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NRG Energy Scraps $870M High Yield Bond Deal

Electric power concern NRG Energy has pulled an offering for $870 million of 10.25-year (non-call five) notes, according to a company statement. The cancellation was “in response to broader market conditions.”

Citi, Credit Agricole CIB, and Deutsche Bank were bookrunners on the deal, which sources say saw initial price talk at 5.75%. Proceeds would have been used to finance a tender offer for its $869 million of 6.625% notes due 2023, which has also been withdrawn.

Risk-on sentiments have waned in the high-yield market as of late, with U.S. high yield funds recording an outflow of $622 million for the week ended Nov. 8, following last week’s $1.2 billion withdrawal. Another sign of weakening was reflected in the Nov. 9 reading of LCD’s flow-name high-yield bonds, which showed the average bid for the 15-name sample dipping 114 bps, to 97% of par, for a new year-to-date low.

NRG’s would-be bond sale is the first to be pulled since Charter Communications scrapped its offering in June. — Jakema Lewis

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GNC Scraps Proposed Leveraged Loan Extension

GNC Holdings has scrapped plans to amend and extend an existing leveraged loan.

Over the past few weeks, GNC had engaged in preliminary discussions with its lenders to opportunistically amend and extend its B term loan and revolver, Bob Moran, interim chief executive officer, said in a statement released this morning.

“In the company’s view the rates and amendments that were achievable during the amend and extend process did not reflect the progress and continuation of positive momentum occurring in our business,” Moran said. “As a result we will discontinue the amend and extend process at this point in time as the costs were incongruous with the business fundamentals and not in the best interest of our shareholders.”

In the statement, the company said it will continue to use its strong free cash flow, expected to be roughly $250 million in fiscal year 2017, to pay down its revolver due September 2018, of which $100 million was outstanding as of March 31, 2017. The company’s free cash flow generation provides it with the flexibility to explore the appropriate time to refinance its $1.1 billion term loan due March 2019.

Pittsburgh-based GNC (NYSE: GNC) is a global specialty health, wellness, and performance retailer. — Richard Kellerhals

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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Kraton Polymers Shelves M&A Credit Amid Volatile US Leveraged Loan Market

Credit Suisse, Nomura, and Deutsche Bank have shelved the $1.35 billion B term loan backing Kraton Performance Polymers’ acquisition of Arizona Chemical, according to sources. The loan is one of a handful of M&A-related transactions to be shelved amid the recent volatile market conditions.

As reported, the arrangers last week sweetened guidance on the six-year loan to L+500, with a 1% LIBOR floor and a 92 offer price, versus initial talk of L+475–500, with a 1% LIBOR floor and a 98 offer price. The revised deal offered a yield to maturity of about 8.19%, versus 6.36–6.63% at the initial talk. Commitments on the revised transaction were due Wednesday.

The TLB included a secured-leverage test opening at 4x and amortization of 2.5% in the first year and 5% thereafter.

The adjoining $425 million eight-year (non-call three) senior bond offering is also understood to be postponed.

NYSE-listed Kraton recently agreed to purchase privately held Arizona Chemical for $1.37 billion in cash. The transaction represents an approximately 7.4x multiple of Arizona Chemical’s LTM adjusted EBITDA as of June 2015, or 5.5x adjusted for expected synergies, according to the company.

Pro forma leverage at closing will run roughly 4.3x, sources said. The M&A transaction is expected to close late in 2015 or early in 2016.

The financing also includes a $250 million asset-based revolving credit facility, which would be undrawn at closing.

The issuer will be retiring its 6.75% notes due 2019 and its existing ABL facility in connection with the transaction.

Arizona Chemical’s $150 million second-lien term loan due 2022 (L+650, 1% LIBOR floor) is currently callable at 101. The issuer’s first-lien term loan due 2021 (L+350, 1% floor) originally totaled $730 million. Arizona Chemical’s loans were syndicated in June 2014 to refinance debt and fund a $410 million dividend to its owners. Goldman Sachs is administrative agent. American Securities in late 2010 acquired a 75% stake in Arizona Chemical from Rhone Capital, which retained a 25% stake in the company, a producer and refiner of pine chemicals.

Kraton Performance Polymers is a global producer of engineered polymers and one of the world’s largest producers of styrenic block copolymers. — Kerry Kantin/Chris Donnelly

This story first appeared on www.lcdcomps.com. Learn more about LCD here.

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Citing Choppy Markets, Veritas Shelves Debt Financing Backing Carlyle LBO

Citing market conditions, Veritas today postponed both the loan and bond components of the cross-border debt financing packaging backing The Carlyle Group’s $8 billion acquisition of the business from Symantec, according to sources.

As reported, the institutional loan component of the transaction launched to market as a $2.45 billion U.S. dollar term loan and a €760 million euro tranche.

Bank of America Merrill Lynch, Morgan Stanley, UBS, Jefferies, Barclays, Citigroup, Credit Suisse, and Goldman Sachs are arrangers on the transaction, with BAML as left lead on the loans and Morgan Stanley as left lead on the bonds. Mizuho and SMBC also are underwriters on the transaction, which is expected to close by Jan. 1, 2016.

As reported, the arrangers last week offered investor-friendly changes to the seven-year loan, boosting guidance to L/E+500, with a 1% LIBOR/Euribor floor and a 95 OID, from initial talk of L/E+450–475, with a 1% LIBOR/Euribor floor and an offer price of 98–99.

Also, investors heard at the time that the U.S. dollar component of the transaction being sold to investors had been reduced to $1.5 billion, from $2.45 billion. Of that $950 million, $250 million was slated to be tacked on to the secured bond deal, originally outlined as $500 million, while the arrangers would have held the $700 million balance, sources said.

At the revised guidance, the term loan offered a yield to maturity of about 7.12%, versus 5.8–6.26%. Loan commitments were due on Friday. Nov. 13.

Some investors were said to have struggled with the transaction’s complex financials as the issuer is carved out of Symantec. Giving full credit for proposed adjustments, the transaction would leverage the issuer at roughly 4.5x through the secured debt and at about 6.5x on a total basis.

The issuer is rated B/B2, while the senior secured debt drew B+/B1 ratings, with a 2L recovery rating from S&P. Agencies assigned CCC+/Caa1 ratings to the unsecured debt, which drew a 6 recovery rating from S&P.

Symantec earlier this year announced it was exploring strategic alternatives for Veritas, a data-storage and recovery business it acquired in 2005. The equity investor group will also include GIC, Singapore’s sovereign wealth fund, and others, sources said.

Veritas provides next-generation information-management software and services, including multiple cloud deployments, managed services, and on-premise infrastructure, and has a top market share in the core backup and recovery markets. — Staff reports

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LCD’s High Yield Market Primer/Almanac Updated with 3Q Charts

LCD’s online High Yield Bond Market Primer has been updated to include third-quarter 2015 and historical volume and trend charts.

The Primer can be found at HighYieldBond.com, LCD’s free website promoting the asset class. HighYieldBond.com features select stories from LCD news, weekly trends, stats, and analysis, along with recent job postings.

We’ll update the U.S. Primer charts regularly, and add more as the market dictates (new this time around: an historical look at Fallen Angels, courtesy S&P).

Charts included with this release of the Primer:

  • US High Yield Issuance – Historical
  • 2015 High Yield Issuance, by Purpose
  • High Yield LBO Issuance
  • Fallen Angels – Historical
  • Cash Flows to High Yield Funds, ETFs
  • PIK Toggle Issuance (or lack thereof)
  • Yield to Maturity: Historical, Recent

LCD’s Loan Market Primer and High Yield Bond Market Primer are some of the most popular pieces LCD has published. Updated annually (print) and quarterly (online) to include emerging trends, they are widely used by originating banks, institutional investors, private equity shops, law firms and business schools worldwide.

Check them out, and please share them with anyone wanting an excellent round-up of or introduction to the leveraged finance market.

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Xerium, amid eroding market conditions, withdraws $495M loan refinancing

Xerium Technologies has withdrawn its proposed opportunistic refinancing due to market conditions, according to sources.

As reported, the company had been seeking a $495 million, covenant-lite B term loan, proceeds of which would have been used to refinance its debt into an all-first-lien structure. Commitments were due Wednesday.

Bank of America Merrill Lynch, Jefferies and Macquarie launched the seven-year deal last month, setting price talk of L+500, with a 1% LIBOR floor and a 99 offer price.

B/B2 Xerium last tapped the loan market in mid-2013 for a covenant-lite term loan due 2019 that includes a springing maturity to the issuer’s $240 million of 8.875% senior notes due June 2018. There was roughly $225 million of term debt outstanding as of June 30.

Xerium, which trades under the ticker XRM on the NYSE, is a global provider of industrial consumables and services, manufacturing clothing and roll covers for the paper industry. – Staff reports

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Crowne Group postpones $130M add-on leveraged loan

The Crowne Group has postponed a package of add-on first- and second-lien term loans that Jefferies had been quietly offering in recent weeks, sources said. Proceeds were earmarked for a potential purchase.

The issuer had been seeking fungible add-ons of $130 million to its first-lien term loan and $160 million to its second-lien term loan. Under the proposal, pricing on both loans would have risen from their current levels, according to sources.

The existing financing steps from the late 2014 purchase of TRICO Products from Kohlberg & Co. That covenant-lite transaction included a $290 million first-lien term loan due Sept. 30, 2020 priced at L+500, with a 1% floor, and a $90 million second-lien term loan due Sept. 30, 2021, priced at L+800, with a 1% floor.

The Crowne Group, headquartered in Cleveland, is a manufacturer and distributor of both aftermarket and OEM component parts for the automotive and other industrial equipment markets. – Chris Donnelly

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CLO roundup: Greek cloud hangs over Europe; US prints eight deals

Having already paused activity last week, Greece’s debt problems now threaten to curtail new-issue CLO activity for the rest of the summer in Europe after yesterday’s rejection of austerity measures. It also remains to be seen whether the U.S. market will lose its momentum after last week’s bonanza that saw eight deals print stateside.

Global CLO volume Jul 3 2015

 

Year-to-date statistics are as follows:

• Global issuance totals $68.38 billion.
• U.S. issuance totals $59.96 billion from 113 deals, versus $64.01 billion from 119 deals during the same period last year.
• European issuance totals €7.56 billion from 19 deals, versus €6.92 billion from 16 deals during the same period last year.  – Sarah Husband

 

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Six Degrees, Stage Entertainment on LCD European mid-market auction watchlist

LCD has compiled a watchlist of auction situations in the European mid-market to track upcoming M&A deal flow in this space, and will update the list fortnightly. It will focus on deals for which the anticipated enterprise value is roughly €400 million and below, or the debt is expected to be roughly €200 million and below. The list is attached as an Excel spreadsheet (note, LCD’s large-cap auction calendar can be found here).

Penta Investments is looking to sell cloud services provider Six Degrees Group, according to market sources. In 2011, Penta invested £40 million in three platform businesses in the connectivity, data-centre and unified communications sectors, before subsequently making further bolt-ons. The firm has mandated DC Advisory to help run the auction, which has now progressed to the second round.

CVC Capital Partners is poised to acquire Stage Entertainment, a U.K.-based theatre operator. The buyout firm is in exclusive talks with the company’s founder about a deal that could value the company at as much as €400 million, according to reports. CVC is understood to have fought off a rival bid from Providence Equity Partners-owned Ambassador Theatre Group.

Dutch buyout firm Waterland Private Equity has mandated Grant Thornton to help it find a buyer for discount dining club Tastecard, according to reports, which suggest the company could fetch roughly £100 million. If the sale is successful, it would represent a quick flip for Waterland, whose portfolio company Didix only purchased Tastecard in September last year.

Several processes have however reached fruition in recent weeks, or been pulled altogether.

U.K.-headquartered special effects company The Foundry was sold by The Carlyle Group to HgCapital in a deal valued at £200 million. HgCapital financed the deal with equity initially, and will now look to the refinance the business with new debt in the coming months, according to sources.

Poundworld has also been sold, as expected, to U.S. buyout firm TPG in a £150 million deal.

CCMP Capital-owned Pure Gym snapped up rival LA Fitness in a deal thought to be sized at £60-80 million. LA Fitness had been put up for sale by a consortium of lenders that acquired it through a debt-for-equity swap in 2013. The deal has yet to be approved by the competition authorities.

The management team of U.K.-based services group SimplyBiz meanwhile are understood to have shelved plans to sell or float the company. The business had attracted interest from around five private equity firms, understood to include Lyceum Capital and Sovereign Capital, and had carried a mooted valuation of roughly £100 million. The firm’s managing director, Neil Stevens, did however reveal the company was looking at alternative funding options that keep the management team and shareholder base “consistent”, suggesting some sort of debt financing is likely in the near future. – Oliver Smiddy

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Withdrawn deal: Bioplan/Arcade tables loan for now; will relaunch in September

bioplan-2-42581Goldman Sachs, Credit Suisse, Barclays, and Deutsche Bank have postponed until September syndication of their financing backing the merger of Bioplan and Arcade Marketing due to market conditions, sources said. The transaction requires regulatory approvals and wasn’t expected to close until mid-to-late-September, sources noted.

Amid difficult market conditions arrangers earlier attempted to jump-start the deal, boosting first-lien pricing to L+450, with a 1% LIBOR floor, offered at 98.5, and increasing talk on the second-lien term loan to L+800, with a 1% floor, at 98.

The covenant-lite deal will comprise a $375 million, seven-year first-lien term loan with six months of 101 soft call protection; a $145 million, eight-year second-lien term loan with 102, 101 call protection; and a $65 million five-year revolver. The first-lien loan was talked earlier at L+400-425, with a 1% floor, at 99, while talk on the second-lien loan was previously at L+750-775, with a 1% floor, at 99. The deal would have included a ticking fee that kicks in at half the spread for days 31-60, rising to the full spread on day 61. Goldman is left lead on the first-lien facilities, while Credit Suisse is left lead on the second-lien term loan.

The issuer is rated B/B3. The first-lien debt is rated B+/B2, with a 2 recovery rating. The second-lien debt is rated B-/Caa2, with a 5 recovery rating.

Ileos, which is owned by Oaktree, and KKR-controlled Visant earlier this month agreed to combine the units into a new business providing sampling products and services for the beauty, fragrance and personal-care segments, sources said.

Oaktree will hold a 75% stake in the venture, while KKR and DLJ Merchant Banking will hold the remaining 25% ownership interest.

The new venture is expected to generate annual revenue of approximately $450 million on a combined basis, according to Ileos. The combined venture would generate roughly $88 million of annual EBITDA, sources added. The transaction is expected to close by the beginning of the fourth quarter of 2014.

The Bioplan subsidiary of Ileos specializes in unit-dose sampling and promotional turnkey products, providing vials, sprays, sachets, tubes and thermoform units for care, perfume, and makeup. Arcade Marketing is a global provider of sampling products for the fragrance, cosmetics, and skincare segments. – Chris Donnelly