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