LevFin Insights BDC Portfolio News 3/29/21Posted on March 30, 2021
Culligan narrows focus of repricing; existing debtholders include FSK
Investor reticence toward aggressive loan transactions was fully on display last week, continuing the prior week’s market trend toward better balance in the wake of a steady stream of new-money allocations. Indeed, issuers barely held the edge in last week’s flex ratio, which stands at 7:4. High-yield investors, however, showed little restraint for another onslaught of supply across ratings, sectors and purposes, establishing new volume records.
Following the previous week’s impressive $11.2 billion haul of allocations, secondary prices remained unchanged to slightly weaker as accounts absorbed the supply. The average bid price of the Credit Suisse Leveraged Loan Index eased to 97.5% of par as of Thursday’s close, down five bps from the March 19 close of 97.55 and 28 bps from 97.78 at the start of the month; the month-to-date return has been whittled down to a mere 0.03%.
Portfolios in brief: Holds reflect most recent reporting period available
Guggenheim: Cologix (B3/B-) — refinancing
A J.P. Morgan and RBC Capital Markets led arranger group launched a $575 million term loan B for Cologix. Proceeds refinance existing loans, partially fund the acquisition of a data center facility in Santa Clara, Calif., and fund capex and general corporate purposes. The seven-year TLB is talked at L+375 with a 0.75% floor at 99.5 with six months of 101 soft call protection. The transaction also includes a $125 million revolving credit. The refinancing targets $412 million of outstanding first-lien term debt and a $75 million revolver that’s currently unfunded. Sponsor Stonepeak Infrastructure Partners is contributing $125 million, including $50 million of new equity and a $75 add-on to a $171.5 million secured term loan due 2026 that sits at Stonepeak TopCo and is structurally subordinated to the syndicated loans. Cologix Canada separately has a C$106.5 million term loan due 2026. Guggenheim Credit Income Fund holds $2M in principal amount of the existing 1L debt.
FSK: Culligan (B3/B) — repricing
A Morgan Stanley-led arranger group retooled Culligan’s repricing transaction and the issuer is now seeking only to reprice last year’s $397 million L+525 term loan to L+375 with a 1% floor and the planned $100 million delayed-draw term loan will be fungible with that tranche. The delayed-draw loan will pay full economics including the floor from day one. The loans are offered at 99.875. Culligan’s L+325 and L+425 term loans will remain in place. The issuer earlier sought to reprice a total of $665 million of incremental term loans term loans due 2023, along with the $100 million delayed-draw term loan to become fungible with the existing $611 million term loan B-1 due December 2023, which is priced at L+325, with a 1% floor, with a 25 bps step-down at 4x net first-lien leverage. The delayed-draw tranche initially included a ticking fee of half the margin that would kick in day 46, rising to the full margin on day 91. FS KKR Capital Corp. holds $85M in principal amount of the company’s 2L debt due December 2024 (L+850, 1% floor).
BDVC, ORCC, Hancock Park: Hyland Software (B2/B-) — M&A
Investors received allocations of the first- and second-lien financing for Hyland Software, with the $140 million add-on to the first-lien term loan (L+350, 0.75% floor) issuing at 99.75. The upsized and repriced $670 million second-lien term loan (L+625, 0.75% floor) was issued at 99.75 for the $120 million add-on and par for the repricing of the existing $550 million loan. Credit Suisse arranged the deal, which layers in $260 million of incremental debt to fund the acquisition of Nuxeo and lowers the margin on the existing second-lien term loan from L+700. Hyland, a provider of enterprise content management software, is controlled by Thoma Bravo. Hancock Park Corporate Income holds $21,733 of the company’s 1L debt. Holders of the 2L debt include Business Development Corp. of America with $6.9M, Hancock Park Corporate Income with $293,452, Owl Rock Capital Corp. with $28.1M, Owl Rock Capital Corp. II with $9.4M and Owl Rock Technology Finance Corp. with $37.4M.
BDVC, NMFC, Audax: MyEyeDr (Caa1/B-) — add-on
Jefferies set talk of L+425 with a 0% floor and a 99 offer price on $75 million incremental term loan for MyEyeDr. The loan will be fungible with the issuer’s original first-lien term loans due August 2026. Proceeds are for GCP. Commitments were due at 3 p.m. ET today. The issuer last tapped the market in July for an $80 million nonfungible incremental term loan (L+625, 1% floor). The incremental debt is coterminous, but not fungible, with the issuer’s existing first-lien term loan due August 2026 (L+425, 0% floor). The issuer’s initial loans, an originally $1.056 billion first-lien term loan strip and a $360 million second-lien term loan due August 2027 (L+825, 0% floor), backed Goldman Sachs Merchant Banking’s acquisition of the optometry platform in 2019. Holders of the existing 1L debt include Audax Credit BDC with $532,087 in principal amount and Business Development Corp. of America with a combined $6.7M. New Mountain Finance holds $20.9M of the company’s 2L debt.
CCAP: PetIQ (B3/B-) — refinancing
Jefferies and Keybanc Capital Markets set a commitment deadline of 2 p.m. ET Tuesday, April 6, on the $300 million term loan B for PetIQ. Price talk on the TLB is L+425 with 0.5% floor, offered at 99-99.5. The term loan will include six months of 101 soft call protection. Proceeds will partially refinance the issuer’s debt. The transaction also includes a $125 million five-year asset-based revolver. Ares Capital Management previously provided the issuer, a distributor and supplier of branded and generic pet pharmaceuticals and over-the-counter products to national retailers, with a private club deal that grew over time and totaled $217 million at year-end 2020. That existing loan is governed by a net first-lien leverage test and is priced at L+500. Crescent Capital BDC holds $14.9M in principal amount of the existing 1L debt.
ARCC, BCSF, Audax: Plaskolite (B2/B) — repricing
Goldman Sachs and Morgan Stanley set price talk of L+400, with a 0.75% floor and a par offer price, on the proposed repricing of Plaskolite’s $647 million term loan due December 2025. The existing loan is priced at L+425, with a 1% floor. The issuer is offering to reset the 101 soft call protection for six months. Commitments are due by 5 p.m. ET Wednesday, March 31. The term loan, originally $640 million, was syndicated in December 2018 to back PPC Partners acquisition of the business from Charlesbank Capital Partners. The buyout was also financed with a $190 million second-lien term loan, which was placed privately, LFI reported at the time. The transaction levered the issuer at 5x/6.4x. Holders of the company’s existing 1L debt include Ares Capital Corp. with $12.2M in principal amount, Audax Credit BDC with $3.9M and Bain Capital Specialty Finance with $2.3M. Ares Capital Corp. also holds $55.7M of the company’s 2L debt (L+775) and an equity stake valued at $600,000.
OFS: WW International (Ba3/B+) — refinancing
An arranger group led by BofA Securities is circulating price talk of L+400, with a 0.50% floor and a 99.5 OID on the $1 billion term loan B for WW International. Proceeds, along with $500 million of other secured debt, will refinance the issuer’s capital structure. The seven-year TLB will include six months of 101 soft call protection. Arrangers on the deal are BofA, Goldman Sachs, J.P. Morgan, Keybanc Capital Markets and Truist. Commitments are due by noon ET Thursday, April 1. As of the end of fiscal 2020, outstandings were $1.209 billion on the issuer’s TLB due November 2024 (L+475, 0.75% floor) and $300 million of 8.625% senior notes due in December 2025. OFS Capital holds $485,000 of the existing 1L debt. – Thomas Dunford
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