LevFin Insights BDC Portfolio News 6/21/21Posted on June 22, 2021
LBO to take out Gastro Health debt held by BC Partners Lending Corp., Goldman Sachs vehicles
Activity surged in both loans and bonds last week on competing concerns. While recent weeks have depended largely on a dizzying parade of intraweek opportunistic loan executions, last week offered a big pre-holiday push of M&A deals calculated to wrap before the July 4 break. An active high-yield new issue market had a much more immediate focus as issuers rushed to refinance quickly ahead of this week’s FOMC meeting.
Although the week was short on $1 billion-plus executions, M&A loans nevertheless accounted for $7.6 billion of new launches from 15 issuers, roughly half the $14.9 billion launched last week across 30 transactions, helping to build $7 billion of net launched volume on the week.
Amid continued pricing concessions from investors, the average all-in institutional spread for all issuers now stands at L+407 versus L+424 at the end of May, with more BB transactions creeping into the mix. Average all-in single B spreads, both including and excluding add-ons, are comparably lower at L+451 and L+454, respectively, versus L+465 and L+469 last month.
Portfolios in brief: Holds reflect most recent reporting period available
TFSA: Blackstone Mortgage Trust (Ba2/B+) — Repricing
Investors received allocations of Blackstone Mortgage Trust’s upsized and repriced $423 million term loan B-2 (L+275, 0.5% floor), which was issued at 99.75. J.P. Morgan was left lead on the deal, which priced in line with talk. The deal reprices $323 million from L+475 with a 1% floor and adds $100 million to repay other secured debt. NYSE-listed BXMT, an affiliate of Blackstone Group, is a real estate investment trust that originates commercial real estate loans and invests in debt in North America and globally to hold on its balance sheet. Terra Income Fund 6 holds an equity stake valued at $6.6M.
NMFC: Cano Health (B2/B) — M&A
Credit Suisse set a 99.5 offer price on the $295 million add-on to Cano Health’s first-lien term loan that will back the acquisition of University Health Care. The term loan due November 2027 is priced at L+450 with a 0.75% floor and includes a 25 bps step-down at B2/B stable/stable ratings. Pro forma for the increase, the loan would total $549 million. The loan’s 101 soft call protection would be reset for six months. Commitments are due at 5 p.m. ET Wednesday, June 23. Under the terms of the agreement, Cano purchased all of the assets and securities of the University Health Care business for $540 million in cash and 4,055,698 shares of class A common stock valued at roughly $60 million. NMFC Senior Loan Program III LLC holds $6.3M in funded 1L debt and $2.3M in unfunded debt. NMF SLF I Inc. holds $13.4M in principal amount of funded 1L debt and $4.9M of unfunded debt.
FSK: Cengage Learning (B3/B-) — Refinancing
A Morgan Stanley-led arranger group this morning set price talk of L+475-500 with a 1% floor and a 99 OID on the $1.25 billion term loan B for Cengage Learning. The five-year loan would include a springing maturity to the $620 million issue of 9.5% notes due 2024. Lenders are offered six months of 101 soft call protection. Proceeds, along with $400 million of other secured debt, would be used to refinance the issuer’s term loan B ahead of its June 2023 maturity. The existing term debt is priced at L+425, with a 1% floor. FS KKR Capital Corp. holds an equity stake valued at $4M.
Palmer Square, NMF SLF: EAB Global (B3/B-) — Recapitalization
A Macquarie-led arranger group set talk of L+350-375 with a 0.5% floor and a 99 offer price on EAB Global’s $745 million first-lien term loan. Macquarie Capital is left lead arranger on the first-lien term loan while UBS is left lead arranger on the $270 million second-lien tranche that has been preplaced ahead of launch. Commitments will be due Friday, June 25. Additional bookrunners include Deutsche Bank, CPPIB, Bank of Montreal and HSBC. Proceeds will be used to finance the recapitalization of the company by BC Partners and Vista Equity Partners. On May 10, BC Partners announced that it will acquire a stake in EAB Global from existing sponsor Vista Equity Partners, which acquired the company in 2017. The issuer was formerly known as Education Advisory Board. Palmer Square Capital BDC holds $3M in principal amount of the company’s 1L debt due 2024 (L+375, 1% floor), while NMF SLF I Inc. holds $1.5M.
GSBD, BC Partners: Gastro Health (B3/B-) — LBO
BMO Capital Markets and Antares Capital set price talk in the L+450 area, with a 0.75% floor and a 99 OID on the $400 million first-lien term loan strip backing the buyout of Gastro Health. The seven-year loan would include six months of 101 soft call protection. Commitments are due by noon ET Wednesday, June 30. The term debt is split between a $300 million funded term loan and a $100 million delayed-draw tranche. Financing also includes a $90 million privately placed second-lien term loan. OMERS private equity’s OMERS Relief Acquisition portfolio company agreed in May to acquire Gastro Health from Audax, which has owned the company since 2016. Goldman Sachs BDC holds $4.9M in principal amount of the company’s 1L debt due September 2023 (P+600) plus a combined $52.8M in 1L debt due September 2024 (L+700, 1% floor). Goldman Sachs Private Middle Market Credit Corp. $3.1M of the 2023 debt and a combined $41.9M of the 2024 debt. BC Partners Lending Corp. holds $3M of the 2024 debt.
Audax: Precisely (B3/B-) — Add-on, M&A
A J.P. Morgan-led arranger group is circulating price talk of 98.75-99 on the $330 million add-on first-lien term loan for Precisely. Guidance on the $85 million second-lien add-on is 99-99.25. Proceeds would fund the planned $600 million acquisition of Winshuttle. The new debt will be fungible with the borrower’s existing first- and second-lien loans. The issuer currently has in place a $1.85 billion first-lien term loan due April 2028 (L+425, 0.75% floor) and a $505 second-lien term loan due April 2029 (L+725, 0.75% floor). The first-lien includes soft call protection that rolls off in October and the second-lien is callable at 102 until April 2022, then at 101 for the next 12 months. J.P. Morgan, Golub Capital, Barclays, Jefferies and Morgan Stanley are arranging the financing, J.P. Morgan is administrative agent on the first-lien and Barclays is admin agent on the second-lien. Commitments are due by 5 p.m. ET Wednesday, June 23. Audax Credit BDC $2.5M of the existing 1L debt.
Audax, Stone Point: Quantum Health (B3/B-) — Repricing
Investors received allocations of Quantum Health’s repriced $300 million term loan (L+450, 0.75% floor), which was issued at par. Credit Suisse was left lead on the deal, which in line with talk and lowers the margin from L+500. Warburg Pincus made a “significant” investment in the health benefits manager as part of a growth investment alongside current owner Great Hill Partners. Holders of the term debt include Audax Credit BDC with $1.5M and Stone Point Capital Credit with $10M.
ARCC, GECC, MSC, PNNT, PFLT, PSEC, FLEX, CSWC, MAIN: Research Now Group (B2/B-) — Add-on, refinancing
Goldman Sachs set price talk of 97.5-98 on the $75 million add-on first-lien term loan for Dynata Corp. The loan will be fungible with the roughly $900 million first-lien term loan due December 2024 (L+550, 1% floor). The issuer is offering to reset the 101 soft call protection for six months. Proceeds will be used to repay revolver borrowings and fund cash to the balance sheet. The commitment deadline is Monday, June 21. Goldman Sachs is agent on the issuer’s first- and second-lien loans, which backed a late 2017 merger between Court Square-controlled Research Now and HGGC-controlled Survey Sampling. Financing for the merger also included a $250 million second-lien term loan (L+950). Holders of the existing 1L debt include Ares Capital Corp. with $41M, MS Income Fund with $10M, PennantPark Investment Corp. with $2.9M, PennantPark Floating Rate Capital with $17.4M, Prospect Capital Corp. with $9.7M, Prospect Flexible Income Fund with $2M, Main Street Capital Corp. with $20.3M and I-45 SLF LLC with $5M. Holders of the 2L debt include Capital Southwest Corp. with $10.5M, Great Elm Capital Corp. with $12M and Prospect Capital Corp. with $50M. Great Elm Capital Corp. also holds $6.9M of funded revolver debt and $3.1M of unfunded revolver debt.
BCRED, NMFC: Unified Women’s Healthcare (B3/B-) — Add-on, M&A
A Barclays-led arranger group set price talk of 99-99.5 on the $235 million add-on first-lien term loan for Unified Women’s Healthcare. The loan will be fungible with the issuer’s $420 million term loan due December 2027 (L+425, 0.75% floor). Proceeds will finance the acquisition of CCRM. The transaction is also being financed with $120 million of second-lien debt and $432 million of new and rollover equity, according to S&P. Commitments are due at noon ET Tuesday, June 29. Proceeds of the original deal, along with a $140 million second-lien term loan and $1.022 billion of equity, backed the buyout of the company by Altas Partners and Ares Management. Bookrunners are Barclays, Credit Suisse, BofA Securities, RBC, Deutsche Bank and Antares. Barclays is administrative agent. Holders of the existing 1L debt include Blackstone Private Credit Fund with $3.1M in principal amount and NMFC Senior Loan Program III LLC with $10M.
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