Cengage cuts pricing on $1.75B exit leveraged loan, amid heavy investor demand

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


Neiman Marcus eyes TLB repricing, sets lender call for Monday

Credit Suisse has scheduled a lender call for noon EST on Monday, March 3, to launch a repricing of Neiman Marcus’ $2.943 billion covenant-lite term loan due October 2020, according to sources.

Price talk is not yet available, but the issuer is not seeking to alter the deal’s 1% LIBOR floor. The paper is currently priced at L+400, with a 1% LIBOR floor, with a step-down to L+375 when first-lien leverage is less than 4x.

Of note, the existing loan is covered by a 101 soft call premium that rolls off in the end of October.

Commitments will be due on Friday, March 7, sources added.

The TLB was syndicated in October via Credit Suisse, RBC Capital Markets, Deutsche Bank, Goldman Sachs, and Morgan Stanley, proceeds of which helped fund Ares Management and Canada Pension Plan Investment Board’s $6 billion purchase of the upscale retailer from Warburg Pincus and TPG. The loan was issued at 99.5, but had been pegged in a 101/101.375 context in recent days, sources said.

Financing for the LBO also includes a $800 million, five-year asset-based revolver and $1.56 billion of bonds, split between a $960 million issue of 8% notes due 2020 and a $600 million issue of 8.75%/9.5% PIK-toggle notes due 2021.

Neiman Marcus is rated B/B3, while the term loan is rated B/B2, with a 3 recovery rating from S&P. – Kerry Kantin


Carlyle Investment Management prices $726.5M CLO via MS

Morgan Stanley today priced a $726.5 million CLO for Carlyle Investment Management, according to market sources.

The deal is structured as follows:

Earlier this week Carlyle’s European CLO management business, CELF Advisors priced an upsized €375 million CLO via Credit Suisse, making it the second manager to price new CLOs on both sides of the Atlantic this year.

The CLO has a 2.1-year non-call period and a 4.1-year reinvestment period.

With Carlyle’s deal, 16 CLOs have priced in February totaling $8.22 billion, according to LCD. Issuance in the year to date stands at $10.77 billion across 21 deals. – Sarah Husband


Leveraged loan fund inflows hit five-week high at $673M

Retail-cash inflows to bank loan mutual funds and exchange-traded funds totaled $673 million for the week ended Feb. 26, according to Lipper. Of the total, roughly 10% was tied to the ETF segment, down from 15% last week and 28% in the week prior.

This is the largest inflow in five weeks and is up from $411 million last week. It extends the net inflow streak to 89 weeks, with a total of $65 billion over that span, by the weekly reporters only.

The four-week trailing average ticks up to $478 million, from $425 million last week, but is below the $523 million two weeks ago.

Year-to-date inflows total $5.3 billion, of which $630 million are ETF-related, or 12% of the sum. In the comparable year-ago period, inflows were $8.2 billion, also with 12% tied to ETFs.

Last year’s full-year inflows totaled $52.3 billion, of which 10% was tied to ETFs.

The change due to market conditions was positive $7.4 million, a rebound from negative $37 million last week. Total assets stood at $107.4 billion at the end of the observation period, with ETFs comprising $7.9 billion of the total, or approximately 7%. (Readers reconciling week-over-week data will take note of a large change in total assets, and it’s likely due to fund reclassifications.) – Jon Hemingway


Leonard Green’s Aspen Dental drops plan to refinance leveraged loan

aspen dentalAspen Dental won’t proceed with its refinancing, investors were told today. The issuer, which is controlled by Leonard Green had sought to remove maintenance covenants from its term loan and reduce pricing by 125 bps, to L+475, with a 1% LIBOR floor via GE Capital Markets, UBS, and Jefferies.

Some investors were concerned about the proposed covenant-lite structure in the light of weaker-than-expected 2012 performance tied to a disruption in third-party financing for some of Aspen’s customers, sources said. While the sponsor in recent days agreed to add a covenant, the prospect of both the maintenance covenant and potentially a lower pricing reduction than originally planned proved unappealing. Instead, B/B2 Aspen is expected to reapproach investors later, when the company can demonstrate that the rebound in the business seen in the most recent quarter has been sustained, sources explained.

The new deal would have included a slight upsizing, and refreshed maturities. The $330 million, six-year B term loan was offered at 99.5 and would have included include six months of 101 soft call protection.

The accompanying $40 million, five-year revolver was talked at L+475, and was offered with 100 bps upfront. The RC included a 50-bps unused fee. The RC would have included a springing leverage covenant when it is drawn or if greater than $15 million of standby letters of credit are outstanding, sources noted. – Chris Donnelly


ILFC/Delos Finance 1.5B loan rises from sub-par issuance on entering trading this afternoon

The $1.5 billion B term loan for International Lease Finance Corp. advanced to 100.25/100.75 after breaking for trading this afternoon at 100/100.5, from issuance at 99.5, according to sources. The seven-year loan is priced at L+275, with a 0.75% LIBOR floor. Issuance is at Delos Finance, a newly formed indirect subsidiary of ILFC. Deutsche Bank, Goldman Sachs, and RBC Capital Markets arranged the loan, which cleared at the tight end of talk and was upsized by $500 million. The aircraft lessor will use the proceeds for general corporate purposes. Terms:

Borrower Delos Finance
Issue $1.5 billion B term loan
Spread L+275
LIBOR floor 0.75%
Price 99.5
Tenor seven years
YTM 3.63%
Call protection six months 101 soft call
Corporate ratings N/A
Facility ratings BBB-/Ba2
S&P recovery rating N/A
Financial covenants Maximum LTV (70%)
Arrangers/bookrunners DB, GS, RBC
Admin agent DB
Px talk L+275-300/0.75%/99.5
Notes No annual amortization

Presidio (Sponsor: American Securities) sets $600M leveraged loan for dividend recap

presidioBarclays, Morgan Stanley, PNC, and SunTrust Robinson Humphrey are launching a dividend recapitalization for Presidio with a bank meeting on Tuesday, March 4, at 10:00 a.m. EST. Presidio, a provider of advanced-technology infrastructure solutions, is seeking a $600 million B term loan due March 31, 2017.

Proceeds will be used to refinance existing debt, fund a one-time distribution to shareholders, and pay related fees and expenses. PNC is administrative agent on the loan, sources noted.

Presidio in August 2012 placed a $385 million term loan at L+450, with a 1.25% LIBOR floor. Amortization on the existing loan, currently 1%, is poised to kick up to 5% later this year. The deal includes a total leverage test.

Sponsor American Securities contributed $230 million of equity in the 2011 LBO, a transaction that leveraged Presidio at roughly 3.8x, all senior, according to sources.

The issue is currently rated B+/B1, with current loan ratings at B+/Ba3. – Chris Donnelly