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LevFin Insights BDC Portfolio News 5/24/21

Posted on May 25, 2021

Issuer-friendly market brings dividend deals for Smart Start, SRS Distribution, Torrid

Opportunistic loans surged last week as new launches rose amid a pronounced swing back to an issuer-friendly environment. The stronger tone brought out high- and low-rated issuers alike seeking aggressive price points and documentation. Likewise, it was another busy week for high-yield with ranging quality and purpose, several off-market arrangements, including a new short structure, and some record-low prints.

Launched gross loan volume jumped to $19 billion last week via 18 issuers, including $13.8 billion of opportunistic volume. As such, it’s no surprise that net launched volume was a far less impressive $4.8 billion.

Amid strengthening technicals, the secondary loan market brushed aside volatility in equities. Through Thursday’s close, the average bid price of the Credit Suisse Leveraged Loan Index edged up four bps from last Friday’s close to 97.69% of par, and players relayed that the tone in the market Friday was firm amid limited supply and strong demand from CLOs.

Though activity is expected to pick up following Memorial Day, there’s not much new-money on offer now, with opportunistic business representing the lion’s share of last week’s activity. Following a flurry of allocations at the end of the week, LFI is tracking $20 billion of loans currently in market representing only $6.7 billion of net new money. The “net net” calendar continues to hover around break even, at negative $100 million.

Portfolios in brief: Holds reflect most recent reporting period available

Hancock Park, OFS: BayMark Health Services (TBD/TBD) — refinancing, M&A

Capital One, BMO Capital Markets and KeyBanc Capital Markets are circulating price talk of L+500 with a 1% floor and a 99 OID on the first-lien term debt for BayMark Health Services, a Webster Capital portfolio company. Guidance on the second-lien debt is L+850 with a 1% floor, offered at 98.5. Commitments are due Friday, June 4. As reported, BayMark is seeking to refinance its current debt and provide capacity for near-term acquisitions. The financing will consist of a $40 million revolver, a $360 million first-lien term loan, a $100 million first-lien delayed-draw term loan, a $100 million second-lien term loan and a $50 million second-lien delayed-draw term loan. The issuer last tapped the loan market in late 2017 for add-ons to its funded and delayed-draw first-lien term loans (L+475, 1% floor) and a $45 million second-lien term loan (L+825, 1% floor). The existing loan is governed by a net total leverage covenant. Holders of the 2L debt included Hancock Park Corporate Income with $3.5M in principal amount and OFS Capital Corp. with $9.1M. OFS also holds $4M in principal amount of the company’s senior secured debt due May 2023 (L+800).

ARCC: Global Healthcare Exchange (B3/B) — recapitalization

Investors received allocations of the $100 million fungible add-on term loan for Global Healthcare Exchange (L+325, 1% floor), which was issued at 99.27. Following the allocation of the add-on, the pro forma $713 million tranche is quoted at 99.5-100.25. J.P. Morgan arranged the deal, which priced tight to original talk. Proceeds will fund the partial redemption of the issuer’s $197 million of preferred equity. The issuer is also putting in place a $240 million privately placed second-lien term loan to replace its existing second-lien term loan. GHX is a provider of SaaS/cloud-based supply chain-automation technology and services to the healthcare sector. Temasek in 2017 purchased a majority stake in the company from Thoma Bravo, which remains a minority investor. As part of that transaction, Ares, which was agent on the issuer’s second-lien term loan, also invested $197 million in preferred shares. Ares Capital Corp. holds a combined $89.3M in principal amount of the existing 2L debt due June 2025 (L+800), plus an equity stake valued at $17.3M and Series A preferred stock valued at $166.9M.

Audax: ProAmpac (B3/B-) — repricing

Investors received allocations of the $1.8 billion repriced term loan for ProAmpac (L+375, 0.75% floor), which was issued at 99.75. Antares Capital arranged the loan, which priced at the wide end of talk. Via the transaction, the issuer is lowering the coupon on the loan from L+400 with a 1% floor. ProAmpac, a supplier of flexible packaging products to a diverse set of end-markets, including food, consumer, industrial, medical, pharmaceutical, pet food and specialty retail, is controlled by Pritzker Private Capital. Audax Credit BDC holds roughly $3M in principal amount of the 1L debt.

Hancock Park, OFS, PSEC: Rocket Software (B3/B-) — M&A

Investors received allocations of the cross-border term loan for Rocket Software (L+425, 0.50% floor), with the $470 million incremental term loan issuing at 97.5. RBC Capital Markets was left lead on the deal, which priced wide of talk and was scaled back from $825 million at launch as a euro-denominated tranche was added to the deal. The €300 million tranche cleared at E+425/0%/97.5. Proceeds back the acquisition of ASG Technologies Group. Closing is expected in the second quarter. The company will also fund the acquisition with cash on hand. The provider of IT management software tools is controlled by Bain Capital. Prospect Flexible Income Fund holds $2.1M in principal amount of the existing 1L debt. Holders of the company’s 2L debt due November 2026 (L+825) include Hancock Park Corporate Income with $1.3M, OFS Capital with $6.3M and Prospect Capital Corp. with $50M.

PTMN, Audax, Steele Creek: Smart Start (B3/B-) — add-on, dividend

BNP Paribas launched a $40 million fungible add-on to Smart Start’s first-lien term loan (L+475, 1% floor), setting an offer price of 99.5. Commitments are due Thursday, May 27. Proceeds along with a privately placed $115 million second-lien term loan and $4 million of cash will fund a $154 million dividend to sponsor ABRY Partners, noted S&P. The issuer last tapped the market in August via BNP for a $350 million seven-year covenant-lite term loan to refinance club loans. The 101 soft call protection rolled off earlier this year. Holders of the existing 1L debt include Portman Ridge Finance Corp. with $2.1M in principal amount, Audax Credit BDC with $995,000 and Steele Creek Capital Corp. with $995,000.

BCRED: SRS Distribution (B3/B-) — refinancing, dividend

Accounts received allocations of the $2.19 billion term loan B for SRS Distribution (L+375, 0.50% floor), which was issued at 99.25. BofA Securities was left lead on the deal, which priced tight to original talk with investor-friendly revisions to documentation. Note the loan was upsized by $150 million to reduce the adjoining unsecured bond deal by the same amount, to $450 million. Proceeds, along with $650 million of first-lien notes, will be used to refinance the issuer’s capital structure and pay a $1.025 billion dividend. The residential roofing distributor is controlled by Leonard Green & Partners. Blackstone Private Credit Fund $11.3M in principal amount of the company’s previous 1L debt due May 2025 (L+300, 0% floor).

FSK, FSKR, TCW: Torrid (B2/B) — refinancing, dividend

Investors received allocations of the $350 million term loan B for Torrid (L+550, 0.75% floor), which was issued at 99. BofA Securities was left lead on the deal, which priced in line with talk. Proceeds will refinance existing debt and fund a sponsor dividend. Torrid was formerly a unit of Sycamore Partners-owned Hot Topic and was spun off to the sponsor in 2015. Torrid is a U.S.-based plus-size women’s direct-to-consumer apparel concern. Holders of the existing 1L debt due December 2024 (L+675, 1% floor) include FS KKR Capital Corp. with $25.9M in principal amount, FS KKR Capital Corp. II with $32.7M and TCW Direct Lending VII with $28.8M.

Download LFI BDC Portfolio News 5-24-21 for BDC investment details provided by Advantage Data; click through links to view stories by LFI.

thomas.dunford@levfininsights.com

212.205.8552

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