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Presidio (Sponsor: American Securities) sets $600M leveraged loan for dividend recap

presidioBarclays, Morgan Stanley, PNC, and SunTrust Robinson Humphrey are launching a dividend recapitalization for Presidio with a bank meeting on Tuesday, March 4, at 10:00 a.m. EST. Presidio, a provider of advanced-technology infrastructure solutions, is seeking a $600 million B term loan due March 31, 2017.

Proceeds will be used to refinance existing debt, fund a one-time distribution to shareholders, and pay related fees and expenses. PNC is administrative agent on the loan, sources noted.

Presidio in August 2012 placed a $385 million term loan at L+450, with a 1.25% LIBOR floor. Amortization on the existing loan, currently 1%, is poised to kick up to 5% later this year. The deal includes a total leverage test.

Sponsor American Securities contributed $230 million of equity in the 2011 LBO, a transaction that leveraged Presidio at roughly 3.8x, all senior, according to sources.

The issue is currently rated B+/B1, with current loan ratings at B+/Ba3. – Chris Donnelly

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Leveraged Loan Volume Rebounded Last Week to $8.3B Though Activity Remained Tepid

weekly leveraged loan volume

Leveraged loan volume in the U.S. totaled $8.3 billion last week, up sharply from the $3.5 billion the previous week, though volume overall remains unimpressive.

The largest deal to launch was a $1.68 billion credit backing CACI International’s acquisition of Six3 Systems. Both companies provided information solutions and services in support of national security missions and government transformation for intelligence, defense, and federal civilian customers.

Of interest last week, private equity concerns Carlyle and Stone Point launched a $135 million term for financial advisory concern Duff & Phelps backing, among other things, a dividend to the sponsors. As well, the loan was covenant-lite, meaning it has fewer restrictions than seen on traditional loans. (You can read more about how covenant-lite loans work here.) Despite the looser structure and dividend purpose, the credit saw appetite enough in the institutional investor market that the fee on offer to join the deal was trimmed during syndication, according to LCD’s Chris Donnelly and Kerry Kantin.

Of the 16 deals officially launching during the week (through yesterday), five were covenant-lite while eight arrived courtesy private equity sponsors (including Duff & Phelps).

With last week’s activity, year-to-date leveraged loan volume totals $508 billion, easily outpacing the full-year 2012 total of $465 billion. The full-year record is $535 billion in 2007. These volume numbers entail “new-money” deals, as opposed to credits that simply reset existing tranches of add-on loans, amendments and restatements.

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Duff & Phelps’ (Carlyle Group, Stone Point) $135M add-on loan enters trading above issue price

duff-and-phelpsThe $135 million add-on term loan for Duff & Phelps broke for trading this afternoon at 99.875/100.375, versus issuance at 99.5, according to sources. The covenant-lite loan due April 2020 is priced at L+350, with a 1% LIBOR floor and includes six months of 101 soft call protection. Credit Suisse, Barclays, RBC Capital Markets, and Goldman Sachs arranged the transaction. The issuer, which was acquired earlier this year by an investor group led by The Carlyle Group and Stone Point, plans to use proceeds to repurchase a portion of a tax-receivable agreement and fund a shareholder dividend. There’s also an amendment alongside the capital raise, which pays a 10 bps fee. The amendment will refresh the incremental tranche at its original level, permit the dividend, reset call protection, and delay the excess cash flow sweep until 2014, sources said. The issuer’s existing $349 million term loan, the proceeds of which backed the leveraged buyout of the company, was syndicated in March via Credit Suisse, Barclays, and RBC Capital Markets. The seven-year loan cleared the market at L+350, with a 1% LIBOR floor, and was issued at 99.75. The financing package also included a $75 million, five-year revolving credit with a springing covenant. Duff & Phelps is a New York City-based provider of independent financial advisory and investment banking services. Terms:

Borrower Duff & Phelps
Issue $135 million add-on term loan
UoP Repurchase a portion of a tax-receivable agreement, fund shareholder dividend
Spread L+350
LIBOR floor 1.00%
Price 99.50%
Tenor/maturity April, 2020
YTM 4.67%
Call protection six months 101 soft call
Corporate ratings B/B2
Facility ratings B/B2
S&P recovery rating 3
Financial covenants none
Arrangers/bookrunners CS, Barclays, RBC, GS
Admin agent CS
Sponsor Carlyle Group, Stone Point
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Europe: PE firms load up on dividends via leveraged loan, high yield bond marts

european dividend volume

Private equity sponsors have used the combined strength of the European leveraged loan and high-yield markets to pay themselves €5.3 billion of dividends in the year to the end of September. This is a record for the post-financial-crisis era, and is roughly evenly split between the loan and high-yield markets.

September’s dividend recaps on the loan side included Charterhouse-owned Card Factory, which raised a £165 million C term loan, and Providence-owned satellite services provider M7, which raised a €355 million financing.

You can read more about dividend/recaps here, in LCD’s online leveraged loan market Primer. It’s free. 

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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.

The URL for the video:

PDF slides of the video on Slideshare are available here.

URL for the slides:

(If you’re reading this on lcdcomps.com the video is at the end of this story.)

While you’re on YouTube please subscribe to LCD’s YouTube Channel. That way you won’t miss any LCD videos. You can also subscribe by clicking on the link to the right of any LCD News email, or here:

http://www.youtube.com/user/LCDcomps

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TransDigm investors give amendment nod as $700M term loan fills

Investors today approved an amendment that paves the way for TransDigm’s dividend recapitalization deal, sources said. Meanwhile, the company’s $700 million incremental C term loan shopped by a Credit Suisse-led arranger group has been oversubscribed in advance of the deadline on Tuesday, June 25, sources said.

The add-on debt is offered at 98-98.5 and would be fungible with the issuer’s existing covenant-lite C term loan maturing in 2020, which is priced at L+300, with a 0.75% LIBOR floor. At the proposed guidance, the loan would yield 4.08-4.17% to maturity.

Credit Suisse, UBS, Barclays, Citi, Morgan Stanley, and RBC Capital Markets are arranging the loan, proceeds of which, along with $700 million of bonds, would be used to fund a shareholder dividend. UBS will be left lead on the adjoining bond deal, sources noted.

TransDigm said this morning that it would be seeking an amendment to its existing loan to allow for the proposed transaction. The contemplated dividend would total $1-1.8 billion, according to the company. Pro forma leverage would increase to roughly 6x. The amendment will also shift the revolver to a springing covenant and widen certain incurrence tests to allow for the deal.

Lenders to the new and existing C term loans will be offered one year of 101 soft call protection, sources noted.

TransDigm last tapped the loan market in February for a covenant-lite refinancing via Credit Suisse that was split between the $2.2 billion TLC due 2020 as well as a $500 million TLB due 2017 (L+275, 0.75% floor). The TLC, which is currently covered by a 101 soft call premium that rolls off in February 2014, had been pegged in a 100.5/101 context prior to news of the proposed debt-financed dividend, sources said. The issuer is currently rated B+/B1.

TransDigm supplies engineered aircraft components for commercial and military aircraft. The company trades on the New York Stock Exchange under the ticker TDG and has a market capitalization of nearly $8.4 billion. – Chris Donnelly/Kerry Kantin

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Dividend volume picks up as leveraged loan market rebound rolls on

dividend loan volume

In another sign that the U.S. leveraged loan market is recovering from its June Swoon, credits backing dividends are re-emerging after a three-week hiatus. Leveraged loan arrangers unveiled to market $1.2 billion of institutional recapitalization/dividend loans over the week ended July 17, and so far this week there have been $1.4 billion in dividend deals. That’s the largest weekly total since mid-June.

In the leveraged loan market, of course, dividend loans often entail a payout to private equity sponsors, which take advantage of an accommodating institutional investor market to lever-up portfolio companies (while withdrawing cash). That has been the case of late. Some recent sponsor-driven dividend loans:

Issuer Sponsor Loan  (mils) Purpose Industry
Asurion Madison Dearborn Partners $400 Recap/Stock Repurchase Insurance
Keystone Automotive Platinum Equity $235 Recap/Dividend Automotive
GENEX Services Stone Point Capital $190 Recap/Dividend Services & Leasing
Choice Cable Spectrum Equity Investors $155 Recap/Dividend Cable
Keystone Automotive Platinum Equity $100 Recap/Dividend Automotive
MultiPlan BC Partners $100 Recap/Dividend Services & Leasing
GENEX Services Stone Point Capital $55 Recap/Dividend Services & Leasing

This analysis has been updated from a July 22 LCD News story, available to subscribers, that also details covenant-lite loan volume (there’s a story on that available to all via LCD’s Forbes blog ), new-issue loan yields (ditto), monthly loan returns (per the S&P/LSTA Index), and average secondary market bids on leveraged loans. You can read about how dividend loans work here, in LCD’s online Loan Market Primer.

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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:

http://youtu.be/XcFt7R3a7tM

Slideshare download is available at:

http://www.slideshare.net/lcdcomps/us-sld-shrjune2013v3f

– Steve Miller

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Yankee Candle cancels dividend recap financing; 8th loan pulled in the last week

Yankee Candle has canceled its proposed dividend recapitalization transaction and pulled the proposed financing from the market, which was to include a $950 million term loan and $450 million of bonds, according to a company statement.

Proceeds were to be used to refinance all of the issuer’s existing debt and pay a $187 million dividend to owner Madison Dearborn, according to the company. The refinancing targeted $654.4 million of term debt, $188 million of 9.75% subordinated notes due 2017, and $315 million of 10.25% senior PIK toggle notes due 2016. As such, the company today canceled planned redemptions of the two bond issues. As reported, the transaction was to include $1.125 billion of credit facilities, including a $950 million, seven-year first-lien term loan and a $175 million amended five-year asset-based revolver.

Price talk on the term loan was L+300-325, with a 1% LIBOR floor and a 99.5 offer price, sources said. The $450 million offering of senior notes was shopped as a five-year deal, to be immediately callable at 101.5% of par through the first two years before stepping to par plus 50% of the coupon and declining thereafter. Barclays and Bank of America were the leads. Note that loan ratings came in at B/B1 and the bonds drew a CCC+/Caa1 profile. This marks the eighth loan transaction pulled from the market in the last week, according to LCD.

On the bond side, this is the fifth postponement this year of a deal in market and the second this week following cancellation of the Warren Resources offering. – Jon Hemingway

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Flagstone Foods wraps $222M dividend recap loan

Golub Capital and M&T Bank have wrapped syndication of a $222 million dividend recap loan for Flagstone Foods, a St. Paul, Minn.-based snack-foods company backed by Gryphon Investors, according to sources.

Sources say this is the first dividend Gryphon has extracted from the business since forming Flagstone Foods in 2010 from the merger of portfolio companies Ann’s House of Nuts and Amport Foods.

Golub led a $132 million, five-year bifurcated term loan, while M&T Bank led a $90 million, asset-based revolver, $40 million of which was funded at closing, according to sources.

The RC is priced at L+175, with no LIBOR floor, sources say. The term loan cleared at L+575, with a 1.25% LIBOR floor at 99, for a 7.45% yield.

Pro forma leverage is 3.5x through the term loan, and 4.6x through $60 million of mezzanine debt. – Kelly Thompson