Loan bids extend decline with fifth-consecutive drop

The average bid of LCD’s flow-name composite fell 32 bps over the past few trading sessions, to 97.20% of par, from 97.52 on Oct. 1. Today’s drop marks the fifth-consecutive drop in the average bid, for a total decline of 128 bps over the 2.5-week span.

The average bid remains at its lowest level since December 2014, and of note, none of the 15 names in the sample are bid at par.

The composite remains biased towards the downside, with 12 loans lower, one unchanged and two higher; however, the two advancers gained a mere eighth of a point from the previous reading. The decliners, meanwhile, ranged from 0.125-1.75 points. Avaya’s typically volatile TLB-7 (L+525, 1% LIBOR floor) was responsible for the 1.75-point drop.

After a downcast session Friday, the market remains very choppy even as high-yield has clawed back some losses. While some loans have recovered from lows touched Friday, others continue to slide.

Traders continue to keep a close eye on the primary market, though there’s little clarity around clearing yields. Amid the recent volatility, several M&A/LBO transactions have gone into overtime and remain in price discovery, while three opportunistic transactions have been withdrawn all together.

With the average loan bid falling 32 bps, the average spread to maturity gained nine basis points, to L+461.

By ratings, here’s how bids and the discounted spreads stand:

  • 99.04/L+383 to a four-year call for the nine flow names rated B+ or higher by S&P or Moody’s; STM in this category is L+377.
  • 94.44/L+610 for the six loans rated B or lower by one of the agencies; STM in this category is L+568.


Loans vs. bonds
The average bid of LCD’s flow-name high-yield bonds advanced 146 bps, to 93.56% of par, yielding 8.05%, from 92.10 on Oct 1st. The gap between the bond yield and discounted loan yield to maturity stands at 371 bps. – Staff reports

To-date numbers

  • October: The average flow-name loan dropped 52 bps from the final September reading of 97.72.
  • Year to date: The average flow-name loan climbed 28 bps from the final 2014 reading of 96.92.

Loan data

  • Bids slip: The average bid of the 15 flow names tumbled 32 bps, to 97.20% of par.
  • Bid/ask spreads tighter: The average bid/ask spread tightened two basis points, to 36 bps.
  • Spreads grow: The average spread to maturity – based on axe levels and stated amortization schedules – increased nine basis points, to L+461.

Concordia sets London, NY meetings this week for cross-border leveraged loan

Goldman Sachs, Credit Suisse, Jefferies, and RBC Capital Markets have set lender meetings in New York and London this week to launch their cross-border loan financing backing Concordia Healthcare’s roughly $3.5 billion acquisition of Amdipharm Mercury Limited (AMCo).

The seven-year covenant lite institutional debt includes a $1.1 billion U.S. dollar term loan B, set to launch with a meeting on Thursday, Oct. 1 at 10 a.m. EDT, and a £500 million (roughly $759 million) sterling term loan B, launching with a lender meeting on Wednesday, Sept. 30 at 9:30 a.m. BST, sources said.

Altogether, arrangers have provided $4.3 billion of credit facilities and bridge commitments to finance the acquisition, and refinance all of AMCo’s outstanding loans. As noted earlier, Concordia will pay £800 million in cash for the acquisition and provide Cinven with 8.49 million of its own common shares. This will leave the private equity firm with a 19.9% stake in Concordia.

The bonds are expected to total round $950they  million, sources said. Of note, Concordia’s existing 7% notes include a 3.5x first-lien incurrence test, so leverage through the loans will be less than that cap.

Concordia today has roughly $575 million of institutional loans and AMCo has £500 million already, so the new money raise is only about $500 million, all in dollars, sources noted.

AMCo was formed through the merger of Mercury Pharma and Amdipharm, which were acquired by Cinven in August and October 2012, respectively. AMCo is an international specialty pharmaceuticals company, focusing on off-patent products. –Chris Donnelly/Nina Flitman


Gray eyes senior secured debt for purchase of Schurz assets

Gray Television plans to issue $415 million of debt to back its planned $442.5 million purchase of Schurz Communications T.V. and radio assets, according to an investor presentation filed with the SEC this morning.

On a conference call this morning to discuss the transaction, management said its “current intention” is to finance the deal on a senior secured basis, pointing to the low coupon on the existing term loan, which is L+300, with a 0.75% LIBOR floor.

The covenant-lite term loan due June 2021, which currently totals about $556 million, is steady on the news, quoted at 100/100.375. Wells Fargo is administrative agent, and also acted as a financial advisor to Gray on the Schurz transaction.

The broadcaster’s shares, which trade on the New York Stock Exchange under the ticker GTN, advanced about 10% on the news, to $12.90.

The M&A transaction, announced after the bell yesterday, is subject to regulatory approval and is expected to close in the fourth quarter of 2015 or the first quarter of 2016.

Pro forma for the transaction, 2014 revenue would have been roughly $774 million, 2014 net political revenue would have been about $120 million and 2014 broadcast cash flow would have been about $348 million. Net leverage, on a trailing eight-quarter basis, would run about 5.5x total at closing, according to the company. Note the existing capital structure also includes a $675 million issue of 7.5% notes due 2020.

Gray last tapped the market about a year ago via Wells Fargo for a $100 million fungible add-on term loan, which was issued at 99. Proceeds helped finance the company’s purchase of two ABC-affiliated television stations.

Gray is rated B+/B2, while the existing term debt is rated BB/Ba3, with a 1 recovery rating. S&P this morning said the company’s ratings are not affected by the acquisition announcement; Moody’s has not yet weighed in on the proposed M&A transaction. – Kerry Kantin 


KIK Custom Products launches $850M TL backing LBO by Centerbridge

Arrangers Barclays, BMO Capital Markets, Nomura, and Macquarie today launched their senior secured loan package backing Centerbridge Partners’ purchase of KIK Custom Products, setting price talk on the term loan of L+450-475, with a 1% LIBOR floor, and a 99 offer price, sources said.

The deal will include a $225 million, five-year asset-based revolver and an $850 million, seven-year covenant-lite B term loan. The transaction is also expected to include $390 million of unsecured notes, sources noted.

The term loan carries six months of 101 soft call protection and would yield roughly 5.8-6.07% to maturity.

Commitments are due by noon EDT on Friday, Aug. 14.

The transaction will leverage KIK Custom Products at roughly 4.1x on a net first-lien basis, and 5.9x net total.

Centerbridge is acquiring the consumer-products manufacturer from CI Capital, which acquired KIK Custom Products in 2007.

KIK Custom Products last tapped the loan market in November 2013 via Credit Suisse and UBS for $275 million of add-on first- and second-lien loans to finance its purchase of Chemtura’s BioLab consumer-products business. With the add-ons, the first-lien grew to $645 million and the second-lien increased to $270 million.

KIK Custom Products is an independent contract manufacturer of consumer packaged goods, and also makes private label household products and branded pool and spa treatment products. – Chris Donnelly/Kerry Kantin


Hostess recap leveraged loans enter trading mart atop new-issue price

Investors this afternoon received allocations of the first- and second-lien dividend recapitalization financing for Hostess Brands. The $925 million, seven-year first-lien term loan (L+350, 1% LIBOR floor) broke to a 100.125/100.625 market, versus issuance at 99.75, while the $300 million, eight-year second-lien term loan (L+750, 1% floor) opened bid at 100.25, from issuance at 99.5, according to sources. Credit Suisse, UBS, Deutsche Bank, Morgan Stanley, RBC Capital Markets, and Nomura arranged the covenant-lite loan, which cleared tight to original talk and with a shift of $100 million from the second-lien to the first-lien. Of note, the leads also added pre-cap language to the heavily oversubscribed deal, which will be used to refinance debt and to fund an approximately $905 million dividend. The pre-cap language allows for portability within the 18 months after the deal closes provided the M&A transaction meets the following criteria: pro forma net leverage is not above 6.3x, the deal has a minimum enterprise value of $2 billion, and the deal will be financed with a minimum of 30% equity, sources noted. Hostess is controlled by Apollo Global Management and Dean Metropoulos. Terms:

Borrower Hostess Brands
Issue $925 million first-lien term loan
UoP Dividend recapitalization
Spread L+350
LIBOR floor 1.00%
Price 99.75
Tenor seven years
YTM 4.62%
Call protection six months 101 soft call
Corporate ratings B/B2
Facility ratings B+/B1
S&P recovery rating 2H
Financial covenants none
Leverage 6.3x net total
Bookrunners CS, UBS, DB, MS, RBC, Nom
Admin agent CS
Sponsor Apollo, Dean Metropoulos
Price talk L+350-375/1%/99.5
Notes Upsized by $100 million; with a step to L+325 @ 4x senior secured leverage
Borrower Hostess Brands
Issue $300 million second-lien term loan
UoP Dividend recapitalization
Spread L+750
LIBOR floor 1.00%
Price 99.5
Tenor eight years
YTM 8.87%
Call protection 102, 101 hard call
Corporate ratings B/B2
Facility ratings CCC+/Caa1
S&P recovery rating 6
Financial covenants none
Leverage 6.3x net total
Bookrunners CS, UBS, DB, MS, RBC, Nom
Admin agent CS
Price talk L+750-775/1%/99
Sponsor Apollo, Dean Metropoulos
Notes Scaled back by $100 million

Kenan tightens pricing on $900M buyout leveraged loan

KeyBanc Capital Markets and Goldman Sachs are seeking recommitments by 1 p.m. EDT today on their term loan strip forKenan Advantage Group, after proposing to tighten the margin to L+300, with the same 1% LIBOR floor and 99.5 offer price as originally outlined. The margin was outlined previously at L+350.

Kenan also would eliminate a proposed step-down in pricing, as well as a proposed MFN sunset provision.

As reported, the underwriters have committed to provide $1.025 billion of secured credit facilities in support of OMERs Private Equity’s purchase of bulk transportation and logistics concern Kenan Advantage Group. The deal includes a $125 million revolver, a $750 million funded B term loan, and $150 million of delayed-draw term debt. Investors are offered a strip of the funded term loan and a $75 million delayed-draw term loan, with the other $75 million sold separately. The term debt includes six months of 101 soft call protection.

The seven-year term loan will now yield roughly 4.15% to maturity, down from 4.67% at initial guidance. The delayed-draw term loan would pay half the margin.

SMBC and Mizuho are syndication and documentation agents, respectively. Goldman is left lead on an accompanying $405 million of senior unsecured notes, sources said. Leverage is marketed at 3.85x/5.88x, sources add.

The issuer is rated B+/B1. The loan is rated BB/Ba3 with a 1 recovery rating.

Kenan Advantage Group is owned by an investor group led by Goldman Sachs Capital Partners and Centerbridge Partners. Kenan has roughly $500 million outstanding across several series of institutional term loans, which are governed by secured-leverage and interest-coverage tests. The new loans are expected to be covenant-lite. The transaction also includes $750 million of equity.

Founded in 1991 and headquartered in North Canton, OH., KAG is North America’s largest provider of liquid bulk transportation services to the fuels, chemicals, liquid foods, and merchant gas markets. The transaction is expected to close during the third quarter of this year. – Chris Donnelly


Deltek preps 1st- and 2nd-lien recap credit for Thursday launch

Jefferies is launching on Thursday a first- and second-lien dividend recapitalization for Deltek Systems, sources said.

The enterprise software provider plans a $30 million revolver, $840 million first-lien term loan and a $350 million, second-lien term loan that will be used to refinance debt and to fund a distribution to Thoma Bravo.

There’s roughly $629 million outstanding under Deltek’s current covenant-lite first-lien term loan due 2018 along with a $305 million second-lien term loan, sources noted. Thoma Bravo bought Deltek for $1.1 billion in 2012, and followed up in 2013 with a first- and second-lien recap deal that funded a $242 million dividend.

Deltek sells enterprise software to corporate clients and government contractors. – Chris Donnelly



Cirque Du Soleil preps June 10 launch of 1st- and 2nd-lien LBO loans

An arranger group led by Deutsche Bank and Bank of America Merrill Lynch will have a lender meeting on Wednesday, June 10, at 10:30 a.m. EDT to launch their first- and second-lien financing backing TPG and Fosun Capital’s purchase of a majority stake in Cirque Du Soleil.

Deutsche is left lead on the $615 million, seven-year first-lien term loan, while BAML is left lead on the $170 million, eight-year second-lien term loan. The term loans will be covenant-lite. Commitments will be due on June 24.

The arranger group also includes RBC Capital Markets, UBS, BMO Capital Markets, National Bank of Canada, Scotia, and TD Securities.

The transaction is valued at roughly $1.5 billion, according to published reports. Cirque du Soleil is a Québec-based organization providing live acrobatic entertainment. – Staff reports


Protection One sets Tuesday bank meeting for $1.45B LBO financing

A Credit Suisse-led arranger group has scheduled a bank meeting for 10:00 a.m. EDT on Tuesday, June 9, to launch a $1.45 billion first- and second-lien financing backing Apollo Management’s purchase of Protection One and ASG Security, according to sources.

The financing is structured as a $1.055 billion, six-year first-lien term loan; a $300 million, seven-year second-lien term loan; and a $95 million revolver. The term loans will be covenant-lite.

Ahead of Tuesday’s meeting, the arrangers are circulating guidance of L+400, with a 1% LIBOR floor and a 99 offer price on the first-lien term loan, and L+875, with a 1% floor and a 98 OID on the second-lien, according to sources. First-lien lenders are offered six months of 101 soft call protection, while the second-lien would include 102, 101 hard call premiums in years one and two, respectively.

At the proposed guidance, the first-lien offers a yield to maturity of about 5.3%, while the second-lien would yield about 10.55%.

Credit Suisse, Barclays, Deutsche Bank, Jefferies, RBC Capital Markets, and Goldman Sachs are arranging the transaction. Commitments will be due on Tuesday, June 23.

Apollo last month agreed to purchase both Protection One and ASG Security and merge the two businesses. The purchase prices of the transactions were not disclosed, but the combined company is expected to generate annual revenue in excess of $500 million, according to Protection One. Closing is expected in mid-2015.

Protection One, a business and home security company, is currently owned by GTCR.

Protection One’s existing loans will be refinanced in connection with the transaction. The issuer has in place a $687 million term loan and a $55 million revolver, according to a recent S&P report. The existing term loan due March 2019 (L+325, 1% floor) is governed by a leverage test. – Kerry Kantin


Varsity Brands, controlled by Charlesbank Capital Partners, issues $805M loan

Accounts yesterday received allocations of the first-lien term loan for Varsity Brands, which ticked to 100.25/101, from an opening market of 100.125/100.875, and issuance at par, according to sources. The covenant-lite loan due December 2021 is priced at L+400, with a 1% LIBOR floor. Via the transaction, the issuer is repricing its approximately $755 million first-lien term loan down from L+500, with a 1% floor, while also layering in an additional $50 million to repay a portion of its second-lien term loan due 2022. Goldman Sachs arranged the deal, which triggers the 101 soft call premium on the existing loan. The repricing component of the transaction cleared in line with talk, though the offer price on the add-on was tightened to par, from original guidance of 99.75. Memphis, Tenn.-based Varsity Brands, which is controlled by Charlesbank Capital Partners, is a manufacturer, marketer, and distributor of sports, cheerleading, and achievement-related products to schools across the U.S. Terms:

Borrower Varsity Brands
Issue $805 million first-lien term loan
UoP Repricing, partial refi of 2nd-lien
Spread L+400
LIBOR floor 1.00%
Price 100.000
Maturity December 2021
YTM 5.1% at par/5.29% including 101 SC payout
Call protection six months 101 soft call
Corporate ratings B/B2
Facility ratings B+/B1
S&P recovery rating 2L
Financial covenants none
Leverage 3.8x first-lien, 5.2x total
Bookrunners GS
Admin agent GS
Sponsor Charlesbank Capital Partners
Px talk L+400/1%/100 (repricing) /99.75 (add-on)
Notes Upsized by $50 million as tack-on was added to deal during the syndication process