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LevFin Insights BDC Portfolio News 9/27/21

Posted on September 28, 2021

Amid issuer-friendly market conditions, several BDC-held credits seek to refinance

Loans continued to run hot last week as arrangers wrapped a significant portion of the busy new-issue calendar, offering a deluge of 23 issuer-friendly pricing revisions tempered by investor-friendly reining in of some aggressive documentation points. Issuance was similarly heavy, again with a helping of pushback around documentation that was by no means widespread.

With in-market loan activity easing lower, supportive conditions for issuance should continue to cushion the current issuer-friendly environment.

Save for a slightly weaker open during Monday’s session when stocks were tumbling on concerns about Evergrande, the secondary loan market remained well-bid last week, which players say is a testament to the white-hot CLO market. After slipping seven bps Monday, the average bid price of the Credit Suisse Leveraged Loan Index ended the week essentially unchanged, closing out Thursday at 98.36% of par, versus 98.37 the previous Friday.

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Portfolios in brief: Holds reflect most recent reporting period available

FSK, Guggenheim: American Tire Distributors (B3/B-/B-) — Refinancing

A BofA Securities-led arranger group rescheduled the lender call for American Tire Distributors to 2 p.m. ET tomorrow, Sept. 28. The original call was set for Thursday, Sept. 23. Proceeds of the seven-year term loan B will be used to refinance the company’s term loans and ABL facilities. The issuer is offering 101 soft call protection for six months. American Tire Distributors’ existing debt includes a $150 million term loan due 2023 and a $795 million term loan due 2024, according to a recent S&P report. Citi and Wells Fargo are arranging the loan alongside BofA Securities. FS KKR Capital Corp. holds $2.6M in principal amount of the company’s term debt due September 2023 (L+600, 1% floor) and $43.3M of its term debt due September 2024 (L+750, 1% floor). Guggenheim Credit Income Fund holds $2.9M of the debt due September 2023.

NMF, PFLT, FCRD: Cano Health (B3/B) — Refinancing

Investors received allocations of the $100 million add-on term loan for Cano Health (L+450, 0.75% floor), which was issued at par. Credit Suisse was left lead on the deal, which priced tight to original talk. Proceeds, along with those from a $300 million issue of 6.25% unsecured notes due 2029, will be used to repay a bridge loan and place cash on the balance sheet. Holders of the company’s existing 1L debt include NMFC Senior Loan Program III LLC with $7M in principal amount, NMF SLF I with a combined $7.1M, PennantPark Floating Rate Capital Fund with $2.7M and First Eagle Logan JV LLC with a combined $2M.

Palmer Square, BCRED, Monroe, Steele Creek: Guidehouse (B2/B) — M&A

RBC Capital Markets launched a $565 million incremental term loan B backing Guidehouse’s planned acquisition of Dovel Technologies. Price talk has yet to emerge. Commitments will be due Friday, Oct. 1. Guidehouse on Sept. 8 agreed to purchase Dovel from Macquarie Capital for an undisclosed sum; closing is expected in the fourth quarter. Dovel is a consulting firm to federal agencies in the health IT, life sciences, public safety and grants management markets. Holders of the company’s existing 1L debt due May 2025 (L+400, 0% floor) include Palmer Square Capital BDC with $6M in principal amount, Blackstone Private Credit Fund with $21.5M, Monroe Capital Income Plus Corp. with $1.2M and Steele Creek Capital Corp. with $995K.

GLAD, CION: Medical Solutions (B2/B) — LBO

A UBS-led arranger group set price talk of L+375-400 with a 0.50% floor and a 99 OID on the $1.2 billion first-lien term loan strip to support Centerbridge Partners’ and Caisse de dépôt et placement du Québec’s planned acquisition of Medical Solutions. The first-lien term loan is split between a $1 billion funded tranche and a $200 million delayed-draw component. Financing for the buyout also includes a $320 million privately placed second-lien term loan. Pro forma leverage runs about 4.2x/5.6x. The transaction would also be financed with $1.005 billion of equity, comprising roughly 43% of total capitalization. Lenders to the first-lien term loan are offered six months of 101 soft call protection. Commitments are due Thursday, Oct. 7. Holders of the company’s existing 2L debt due June 2025 include Gladstone Capital Corp. with a combined $6M and CION Investment Corp. with $10M.

Steele Creek: Mirion Technologies (B1/B) — SPAC merger

A Goldman Sachs-led arranger group set talk of L+350 with a 0.5% floor and a 99 offer price on the  $830 million term loan B for Mirion Technologies backing its merger with the GS Acquisition Holdings Corp II special purpose acquisition company. The seven-year TLB will include six months of 101 soft call protection. Commitments are due Oct. 5. Proceeds from the financing along with balance sheet cash, cash held in trust and PIPE proceeds will be used to pay down existing debt, add cash to balance sheet and fund the business combination of GS Acquisition Holdings Corp II with the ultimate parent company of Mirion Technologies. Steele Creek Capital Corp. holds $992K in principal amount of the company’s existing 1L debt due (L+400, 0.2% floor).

BCRED, Audax, Palmer Square, GECC: Mitchell International (B3/B-) — Div recap

A Goldman Sachs- and KKR Capital Markets-led arranger group set price talk of L+375-400 with a 0.50% floor and a 99 OID on the $2.475 billion first-lien term loan for Mitchell International. Guidance on the second-lien tranche is L+650-675 with a 0.50% floor, offered at 99. Proceeds, along with cash from the balance sheet, will be used to refinance debt and fund a shareholder dividend, which will total approximately $457 million, according to Moody’s. The loan would include portability language, though specifics weren’t available at publication time. The seven-year first-lien loan would include six months of 101 soft call protection, and the eight-year second-lien would carry 102, 101 hard call premiums in years one and two. Commitments are due Friday, Oct. 1. Blackstone Private Credit Fund holds $11.2M of the company’s 1L debt due December 2024 (L+325) and $13M of the 1L debt due December 2024 (L+425). Other holders of the L+425 debt include Audax Credit BDC with $993K and Palmer Square Capital BDC with $3.2M. Great Elm Capital Corp. holds $3M of the company’s 2L debt due December 2025 (L+725).

BCRED: NFP Corp. (B3/B) — M&A

Investors received allocations of NFP Corp’s $75 million add-on term loan (L+325, 0% floor), which was issued at 98.79. BofA Securities was left lead on the deal, which priced in line with talk. Proceeds fund current or future acquisitions. The insurance broker is controlled by Madison Dearborn. Blackstone Private Credit Fund holds $13.4M in principal amount of the existing 1L debt.

Steele Creek: Spirit AeroSystems (B2/B) — Refinancing

BofA Securities set price talk of L+425-450 with a 0.50% floor and 99.5 OID on Spirit AeroSystem’s $600 million term loan B. Proceeds will be used to refinance the company’s term loan B due 2025 and for general corporate purposes, including payment of debt or debt-like items. The existing loan is priced at L+525, with a 0.75% floor. The 101 soft call protection is set to roll off the existing loan in early October, and the issuer is offering six months of 101 soft call protection on the new loan, which will have the same January 2025 maturity date as the existing facility. Commitments are due by 10 a.m. ET Friday, Oct. 1. Steele Creek Capital Corp. holds $498K in principal amount of the company’s 1L debt due January 2025 (L+525, 0.75% floor).

TFSA: Starwood Property Trust (Ba2/BB-/BB+) — Refinancing

J.P. Morgan launched a $150 million add-on to Starwood Property Trust’s term loan B-2 to repay repurchase facilities. In addition, Starwood is seeking to amend its asset coverage ratio covenant. The arranger set price talk of L+350, with a 0.75% floor and a 99.5 OID, inclusive of a 25 bps consent fee that is offered to holders of both the issuer’s TLB-1 and TLB-2. A commitment deadline has been set for 5 p.m. ET today. The fungible add-on term loan B-2 due July 2026 would increase that tranche to $399 million. The loan was put in place in September 2020 and is not fungible with the originally $400 million TLB-1 due 2026 put in place in 2019, which is priced at L+250 with a 0% floor. Current TLB-1 outstandings are $393 million. Terra Income Fund 6 holds an equity stake valued at $1.7M.

FCRD, FSK: Trace3 (B3/B) — LBO

Credit Suisse, Jefferies and Wells Fargo circulated price talk of L+425-450 with a 0.50% floor and a 99 OID on the $415 million first-lien term loan backing American Securities acquisition of Trace3. The seven-year loan will include six months of 101 soft call protection. A $135 million second-lien term loan is being placed privately; the capital structure will also include a $150 million asset-based revolver. Commitments are due by 5 p.m. ET Wednesday, Oct. 6. Issuance will technically be at Escape Velocity Holdings. Holders of the company’s 1L debt due October 2024 (L+675, 1% floor) include First Eagle Alternative Capital BDC with $3M in principal amount, FS KKR Capital Corp. with $250.6M and Credit Opportunities Partners JV LLC with $32.8M. FS KKR also holds an equity stake valued at $5.9M.

Palmer Square, Audax: Zelis (B2/B) — M&A

A Morgan Stanley-led arranger group set talk of L+350 with a 0% floor and a 99-99.25 offer price on Zelis’s $850 million term loan package. The financing includes a $550 million funded term loan that would be used to fund the acquisition of Sapphire Digital and a $300 million delayed-draw term loan that would be used to fund future acquisitions, capital expenditure or other investments. The deal is an add-on to the issuer’s term loan due Sept. 30, 2026. Zelis will reset 101 soft call protection for six months. Ticking fees are 50% of the margin for days 60-120, rising to the full margin on day 121. Commitments are due by 10 a.m. ET Friday, Oct. 1. The issuer last tapped the market in January for a repricing of its $1.485 billion term loan, which lowered the margin to L+350, from L+475, with no change to the 0% floor. Holders of the existing 1L debt include Palmer Square Capital BDC with $4.8M in principal amount and Audax Credit BDC with $2.4M.

Download LFI BDC Portfolio News 9-27-21 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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