A

A Goldman Sachs-led arranger group set price talk of L+600 with a 0% floor and a 98-99 OID on Kymera International’s $165 million add-on to its existing $240 million term loan B due 2025, which will be priced up from L+550. Commitments are due Wednesday, Feb. 12, at 5 p.m. ET. The company will reset the 101 soft call for 12 months. The seven-year covenant-lite term loan B will continue to amortize at 2.5% per annum. Proceeds from the transaction will be used to finance an acquisition. Earlier this month, Kymera announced it had entered into an agreement with Ametek to acquire the firm’s Reading Alloys business, according to a company statement. Holders of the company’s existing 1L debt due October 2025 (L+550) include Blackstone/GSO Secured Lending Fund with $3.9M in principal amount, CION Investment Corp. with $7.9M and Garrison Capital with $2.2M.

Audax: Mister Car Wash (B3/B-) — repricing

A Jefferies-led arranger group softened the proposed repricing of Mister Car Wash‘s $836 million first-lien term loan strip, to L+325 at par, from L+300. As before, the loan would include a 25 bps step-down at 4.25x net first-lien leverage. The deadline has been accelerated to 5 p.m. ET today from noon ET tomorrow. The issuer is offering to reset the 101 soft call protection for six months. The existing covenant-lite first-lien loan due May 2026 is priced at L+350, with a step to L+325 at 4.83x net first-lien leverage. Audax Credit BDC holds $2M of the existing 1L debt.

NMFC: National Mentor (B2/B) — refi

A Goldman Sachs-led arranger group this morning set price talk of L+425 with 0% floor and an OID at a range of 99.5-99.75 on the $205 million add-on first-lien term loan for National Mentor. Commitments are due at noon ET Thursday, Feb. 6. Proceeds from the transaction will be used to refinance the issuer’s existing second-lien term loan. The company issued a privately placed second-lien term loan in October. The $200 million second-lien term loan due March 2027 is priced at L+850. UBS and Barclays are also bookrunners on the transaction, which will have the same call protection. New Mountain Finance holds $21.1M in principal amount of the existing 2L debt.

BBDC: NFP Corp. (B3/B) — refi

An arranger group led by BofA Securities finalized NFP Corp.‘s $1.8 billion first-lien term loan maturing 2027 at L+325, widening from price talk at L+300, while the OID was finalized at 99.5, the tight end of its 99.25-99.5 range. The loan is expected to allocate today. Proceeds from the transaction will be used to refinance the firm’s existing January 2024 TLB, which is priced at L+300. The company in December added $175 million to the TLB at a 99.25 OID. Barings BDC holds $8.6M in principal amount of the existing TLB.

Sierra, SLRC, MRCC: Octave Music Group (B2/B) — refi

Citizens launched a $315 million refinancing for Octave Music Group, setting a lender meeting for 10:30 a.m. ET tomorrow. Via the refinancing, the issuer is extending the maturity of its revolver and term loan while also upsizing the first-lien term loan to take out its existing second-lien, shifting to an all-senior structure. The transaction is split between a $290 million first-lien term loan due May 2025 and a $25 million revolver due November 2024, which represents a 3.5-year extension of the revolver and a four-year extension of the term loan. Ahead of tomorrow’s meeting, the term loan is talked at L+500-525, with a 0% floor and a 99 OID, with six months of 101 soft call protection, sources said. Like the existing loans, the new financing will be governed by a maintenance covenant. By comparison, the existing first-lien loan is priced at L+475, and the second-lien is priced at L+825. Holders of the 2L debt include Sierra Income Corp. with $6.5M in principal amount, Solar Capital with $12.2M and Monroe Capital $4.4M.

PTMN, Audax, SUNS, GBDC: Radiology Partners (B3/B) — repricing

Investors received allocations of Radiology Partners’ repriced $1.34 billion term loan (L+425), which was issued at par. Barclays was left lead on the loan, which priced in line with talk and lowers pricing from L+475. The issuer also placed $710 million of 9.25% senior notes that reprice the issuer’s privately placed second-lien debt, revolver borrowings and $50 million the term loan. Radiology Partners, a portfolio company of New Enterprise Associates and Future Fund, is a physician practice management business that operates in hospitals and outpatient imaging centers. Holders of the company’s existing 1L debt due July 2025 include Portman Ridge Finance Corp. with $3M in principal amount, Audax Credit BDC with $5.2M and Solar Senior Capital with $7.4M. Golub Capital BDC holds equity stakes valued at a combined $410,000.

Audax, OFS, NMFC: Spring Education (B3/B-) — repricing

Macquarie Capital set talk of L+375-400 with a par offer price on the proposed repricing of Spring Education Group’s term loan B. Investors are offered six months of 101 soft call protection. The roughly $640 million term loan due 2025 is currently priced at L+425. The cap stack also includes a $225 million second-lien term loan due 2026 (L+825). Commitments are due at 5 p.m. ET Wednesday, Feb. 5. Holders of the existing 1L debt include Audax Credit BDC with $990,000 in principal amount and OFS Capital with $974,000. Holders of the 2L debt include OFS with $7.2M and New Mountain Finance with $24.5M.

Audax, OCSI: StandardAero (B3/B/B) — repricing

A Credit Suisse-led arranger group outlined a 99.5–99.75 OID on the $200 million fungible add-on term loan for StandardAero that launched Friday alongside a repricing of the issuer’s $2.14 billion term loan due April 2026. As noted earlier, the issuer is seeking to reduce the margin on the loan to L+350, from L+400 currently; the repricing is offered at par. Like the existing loan, the repriced and add-on debt would include a 25 bps step-down that would be achieved at 4.25x first-lien net leverage, according to sources. The issuer is offering to reset the 101 soft call protection for six months. Proceeds from the incremental debt would be used to repay borrowings against the issuer’s asset-based revolver. Commitments are due by 5 p.m. ET on Thursday, Feb. 6. Holders of the existing 1L debt include Audax Credit BDC with $5.5M, Oaktree Strategic Income Corp. with $2M and Oaktree Strategic Income II Inc. with $3M.

Audax, BDVC: Veritext (B3/B) — repricing

Investors received allocations of Veritext’s repriced $470 million term loan (L+350), which broke to a par bid from issuance at par, sources said. Jefferies was left lead on the loan, which priced in line with talk and lowers pricing from L+375. Veritext, owned by Leonard Green Partners, provides law firms and corporations with staff and technology to support depositions and litigation activities. Holders of the existing 1L debt include Audax Credit BDC with $3.2M in principal amount and Business Development Corp. of America with $5M. Audax Credit BDC also holds $1M in principal amount of the company’s 2L debt due July 2026 (L+700).

FSK: Vertiv (B1/B+) — refi

Citi today set talk of L+300-325 with a 0% floor and a 99.5 offer price on Vertiv‘s proposed $2.2 billion, seven-year TLB to refinance its remaining capital structure as it plans to merge with special purpose acquisition company GS Acquisition Holdings (GSAH). Commitments are due at 5 p.m. ET Monday, Feb. 10. Citi will be administrative agent on the transaction, which will have 101 soft call protection for six months. The issuer earlier this month won lender approval for a change-of-control waiver, which paid a five-basis-point fee to consenting lenders; administrative agent J.P. Morgan ran the process. Holders of the company’s existing 1L debt due November 2023 (L+400) include FS KKR Capital Corp. with $11.7M in principal amount, FS Investment Corp. II with $11M, FS Investment Corp. III with $12.6M and FS Investment Corp. IV with $558,000. Holders of the company’s 9.25% unsecured notes due October 2024 include FS KKR Capital Corp. with $22.8M in principal amount, FS Investment Corp. II with $16.6M, FS Investment Corp. III with $18.7M, FS Investment Corp. IV with $5.1M and Corporate Capital Trust II with $3.1M.

CCAP: Wrench Group (B3/B) — repricing

Investors received allocations of Wrench Group’s $298.9 million first-lien term loan strip (L+400), which was issued at par. Jefferies was left lead on the deal, which priced at the wide end of guidance. Via the transaction, Wrench is lowering pricing from L+425 on both its $223.9 million funded tranche and a $75 million delayed-draw component, which has not yet been funded. Wrench Group, which is controlled by Leonard Green & Partners, provides home maintenance and repair services including heating, ventilation and air conditioning, plumbing and electrical services. Crescent Capital BDC holds $4.6M in principal amount of the company’s existing 1L debt together with $2.5M of its 2L debt due April 2027 (L+787) and an equity stake valued at $109,398. – Thomas Dunford

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thomas.dunford@levfininsights.com

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