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LevFin Insights BDC Portfolio News 8/16/21

Posted on August 17, 2021

M&A activity continues to drive incremental financing as market hiatus nears

The more tentative conditions in the new-issue loan market gave way to a somewhat more issuer-friendly outlook in last week in time for underwriters’ concerted efforts to clear the summer calendar; issuers took advantage of that more constructive landscape to push out a final few deals before the market heads off to its hiatus. Yet significant high-yield supply drove some pricings at the wider end of targets and less enthusiasm once those deals moved into the secondary.

Slowing down in earnest, last week’s launched loan volume plummeted, ostensibly, to $2.9 billion gross/$2.5 billion net via 10 issuers, though it was actually much busier owing to at least a half-dozen lender calls that were scheduled during the prior week. Even so, volume pales in comparison to the previous week’s $15.8 billion gross/$5.9 billion net launched volume.

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Portfolios in brief: Holds reflect most recent reporting period available

GLAD, PSEC: 8th Avenue Food & Provisions (B2/B-) — Repayment, M&A, GCP

Barclays circulated price talk of L+475 with a 0.75% floor and a 98.5-99 OID for 8th Avenue Food & Provisions‘ $125 million incremental term loan. Proceeds would be used to repay revolver borrowings incurred to finance a portion of the Ronzoni acquisition and to fund working capital and general capital purposes. The incremental debt would be coterminous with the borrower’s existing term loan due October 2025. Commitments are due by noon ET Tuesday, Aug. 17. The issuer’s existing loans, an originally $525 million first-lien term loan due 2025 (L+350, 0% floor) and a $100 million second-lien term loan due 2026 (L+775, 0% floor), date back to the 2018 separation of Post Holdings’ private brands business in partnership with Thomas H. Lee Partners. Note the spread on the existing first-lien has stepped down from L+375 at closing per a step-down at 4.5x net first-lien leverage. Holders of the existing 2L debt include Gladstone Capital Corp. with $3.7M in principal amount and Prospect Capital Corp. with $27.1M.

Palmer Square, Audax: ECI Software (B3/B-) — M&A

Golub Capital was left lead arranger on a $170 million first-lien term loan add-on for ECI Software (L+375, 0.75% floor), bringing the pro forma tranche to $906 million. Proceeds will fund an acquisition. ECI was last in the market in September with the $740 million first-lien component of a portable dividend recapitalization transaction. BofA Securities was left lead on the first-lien term loan, which was adjoined by a $250 million privately placed second-lien term loan. Holders of the existing 1L debt include Palmer Square Capital BDC with $6M in principal amount and Audax Credit BDC with $2M.

BCRED, Audax, Steele Creek: Kenan Advantage Group (B3/B-) — Refinancing

KeyBanc Capital Markets set talk of L+375 with a 0.75% floor and a 99.5 offer price on Kenan Advantage Group’s $100 million incremental first-lien term loan, while Barclays set talk of L+725 with a 0.75% floor and a 98-99 offer price on the issuer’s new $300 million six-year second-lien term loan. Barclays will be administrative agent on the second-lien term loan, which includes 102, 101 hard call protection. As noted earlier, Kenan is raising new first- and second-lien loans to back a refinancing of its $405 million senior notes due July 2023. In addition, the existing first-lien loan is being amended to permit the proposed transaction and allow for related changes; consenting lenders are offered a 10 bps fee. Commitments are due at noon ET Tuesday, Aug. 17. Holders of the existing 1L debt include Blackstone Private Credit Fund with $7.4M, Audax Credit BDC with $998K and Steele Creek Capital Corp. with $817K.

Owl Rock: Packers Holdings (B3/B-/B-) — M&A

Jefferies-led arranger group set a 98.5 OID on the $165 million add-on term for Packers Holdings. The incremental debt would be fungible with the borrower’s $1.055 billion first-lien term loan due 2028 (L+325, 0.75% floor). The existing loan includes two leverage-based step-downs and another 25 bps step-down tied to an IPO. Proceeds back the company’s acquisition of Safe Foods. The arranger group includes Jefferies, Blackstone, Nomura and Morgan Stanley. Commitments are due by noon ET on Thursday Aug. 19. Owl Rock Core Income Corp. holds $4.3M in principal amount of the existing 1L debt.

BCRED, Palmer Square, BDVC, NMFC: PetVet Care Centers (B3/B) — M&A

Accounts received allocations of the $275 million add-on term loan for PetVet (L+350, 0.75% floor), which was issued at 99.5. Jefferies was left lead on the financing, which priced tight to talk. Proceeds fund the company’s acquisition pipeline and general corporate purposes. The operator of veterinary hospitals is controlled by KKR. Holders of the existing 1L debt include Blackstone Private Credit Fund with $8.3M in principal amount; Palmer Square Capital BDC with $3.5M; and NMFC Senior Loan Program III LLC, a joint venture between New Mountain Finance Corp. and SkyKnight Income II LLC, with $4.5M. – Thomas Dunford

Download LFI BDC Portfolio News 8-16-21 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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