A Credit Suisse-led arranger group today cut pricing on Cengage’s $1.75 billion exit term loan amid heavy investor demand. Pricing is now L+600, with a 1% LIBOR floor, offered at 99.5, with the commitment deadline accelerated to Monday, March 3 at 5:00 p.m. EST.
By contrast, Credit Suisse, Deutsche Bank, Morgan Stanley, Citi, and KKR Capital originally talked the covenant-lite deal at L+700, with a 1% floor, at 99. As before the loan includes six months of 101 soft call protection.
Cengage is tweaking other items in the credit agreement, including revising step-down levels in the 50% excess-cash-flow sweep and slightly expanding the incremental loan basket.
As revised the loan would yield 7.3% to maturity down from 8.48% at initial talk.
The transaction also includes a $200 million asset-based revolver.
As noted earlier, creditors have until March 10 to vote on Cengage’s reorganization plan, with a confirmation hearing set for March 13. The settlement requires Cengage to emerge from Chapter 11 by March 31.
Under the settlement (see “Cengage, creditors hammer out consensual plan; exit seen by March 31,” LCD, Feb. 3, 2014), first-lien lenders are to receive 100% of the new reorganized equity (subject to the election of second-lien lenders and unsecured creditors to receive equity in lieu of cash in exchange for their claims), cash proceeds of the new term debt, and a share of the company’s “distributable cash,” which will be in an amount to be determined between $50-175 million. The allocation of equity and distributable cash to first-lien lenders will ultimately depend, in part, on the extent to which second-lien and unsecured creditors opt for equity in lieu of cash.
Second-lien lenders and unsecured creditors are to generally receive $225 million, comprised of each holder’s election of either cash or new equity. Of that amount, second-lien lenders will get 62.5%, or about $141 million, while the remaining 37.5% will be distributed to holders of senior notes claims (about $72.14 million), general unsecured claims ($11.22 million), and PIK notes claims (about $1 million), subject to certain adjustments related to the holdings of Cengage equity sponsor Apax Partners. – Staff reports