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LevFin Insights BDC Portfolio News 9/20/21

Posted on September 21, 2021

Caesars reprices debt held by Palmer Square; heavy slate of business still ahead

Loan investors appear to be absorbing the huge calendar of new issues in stride, prompting an increasing number of accelerations and first reverse flexes among post Labor Day transactions. High-yield was back to business with a big pipeline, oversubscribed deals and plenty of M&A transactions, but Coinbase Global debt slipped underwater after aggressive pricing.

Thus far, activity has lived up to expectations that underwriters would quickly move to derisk M&A underwritings, underscored by the retail launch last week of Medline Industries’ long-awaited jumbo cross-border LBO loan by a BofA Securities-led underwriter group. At $6 billion, the U.S. dollar loan is the largest new-money institutional loan to hit the market since Refinitiv’s $6.5 billion loan about three years ago, although ahead of the lender call, sources indicated that preliminary interest already exceeds the deal size following an early-look round. 

Price talk has yet to emerge. Accounts are being told to expect B2/B+/B+ corporate and B1/B+/BB- facility ratings. In addition to the TLB (which also includes a $1 billion equivalent euro-denominated tranche), debt financing for the buyout will include $3.77 billion of other secured debt, $2.23 billion of other secured mortgage debt and $4 billion of other unsecured debt, sources added. Earlier marketing materials shown to investors outlined pro forma leverage of 4.6x/6.3x off of marketed adjusted EBITDA of $2.368 billion, with an equity check of approximately $16.69 billion, according to sources.

Even if the transaction moves swiftly through the market as expected, it won’t dent active deal flow, with $34.7 billion currently in market via 41 issuers. The furious pace of the previous week’s launches abated somewhat last week. Gross and net volume were $18.1 billion and $11.4 billion, respectively, but stripping out Medline volume would be far more modest at $12.1 billon/$5.4 billion. Obviously, Medline weighs heavily on the $11.3 billion of launched M&A and opportunistic activity continued to keep pace, at $6.6 billion last week, with more deals said to be in the works.

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Portfolios in brief: Holds reflect most recent reporting period available

Palmer Square: Caesars Resort Collection (B2/B) — Repricing

Investors received allocations of Caesar Resort Collection’s repriced $1.787 billion first-lien term loan (L+350, 0% floor), which broke to a 100.125-100.5 market from issuance at par. The transaction reduces pricing from L+450 with a 0% floor. Credit Suisse was left lead on the financing, which priced tight to talk. Caesars Resort Collection, a subsidiary of casino-entertainment company Caesars Entertainment, was formed in 2017. Palmer Square Capital BDC holds $3M in principal amount of the existing 1L debt.

BCRED, Palmer Square: CHG Healthcare Services (B2/B) — Refi, dividend

A Goldman Sachs-led arranger group set price talk of L+375-400, with a 0.50% floor and a 99 OID on CHG Healthcare’s $1.58 billion first-lien term loan. Commitments are due at 10 a.m. ET Thursday, Sept. 23. The first-lien term loan would include a 25 bps step-down set at a half-turn inside of closing net first-lien leverage. The issuer is seeking a $1.58 billion first-lien term loan and a $430 million second-lien term loan, which has been placed privately. Proceeds, along with around $300 of cash on hand, will be used to refinance its roughly $1.71 billion of existing debt and pay a $560 million dividend to shareholders, according to a Moody’s report. Holders of the company’s 1L debt due July 2023 (L+300, 1% floor) include Blackstone Private Credit Fund with $23.5M in principal amount and Palmer Square Capital BDC with $484K.

NexPoint, OCSL, Palmer Square, BCRED, Steele Creek, ARCC: Global Medical Response (B2/B) — Dividend

Investors received allocations of the $480 million add-on term loan for Global Medical Response (L+425, 1% floor), which was issued at par. KKR Capital Markets was left lead on the transaction, which priced tight to talk. Proceeds will refinance preferred equity. The provider of air ambulance services, formerly known as Air Medical Group, is controlled by KKR. Holders of the company’s existing TL debt due March 2025 include NexPoint Capital with $3.4M in principal amount, Oaktree Specialty Lending Corp. with $8.7M and Oaktree Strategic Income II with $1.1M. Holders of the TL debt due October 2025 (L+475, 1% floor) include Palmer Square Capital BDC with $4.5M, Blackstone Private Credit Fund with $21.8M and Steele Creek Capital Corp. with $497K. Ares Capital Corp. $145.1M in principal amount of the company’s subordinated debt due March 2026 (L+788, 1% floor) and an equity stake valued at $2.4M.

CCAP: MDVIP (B2/B) — LBO

A Goldman Sachs- and Jefferies-led arranger group launched a $685 million first- and second-lien financing backing Goldman Sachs Asset Management and Charlesbank Capital Partners’ planned acquisition of MDVIP, setting a lender call for 11 a.m. ET Tuesday, Sept. 21. The financing is split between a $500 million first-lien term loan and a $185 million second-lien tranche. Goldman Sachs is left lead on the first-lien term loan and Jefferies is left lead on the second-lien loan. They are joined by Societe Generale, KeyBanc Capital Markets, KKR Capital Markets, Citizens and Stone Point as arrangers. Crescent Capital BDC holds $9.5M of the company’s existing 1L debt due November 2024 (L+425, 1% floor) together with an equity stake valued at $1.6M.

Palmer Square, SIRR, PFX: Northstar Group Services (B2/B) — Recap

Macquarie Capital launched a $200 million incremental term loan for NorthStar Group Services, setting a lender call for 10 a.m. ET Tuesday, Sept. 21. The incremental term loan will support a recapitalization of the company that includes equity contributions from new third-party investors. Price talk is not yet available, but the incremental debt would be fungible with the borrower’s approximately $420 million term loan due November 2026 (L+550, 1% floor). The loan is governed by a maintenance covenant and has annual amortization of 2.5% until year four, at which point it steps up to 5%, and again to 7.5% in years five and six. Holders of the existing 1L debt include Palmer Square Capital BDC with $3M in principal amount and Sierra Senior Loan Strategy JV I with $4.9M. PhenixFIN Corp. holds an equity stake valued at $33.4M.

PSEC, GBDC: Southern Veterinary Partners (B3/B-) — M&A

Jefferies outlined a 99.5-99.75 offer price for the $150 million add-on term loan for Southern Veterinary Partners. Proceeds fund the company’s acquisition pipeline. The incremental loan will be fungible with the borrower’s existing first-lien term loan due October 2027, which is priced at L+400, with a 1% floor, and is covered by 101 soft call protection through Oct. 5. Pro forma for the add-on, the first-lien would grow to about $583 million. The issuer is concurrently placing privately a $100 million delayed-draw first-lien term loan. Commitments are due by noon ET Wednesday, Sept. 22. Prospect Capital holds $8M in principal amount of the company’s 2L debt due October 2028 (L+775, 1% floor). Golub Capital BDC holds equity stakes valued at a combined $5.9M.

Audax: Therma Holdings (B2/B-) — M&A

A Jefferies-led arranger group set an offer price in the 99.5 area on the $350 million funded add-on first-lien term loan for Therma Holdings. The proposed $67.8 million add-on to the delayed-draw loan is offered at 99 in order to be fungible with the borrower’s existing unfunded delayed-draw term loan, which priced at 99 in December. The funded add-on term loan add-on would be fungible with the existing first-lien loan due December 2027 (L+400, 0.75% floor), increasing the tranche size to about $738.1 million. The delayed-draw add-on would be tacked on to the existing $75 million delayed-draw tranche that trades as a strip with the term loan, increasing the DDTL to $142.8 million. The ticking fee would be 100% of the spread at closing, consistent with the existing debt. Proceeds would support acquisitions. Audax Credit BDC holds $417K in principal amount of the existing 1L debt.

BCRED: Virtusa Corp. (B2/B+) — Repricing

A BofA Securities-led arranger group set price talk of L+375 with a 0.50-0.75% floor at par on the repricing of Virtusa’s $599 million term loan B due February 2028. Commitments are due at noon ET Wednesday, Sept. 22. The existing loan, which was syndicated in December but closed in February, cleared at L+425 with a 0.75% floor and a 25 bps step-down at 3x gross first-lien leverage, versus 3.8x at closing. The 101 soft call protection rolled off last month. Barclays, Deutsche Bank, Goldman Sachs, HSBC and Nomura are joining BofA as co-arrangers on the loan. Blackstone Private Credit Fund holds $17.5M in principal amount of the existing 1L debt. – Thomas Dunford

Download LFI BDC Portfolio News 9-20-21 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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