American Seafoods recap leveraged loan a big catch for BDC Ares Capital

Ares Capital earlier this month closed an $800 million loan financing for American Seafoods Group (ASG) in what is the latest example of a non-regulated arranger stepping in to capture business typically in the realm of large banks.

As part of a recapitalization of ASG, the Nasdaq-listed BDC recently closed a $540 million first-lien term loan due August 2021 (L+500, 1% LIBOR floor) and a $200 million second-lien term loan due February 2022 (L+900, 1% floor). A $60 million revolving credit rounded out the financing.

One of the main themes in the loan market this year is the effort by non-traditional arrangers to capture business that is outside of the parameters of the leveraged lending guidelines. While BDCs are increasingly leading larger deals, a transaction of this size for a seasoned borrower of the broadly syndicated loan and high-yield markets is a unique event.

The company’s existing loans dated to a 2011 refinancing in which ASG placed a $281.5 million B term loan due 2018 (L+300, 1.25% floor) via Bank of America Merrill Lynch, Wells Fargo and DnB NOR. It came alongside a $100 million TLA and an $85 million, five-year revolving credit. The company’s last foray into the high-yield market was in 2010 with $275 million of 10.75% subordinated notes due 2016 and $125 million of 15% senior holdco PIK notes due 2017, also via leads Bank of America Merrill Lynch and Wells Fargo. The RC and TLA had springing maturities to November 2015 if the senior subordinated notes remained outstanding.

For ASG, this new deal is a deleveraging event. In addition to refinancing the existing bank debt, the company executed a distressed exchange of its PIK notes, offering cash or equity, and received an equity infusion from private equity firm Bregal Partners and an industry group led by family-owned Pacific Seafoods. According to S&P, the company cut its overall debt burden from $911 million as of June 30.

The deal was complicated by several moving parts and a short timeline, playing to the strength of a BDC that can tailor its investment. It also helps the syndication process when the lead arranger is willing to hold a large piece of the deal, sources said. In this case it might represent as much as 25% of the total commitment. Ares is understood to have taken down $100-200 million across the first- and second-lien tranches.

Still, there were between 20-30 lenders in the group. They included similar alternative-asset managers alongside some foreign banks, sources note. Some existing investors rolled into the new deal.

Tackling a transaction of this size might not be a normal event for Ares Capital but the lender will seek similar opportunities to underwrite and syndicate larger transactions, particularly now that its joint venture with GE Capital was discontinued (Senior Secured Loan Program). “It’s not difficult for us with our capital base to underwrite deals of up to $500 million,” Ares Capital’s CEO Kipp deVeer told LCD, “Strategically, to do one or two of these a quarter would be fantastic.”

Following completion of the loan transaction agencies assigned ratings of B+/B2 to American Seafoods Group’s first-lien facility, with a recovery rating of 1 from S&P. The second-lien came in at CCC+/Caa2, with a recovery rating of 5. Corporate ratings are B-/B3, with stable outlooks from both. – Jon Hemingway


Hostess tightens pricing on $1.25B leveraged loan backing recap/dividend to apollo

A Credit Suisse-led arranger group is seeking commitments by 5 p.m. EDT today on the first- and second-lien dividend recapitalization financing for Hostess Brands after offering issuer-friendly changes to the deal, including tightening pricing and adding pre-cap language to the transaction, according to sources.

The spread on the first-lien term loan firmed at L+350, the tight end of L+350-375 guidance, and the offer price was tightened to 99.75, from 99.5. The 1% LIBOR floor is unchanged.

The second-lien also firmed at the tight end of the initial L+750-750 range, while the arrangers tightened the OID to 99.5, from 99. The 1% floor is unchanged.

As revised, the first-lien offers a yield to maturity of about 4.62%, while the second-lien would yield about 8.87%, which compares with 4.67-4.93% and 8.96-9.23% at the original guidance, respectively.

Credit Suisse, UBS, Deutsche Bank, Morgan Stanley, RBC Capital Markets, and Nomura are arranging the deal.

In addition, the leads shifted $100 million to the first-lien term loan from the second-lien. As revised, the deal includes a $100 million revolver; a $925 million, seven-year first-lien term loan; and a $300 million, eight-year second-lien term loan.

The issuer is rated B/B2. Prior to the shift in funds, the first-lien drew B+/B1 ratings and the second-lien drew CCC+/Caa1 ratings, with 2H and 6 recovery ratings from S&P, respectively.

The term loans will be covenant-lite. As before, the first-lien term loan is set to include six months of 101 soft call protection, and the second-lien loan will be callable at 102 and 101 in years one and two, respectively.

The recap loan follows news that the issuer – which is controlled by Apollo Global Management and Dean Metropoulos – took the company off the auction block and was instead preparing to pursue an initial public offering. The dividend is roughly $905 million. – Kerry Kantin/Chris Donnelly 


Hostess readies $1.325B leveraged loan backing recap, dividend to Apollo

Credit Suisse, Deutsche Bank, UBS, Morgan Stanley, RBC Capital Markets, and Nomura have set a lender meeting for Thursday, July 16, at 2 p.m. EDT to launch a $1.325 billion, first- and second-lien dividend recapitalization for Hostess Brands, sources said.

The deal will include a $100 million revolver, an $825 million seven-year first-lien term loan, and a $400 million eight-year second-lien term loan. The term loans will be covenant-lite and will include a 1% LIBOR floor. The first-lien term loan is set to include six months of 101 soft call protection, and the second-lien loan will be callable at 102 and 101 in years one and two, respectively.

Commitments will be due at 5 p.m. EDT on Thursday, July 30.

The recap loan follow news that the issuer, which is controlled by Apollo Global Management and Dean Metropoulos, took the company off the auction block and was instead preparing to pursue an initial public offering.

The 2013 LBO included a $500 million seven-year covenant-lite term loan, priced at L+550, with a 1.25% LIBOR floor, and a $60 million, five-year revolver that was arranged by Credit Suisse and UBS.

At the time, the snacks business was shuttered. The buyers restarted operations, and the relaunched business outperformed plan to the point that lenders were asked in 2014 to allow Hostess to pay a $175 million dividend from cash on hand. The lender group countered with an offer of bigger fees and a smaller payout, which the owners passed on, sources said. At that point, the restarted business was already generating $145 million of run-rate EBITDA and $100 million of run-rate free cash flow. At this point, EBITDA has expanded to nearly $200 million and the term loan has been reduced to about $345 million.

The existing term loan will be repaid at 102. – Chris Donnelly


Kendra Scott Design widens guidance on $70M loan

Lead arranger BNP Paribas has widened talk on the $70 million term loan for Kendra Scott Design, sources said.

Price talk for the six-year term loan is L+600, with a 1% LIBOR floor, offered at 99. Previously, the talk was L+500-525, with a 1% LIBOR floor, offered at 99. As revised, the yield to maturity is 7.41%, compared to 6.35-6.62% at launch.

The unrated term loan will include six months of 101 soft call protection. Financial covenants include a total-net-leverage test and fixed-charge coverage.

Proceeds from the deal will back a dividend recapitalization of Kendra Scott, a portfolio company of Norwest Venture Partners, according to sources. The financing package also includes a $15 million, five-year revolving credit.

Kendra Scott Design, based in Austin Tex., designs and retails jewelry for women. Norwest Venture Partners first invested in the company last year. – Abby Latour/Jon Hemingway

Follow Abby on Twitter @abbynyhk for middle-market deals, leveraged M&A, distressed debt, private equity, and more


8point3 Energy Partners inks $525M credit facility ahead of IPO

8point3 Energy Partners LP, a recently formed joint venture sponsored by First Solar and SunPower Corp., disclosed that it has obtained a $525 million credit facility ahead of its upcoming initial public offering. Proceeds will be used to refinance existing debt, finance permitted acquisitions, to pay a distribution to the sponsors, and for general corporate purposes.

The five-year credit facility is split between a $300 million A term loan, a $25 million delayed-draw term loan, and a $200 million revolver. Pricing is L+200 flat for drawn amounts, with a 30 bps commitment fee on unfunded revolver and delayed-draw term loan commitments. The deal also is covered by a debt service coverage ratio of 1.75x beginning with the fiscal quarter ending Aug. 31, 2015, and a leverage ratio set at 7x through May 2016, 5.5x through May 2017, and 5x thereafter.

Funding under the loan will occur in conjunction with the IPO, with a ticking fee of 30 bps if the IPO does not occur during the 45-day grace period.

Credit Agricole CIB, Deutsche Bank, J.P. Morgan, Citigroup, and Goldman Sachs acted as joint lead arrangers. HSBC, Mizuho, and MUFG Union Bank also participated in the transaction. Credit Agricole is administrative agent.

8point3 Energy Partners has interests in more than 430 megawatts of solar energy projects, which serve utility, commercial and industrial, and residential customers. The company is based in San Jose, Calif. – Richard Kellerhals


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



Academy launches $1.825B TL to refi debt, fund dividend

A Morgan Stanley-led arranger group this afternoon launched a $1.825 billion B term loan for Academy as part of a comprehensive refinancing for the sports and outdoor apparel and equipment retailer. The seven-year term loan is talked at L+350-375, with a 1% LIBOR floor, and is offered at 99.5. Investors are offered six months of 101 soft call protection.

The covenant-lite loan also includes a 25 bps step-down tied to an initial public offering. At current talk, the term loan would yield roughly 4.67-4.93% to maturity.

Term loan proceeds, along with $100 million of revolver drawings and $120 million of cash on hand, will be used to refinance Academy’s debt and fund a $200 million pay-out to sponsor KKR.

During today’s call, the company also reviewed its first-quarter results. Academy reported a strong performance for the quarter, with positive comparable store sales and 17% year-over-year adjusted EBITDA growth, according to sources.

The issuer, formerly known as Academy Sports & Outdoors, is also putting in place a new $650 million asset-based revolver, on which J.P. Morgan is left lead, sources added. Bookrunners on the term loan are Morgan Stanley, KKR, Goldman Sachs, Barclays, J.P. Morgan, Mizuho, and Wells Fargo.

Loan and issuer ratings are B/B2, with a 4H recovery rating. Commitments are due on Thursday, June 11.

The capital structure currently includes the term loan due August 2018, which originally totaled $840 million; a $450 million issue of 9.25% notes due 2019; a $400 million issue of 8/8.75% PIK toggle notes due 2018; and a $650 million asset-based revolver due 2017.

The term loan, 9.25% notes, and ABL RC all date back to KKR’s 2011 buyout of the company, while the PIK toggle notes were placed in 2012 to fund a sponsor dividend. Recall the company in November 2012 wrapped a repricing of its covenant-lite TLB, which cleared at L+325, with a 1.5% LIBOR floor, but note that it has since stepped down to L+300.

Academy, which is based in Katy, Texas, operates 198 stores throughout Alabama, Arkansas, Florida, Georgia, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, Oklahoma, South Carolina, Tennessee, and Texas. – Chris Donnelly/Kerry Kantin


Investors receive allocations of Bass Pro $1.74B loan

Investors this afternoon received allocations of Bass Pro Group’s $1.74 billion term loan, which broke for trading at 100/100.5, from issuance at 99.75, and priced at the tight end of L+325-350 talk, with a 0.75% LIBOR floor, according to sources. Bass Pro’s existing term loan due November 2019 totals roughly $1.15 billion and is priced at L+300, with a 0.75% LIBOR floor. The existing loan includes a leverage covenant. The February 2015 acquisition of fishing-boat manufacturer Fishing Holdings from Platinum Equity was financed via borrowings under its $300 million asset-based revolver and a $100 million FILO loan that was expected to be folded into the ABL facility. The new deal funds a $300 million dividend, and will also be used to refinance $275 million of those ABL borrowings. Leverage here is 4.8x, and about 5.15x lease adjusted, all senior. Bass Pro Shops (Outdoor World) is headquartered in Springfield, Mo., and does business under three main brands: Bass Pro Shops, Tracker Marine, and Big Cedar Lodge. Terms:

Borrower Bass Pro Group
Issue $1.74 billion term loan
UoP Dividend recapitalization
Spread L+325
LIBOR floor 0.75%
Price 99.75
Tenor/maturity June 2020
YTM 4.12%
Call protection 12 months 101 soft call
Corporate ratings BB-/Ba3
Facility ratings BB-/B1
S&P recovery rating 3L
Arrangers/bookrunners JPM
Admin agent JPM
Px talk L+325-350/0.75%/99.75; L+350-375/0.75%/99
Notes Leverage 4.8x, and ~5.15x lease-adjusted, all senior

Camping World sets lender call for repricing, $95M add-on loan

Goldman Sachs is holding a lender call on Monday to launch a repricing and $95 million add-on term loan for Camping World, sources said. Proceeds of the add-on would fund a dividend.

Good Sam Enterprises, formerly known as Affinity Group, is a provider of membership clubs, as well as subscription-based products, services, and publications, targeted toward recreational vehicle and other outdoor enthusiasts in the U.S.

Additionally, the company owns Camping World, the nation’s largest retailer of RV supplies, accessories, services, and new and used RVs. The company is 97% owned by private equity investor Stephen Adams. – Staff reports


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