Alvogen $700M leveragd loan allocates, breaks above 99.5 OID; terms

Investors today received allocations of the $700 million covenant-lite term loan for Alvogen Pharma US, which freed to trade at 100/100.5, from issuance at 99.5, according to sources. The seven-year loan is priced at L+500, with a 1% LIBOR floor. Jefferies, Goldman Sachs, and SunTrust Robinson Humphrey arranged the loan, which cleared inside of original talk and was upsized by $25 million. Proceeds will be used to repay the roughly $283 million outstanding under the issuer’s existing term loan, repay other debt, including a $255 million short-term bridge loan provided by Jefferies and sponsor Pamplona Capital Management, and fund general corporate purposes at parent Alvogen Group, sources said. The $25 million of additional proceeds are available for GCP and may be used to fund future potential acquisitions. Note the capital structure also includes a $75 million asset-based revolver. Alvogen is a multinational drug company focused on complex generic products. Terms:

Borrower Alvogen Pharma US
Issue $700 million B term loan
UoP Refinancing, GCP
Spread L+500
LIBOR floor 1.00%
Price 99.5
Tenor seven years
YTM 6.25%
Call protection six months 101 soft call
Corporate ratings B/B3
Facility ratings B/B3
S&P recovery rating 4L
Financial covenants none
Arrangers JEFF, GS, STRH
Admin agent JEFF
Px Talk L+500/1%/99
Sponsor Pamplona
Notes Amortizes at 5% p.a.; upsized by $25M; ECF opens at 50%, with leverage-based step-downs

Mueller Water launches $500M cov-lite leveraged loan to refinance debt

Bank of America Merrill Lynch, J.P. Morgan, Wells Fargo, SunTrust Robinson Humphrey, TD Securities, Goldman Sachs, Credit Suisse, and MCS Capital Markets launched their refinancing for Mueller Water Products, setting price talk of L+375, with a 0.75% LIBOR floor, and a 99-99.5 offer price on the $500 million, covenant-lite, seven-year term loan B, sources said.

The leveraged loan includes six months of 101 soft call protection and would yield 4.67-4.76% to maturity.

Commitments are due on Nov. 20.

Mueller refinanced out of the institutional loan market in 2010 via an asset-based RC and bond deal.

The issuer is rated BB-/B1. The loan is rated BB/B2, with a 2 recovery rating.

At Sept. 30, total debt was $545.6 million and included $365 million of 7.375% senior subordinated notes due 2017, $178.3 million of 8.75% senior unsecured notes due 2020, and $2.3 million of other debt. Net leverage was down to 2.1x at Sept. 30, 2014.

Mueller is a leading manufacturer and marketer of products and services used in the transmission, distribution, and measurement of water in North America. – Chris Donnelly


Cancelled deal due to market conditions: HCP Global joins handful of recent withdrawals

 hcp_200x200HCP Global Limited this morning withdrew its covenant-lite dividend recapitalization loan citing market conditions, according to sources.

The first- and second-lien financing launched to market late last month via Citigroup, Bank of America Merrill Lynch, and BNP Paribas. Commitments were due yesterday.

HCP’s deal is one of a handful of loans to be pulled or postponed amid challenging market conditions in recent days. SeaStar SolutionsBlackboard, and Paradigm all cancelled proposed repricings, while QSRH (Red Rooster) withdrew a planned refinancing. Styrolution, meanwhile, has shelved a cross-border M&A-related transaction.

The HCP transaction included a $50 million, five-year revolver; a $230 million, seven-year first-lien term loan; and a $100 million, eight-year second-lien term loan. The first-lien was originally talked at L+375, with a 1% LIBOR floor, offered at 99. Guidance on the second-lien was L+725-750, with a 1% floor and a 99 OID.

The first-lien loan included 12 months of 101 soft call protection and offered a yield to maturity of 5.02% at original talk. The second-lien loan included 102 and 101 call premiums and offered a yield of 8.7-8.96%.

Proceeds would have been used to refinance existing debt and fund a dividend to shareholders. The Taiwan-based cosmetics-packaging firm was acquired by TPG in 2012.

HCP produces packaging for global cosmetics firms, including L’Oreal SA, Shiseido Co. and Procter & Gamble Co. – Kerry Kantin/Chris Donnelly


July 2014 European Leveraged Loan Market Analysis – Video, Slides

This is S&P Capital IQ’s monthly loan market update. In this post, we concentrate on the trends at work in the European leveraged loan market during 2014 so far, including an increase in M&A financing and some signs of heating in the market. We’ll also touch on the question of whether some slowdown is to be expected.



Out of the €45 billion of leveraged loan issuance so far this year, M&A-related deals contributed €25 billion, more than double what was raised in the first half of last year. This total was boosted by some jumbo corporate M&A deals, most recently  the cross-border financing for Jacobs Douwe Egberts. Among sponsor-backed buyouts, LCD tracked an increase in the number of asset sales by corporates and families, bringing some welcome debut borrowers to the loan market.


Institutional investors continued to show strong appetite for leveraged loans during the second-quarter, and heavy repayments on existing loans spurred them on. In fact repayments reached a record quarterly high of €16.6 billion, based on the S&P European Leveraged Loan Index, as the chart shows.


Adding to institutional demand, there was lively issuance of new-generation CLOs, particularly during June, including some new managers entering the 2.0 market, and sources say the pipeline for further CLO issuance in the second half of the year looks healthy.


Through much of the year so far, there has been relatively little complaint from buyside firms about leverage multiples, and indeed first-lien leverage is pretty much flat on last year at around 3.7 times EBITDA. But second-lien tranches are appearing more frequently, and this helped drive total leverage a little higher, to 4.9x. Some arrangers argue leverage is unlikely to spiral up and up because this would result in deals coming to market with low single-B ratings, these often being hard to shift in syndication.


Instead, the market is showing its aggression in other ways – particularly in the use of covenant-lite loans. €10 billion of cov-lite paper – a record – has been raised this year, meaning that roughly one in three euros sold to fund managers had no maintenance covenants. The ELLI Index now includes a 13% cov-lite portion, the highest in its history – although a long long way behind the U.S., where the trend started.


However, from the point of view of yields, Europe looks less aggressive than it did earlier in the year as this chart suggests. Behind the scenes, yields on domestic European deals were flat from the first quarter to the second. But in line with the weaker technical picture in the U.S. market, cross-border yields widened in recent months, dragging the average out too.

Looking ahead, some kind of summer slowdown is likely, but arrangers say they are pitching on some aggressively structured deals and will be looking out for signs of pushback among investors if terms get too heated.


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– Ruth McGavin


YouTube: June 2014 US leveraged loan market analysis (plus slides)

LCD’s video analysis detailing the US leveraged loan market during May is now on YouTube.

Loan prices rebounded during the month after April’s mini correction, a result of strong CLO issuance and slowing volume.

Looking to the summer, most players think the market will remain largely CLO-driven, with retail a slight drag on demand. Loan supply, meanwhile, is roundly expected to be lackluster. Though the M&A loan calendar remains within the recent range, some transactions are not expected to launch until the fall, and there are few blockbuster executions in the mix.

This month LCD looks at:

  • Average Bid of S&P/LSTA Loan Index
  • S&P/LSTA Index Loans Outstanding
  • Visible inflows
  • Average New-Issue Clearing Yields of First-Lien Loans
  • Loan Default Rate
  • M&A Institutional Loan Forward Calendar

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Leslie’s Poolmart (CVC) repriced leveraged loan enters trading above par


Accounts on Friday received allocations of the repriced $610.5 million covenant-lite term loan for Leslie’s Poolmart, which broke for trading at 100.25/100.75, from issuance at par. The loan due October 2019 is priced at L+325, with a 1% LIBOR floor, with six months of soft call protection. Bank of America Merrill Lynch arranged the transaction, which cleared in line with original guidance. Via the transaction, the issuer is reducing pricing from L+400, with a 1.25% LIBOR floor, with two leverage-based step-downs; the existing deal is callable at par. The pool-supplies company is controlled by CVC Capital Partners.


Borrower Leslie’s Poolmart
Issue $610.5 million term loan
UoP Repricing
Spread L+325
LIBOR floor 1%
Price 100
Maturity October 2019
Call protection six months 101 soft call
YTM 4.32%
Corporate ratings B/B3
Facility ratings B/B2
S&P recovery rating 4
Financial covenants none
Bookrunners BAML
Admin agent BAML
Sponsor CVC Capital Partners

YouTube, slides: October 2013 US Leveraged Loan Market Analysis

LCD’s video analysis detailing the US leveraged finance market during September is now on YouTube.

With interest rates trending lower during the month loan returns trailed those of high-yield and other fixed-income categories, reversing the pattern of the prior four months, when 10-year Treasury rates were on the rise. Looking ahead, most participants think supply is more likely to ebb than to rise in the out months of 2013.

This month LCD looks at:

  • Leveraged loan volume
  • Average bid of S&P/LSTA loan 100 index
  • S&P/LSTA Index loans outstanding
  • Visible inflows
  • New-issue clearing yields of first-lien loans
  • Covenant-lite share of  new issue volume
  • High yield bond prices
  • Loan default rate
  • M&A institutional loan forward calendar

The video is available here.

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Rue 21 loan backing Apax’s $1.1B LBO extends gains in secondary, rises to mid-80s

The $538.5 million covenant-lite term loan for Rue 21 has extended gains on the break, rising to an 84/85 market today, with one desk bidding as high as 86 for the paper, sources said.

The seven-year loan, which is priced at L+462.5, with a 1% LIBOR floor, was issued late yesterday at 81.5, and opened bid at 82.5. The gains in the paper come amid rangebound but quiet secondary market conditions today.

The loan, which backs Apax Partners’ $1.1 billion LBO of the fashion apparel retailer, is poised to close shortly. The accompanying $250 million bond bridge was never distributed and the notes remain unsold, although sources have speculated that a strong break into the secondary of the fully distributed term loan could open the door to a selldown of the unsecured debt.

The loan ultimately printed at a steep discount to par – albeit toward the tight end of a revised 80-82 range – after underwriters J.P. Morgan, Bank of America Merrill Lynch, and Goldman Sachs garnered additional commitments after circling it with a core group of investors after weeks of behind-the-scenes discussions. The financing commitment for the LBO also provides for a $150 million asset-based revolver.

The issuer is rated B-/Caa1, while the term loan is rated B-/B3, with a 4 recovery rating from S&P. Apax is purchasing Warrendale, Pa.-based Rue 21 for $42 per share. – Kerry Kantin/Chris Donnelly 


BMC Software readies $4.55B leveragd loan backing LBO by Bain

bmc software logoA Credit Suisse-led arranger group has scheduled bank meetings for next week to roll out the approximately $4.55 billion covenant-lite loan backing the $6.9 billion leveraged buyout of BMC Software, according to sources. A meeting is scheduled for 2:00 p.m. EDT on Tuesday, July 30 in New York and for 2:00 p.m. BST on Monday, July 29 in London.

The senior secured component of the financing is structured as a $3.2 billion, seven-year term loan; a €750 million, or roughly $1 billion, seven-year term loan; and a $350 million, five-year revolving credit.

Ahead of the bank meeting, the dollar term loan is talked at L+400, with a 1% floor, offered at 99. Guidance on the euro loan is E+450, with a 1% floor, offered at 99. Both tranches would include six months of 101 soft call protection.

At the proposed guidance, the dollar loan offers a yield to maturity of 5.28%, while the euro loan would yield about 5.8%.

Credit Suisse, RBC Capital Markets, Barclays, Goldman Sachs, Deutsche Bank, Citigroup, Mizuho, Jefferies, BMO Capital Markets, HSBC, and UBS are arranging the financing. Commitments will be due on Thursday, Aug. 8.

The deal backs the purchase of BMC by Bain Capital and Golden Gate Capital, together with GIC Special Investments and Insight Venture Partners. As reported, the financing commitment for the LBO also provides for a $1.68 billion unsecured bridge loan, which is expected to be replaced with high-yield bonds.

Cash equity will total $1.25 billion, and the issuer will also utilize $1.4 billion of cash on hand.

Under the terms of the agreement, which was announced in May, affiliates of the investor group will acquire all outstanding BMC common stock for $46.25 per share in cash, or approximately $6.9 billion.

BMC Software provides business services and applications across distributed, mainframe, virtual, and cloud environments. For the four fiscal quarters ended March 31, 2013, BMC had revenue of $2.2 billion. – Kerry Kantin


June 2013: US Leveraged Loan Market Analysis; Video, Charts

Through the first weeks of May, the loan-market’s 2013 rally persisted, however, loan prices eased about a quarter point in the last week of May. On the whole, the loan market has been resilient, bolstered by inflows from retail and institutional investors looking to loans as a way to hedge against rising rates. Looking ahead, participants expect tone in the HY market to remain a key driver of loan market conditions.

Reviewing the details:











Through the first three weeks of May, the loan-market’s virtually uninterrupted 2013 rally persisted. During the final week of the month, however, loan prices eased about a quarter point. The reason was twofold. For one thing, high-beta names came under selling pressure from high-yield accounts seeking to build cash in the teeth of outflows. For another, an increase in loan supply helped soak up some of excess liquidity that has long kept prices aloft. Thus, after generating a 0.50% return during the first 22 days of May, the S&P/LSTA Index lost 0.31% during the final 9 days of the month. All told, then, the Index eked out a 0.19% gain in May –  the smallest monthly advance in a year. Still, with the 10-year Treasury yield up about 50 bps in May, loans handily outperformed fixed-income products.












With CLO issuance still curtailed in May, visible inflows again fell short of the first quarter’s sky-high levels. In all, investors put $10.7 billion to work in the asset class in May, including $4.9 billion of new CLO prints and $5.8 billion in retail mutual fund subscriptions based on data from Lipper FMI.



On the other side of the technical ledger, the amount of S&P/LSTA Index loans outstanding increased $5.5 billion in May. But that was only the start. Owing to a slew of large M&A-driven executions in recent months, the backlog of new-money loans that have allocated but not yet funded into the index stood at $33 billion by the end of May, putting further pressure on loan prices.



The impact of the market’s late May swoon was felt mainly in the secondary. In the primary market, by contrast, clearing yields were largely stable with BB loans printed in a 3-3.5% band and single B’s in a 5.0% context. That said, managers were able to push back again some of the more aggressive transactions that launched in late May and early June.



Dividend financing was a major source of new primary product in May. Indeed, the amount of dividends financed by leveraged loans pushed to a record $7 billion during the month.



Turning to credit conditions, the default rate retreated to 1.4% in May from April in 1.9% and a 28-month high of 2.2% in March. Managers are constructive on the near-term outlook. On average, they expect the rate to tick up to 1.8% or so by December according to LCD latest buy-side poll taken in mid-March.




On the whole, the loan market has been resilient, bolstered by inflows from retail and institutional investors looking to loans as a way to hedge against rising rates.

As a result, the new-issue clearing yields have moved up only marginally in recent weeks.

Looking ahead, participants expect tone in the HY market to remain a key driver of loan market conditions.


A video of this presentation is available at:

Slideshare download is available at:

– Steve Miller