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 


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

JC Penney bonds gain on earnings, loan investors eye call protection

Bonds backing J.C. Penney advanced this morning, just as credit protection cheapened, after the retailer reported better-than-expected quarterly results. Shares dropped, however, with JCP trading on the NYSE roughly 7% lower, at $8.07 per.

The 8.125% notes due 2019 advanced two points, to 101/101.5, while the 5.65% notes due 2020 ticked up half of a point, to 87/88, according to sources. Long-tenor 7.4% bonds due 2027 changed hands in blocks at 83.5, which is up roughly two points from recent prints, trade data show.

Over in the CDS marketplace, five-year protection on the credit tightened roughly 19% this morning, to 4.8/5.7 points upfront, according to Markit. That’s approximately $125,000 cheaper upfront, with a mid-point $520,000 initial payment, in addition to the $500,000 annual expense, to protect $10 million in J.C. Penney bonds.

The company reported net sales of $2.86 billion during its fiscal first quarter ended May 2, up from $2.8 billion in the year-ago fiscal first quarter, according to a corporate filing. Results were in line with the S&P Capital IQ consensus estimate for sales; however, the adjusted EBITDA result of $82 million in the quarter was well ahead of the consensus estimate of $29 million.

Looking ahead, the company tightened its 2015 full-year guidance for a sales increase by 4-5%, from 3-5% previously, and put forth an estimate for $600 million in EBITDA, versus none prior, filings show.

Over in the loan market, J.C. Penney’s covenant-lite term loan due 2018 (L+500, 1% LIBOR floor) was little changed on the news, quoted at 99.875/100.25, according to sources. On yesterday’s conference call, CFO Edward Record noted that the 101 hard call protection rolls off the loan this month.

“It’s something we continue to look at,” Record said, according to a transcript of the call provided by S&P Capital IQ. “We know it is probably over-collateralized, and there may be some opportunity there. We also know that it doesn’t come due to 2018, so we don’t have a gun to our head to have to do anything any time soon. We’ll continue to monitor rates and see if there’s any opportunity to do something there.”

The loan, originally $2.25 billion, was placed in May 2013; it originally included 102, 101 call premiums. Goldman Sachs is administrative agent.

The Plano, Texas-based company is rated CCC+/Caa2, with positive and stable outlooks, respectively. – Matt Fuller/Kerry Kantin

Follow Matthew on Twitter @mfuller2009 for leveraged debt deal-flow, fund-flow, trading news, and more.



Epicor sets offer on $1.4B recap term loan

Jefferies, Macquarie, and Nomura launched their $1.5 billion first-lien credit package backing a recapitalization of Epicor today, setting pricing of L+400, with a 1% LIBOR floor, on the $1.4 billion, seven-year covenant-lite first-lien term loan, sources said.

Much of the first-lien term loan comprises a roll-over, and existing accounts are being offered paper at par, with new money offered at 99.5. Price talk represents a 100 bps increase from the current roughly $840 million term loan due May 2018. At current talk, the new money would yield roughly 5.19% to maturity, while rollover commitments would yield about 5.1%.

The term loan includes six months of 101 soft call protection. A $100 million revolver rounds out the first-lien facilities.

Another $610 million of second-lien notes have been pre-placed, sources noted.

Commitments are due on May 20.

Epicor is seeking to refinance its current capital structure and fund a distribution to an investor group led by Apax Partners. Concurrently, Epicor will divest its non-core retail-solutions group, sources said.

Pro forma for the transaction, Epicor generated annual revenue and EBITDA of $855.1 and $269.2 million, respectively. The transaction would leverage the software concern at 5.1x first-lien, and 7.3x total, sources said.

Epicor, a global provider of business software for the manufacturing, distribution, retail, and services industries, in January 2014 repriced its $840 million first-lien term loan via Bank of America Merrill Lynch, taking pricing down to L+300, with a 1% LIBOR floor. The issuer in January 2013 placed $400 million holdco of 9% PIK toggle notes due June 2018 to fund a dividend. – Chris Donnelly


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