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YouTube video: April 2014 European leveraged loan market analysis

LCD’s video analysis detailing the European leveraged loan market during March and 2014′s first quarter is now on YouTube.

Of note is the imbalance created by thin supply and vigorous demand, which is causing conditions in the market to become increasingly issuer-friendly. The loan market definitely felt livelier in terms of new issuance, with a mix of new buyouts and opportunistic refinancing and repricing activity coming over the horizon. The elephant in the waiting room is Numericable, which has lined up a huge covenant-lite M&A financing to back its bid for SFR.

This month LCD looks at:

  • Annual senior loan volume
  • Annual arbitrage CLO volume
  • Average TLB primary spread and yield to maturity
  • Annual pro forma debt/EBITDA ratios of LBOs
  • Quarterly Index returns (excluding currency)
  • Forward pipeline volume as of April 4, 2014


The video is available here.

Click here to download PDF slides of the video on Slideshare.

While you’re on YouTube please subscribe to LCD’s YouTube Channel. That way you’ll be certain not to 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

If you’d like to embed any LCD video on a web page or in other digital media, it’s simple via the “embed” button on the YouTube page for the video. You can also embed the slides via Slideshare.

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Credit Suisse to provide financing for Thoma Bravo’s TravelClick buy

travelclick logoCredit Suisse is providing financing for Thoma Bravo’s $930 million purchase of TravelClick from middle-market private equity firm Genstar Capital Management, sources said.

The sale is expected to close in the second quarter. Evercore served as financial advisor to Genstar and TravelClick.

TravelClick, based in New York City, provides reservations technology systems and marketing services for hotels.

Genstar and Bain Capital Ventures acquired TravelClick in 2007. Since the acquisition, TravelClick’s revenue and EBITDA have more than doubled, according to a joint press release from Genstar and Bain.

In March 2011, BMO Capital Markets arranged a $160 million term loan (L+500, 1.5% LIBOR floor) and a $20 million revolver to refinance junior and senior debt at TravelClick.

Last year, BMO arranged a $90 million second-lien term loan due 2018 for TravelClick to pay a dividend. At the same time, $192 million of TravelClick’s first-lien debt was repriced to L+450, with a 1.25% LIBOR floor.

To finance the 2007 buyout, San Francisco-based Genstar lined up a $105 million senior secured loan via Jefferies and $40 million of mezzanine debt via Blackstone Group. – Abby Latour

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

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Bain sweetens pricing on loan backing Bob’s Discount Furniture LBO

bobs discount funitureRBC Capital Markets and UBS have finalized pricing on the LBO financing for Bob’s Discount Furniture after increasing the spread on the first-lien term loan and cutting the offer price on the second-lien, according to sources.

The spread for the $180 million, seven-year first-lien term loan was increased to L+425, from original talk of L+400, while the 1% LIBOR floor and 99 offer price remain unchanged, according to sources. At the revised level, the yield-to-maturity increases to 5.54%, from 5.28%. The loan includes 101 soft call protection for 6 months.

Pricing for the $80 million, eight-year second-lien term loan is unchanged, at L+800, with a 1% LIBOR floor, but the OID was cut to 98, from 99. With that, the yield-to-maturity is 9.7%, versus 9.5% as initially outlined. The second-lien will be callable at 102 and 101 in years one and two.

The financing will also include a $40 million asset-based revolver.

Corporate ratings are B/B3. The first-lien is rated B/B2, with a 3 recovery rating. The second-lien is rated CCC+/Caa1, with a 6 recovery rating.

The financing supports the buyout of Bob’s by Bain Capital, which was announced in December. Bain is taking a majority stake in the retailer from Apax Partners, KarpReilly and other shareholders. Company management will continue to own a significant stake.

Bob’s Discount Furniture, based in Manchester, Conn., operates as a furniture retailer, with 47 stores located throughout the Northeast and Mid-Atlantic regions. – Jon Hemingway

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Apollo readies $725M leveraged loan backing Chuck E. Cheese LBO

chuck e cheeseDeutsche Bank, Credit Suisse, Morgan Stanley, and UBS have scheduled a bank meeting for 2:00 p.m. EST on Tuesday, Feb. 4 to launch a $725 million, seven-year covenant-lite term loan backing Apollo Global Management’s $1.3 billion acquisition of CEC Entertainment, according to sources.

Price talk is not yet available. Financing for the LBO also includes a $150 million, five-year revolving credit facility and $305 million of unsecured notes. Credit Suisse will be left lead on the adjoining bond deal.

CEC, which operates pizza and family entertainment chain Chuck E. Cheese’s, announced earlier this month that Apollo agreed to purchase the company, for $54 per share, or $1.3 billion, including the assumption of debt.

The sale was the result of a strategic review aimed at boosting revenue and profit. Revenue dipped slightly in the fiscal third quarter ended Sept. 29, 2013, to $195.9 million, from $196.6 million in the comparable 2012 quarter, while operating income fell to $13.2 million from $14.5 million. – Kerry Kantin/Abby Latour

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Crosby loans backing KKR LBO enter secondary above issue prices

Accounts late this afternoon received allocations of the covenant-lite first- and second-lien financing backing KKR’s acquisition of Crosby Worldwide, a lifting and rigging applications provider. The $560 million first-lien term loan opened at 100/100.5, from issuance at 99.875, according to sources. The seven-year tranche is priced at L+300, 1% LIBOR floor, with a step to L+275 at 4.5x net leverage. It carries six months of 101 soft call protection. The $90 million second-lien term loan opened at 101.5/102.5, from issuance at 99.875; the eight-year loan is priced at L+600, with a 1% LIBOR floor, and carries 102, 101 hard call premiums in years one and two, respectively. Morgan Stanley, UBS, KKR Capital Markets, Deutsche Bank, Mizuho, and HSBC arranged the loan, which also includes a $65 million, five-year revolving credit. Both term loans cleared tight to original guidance after the arrangers cut pricing twice during the syndication process, while the issuer also shifted $30 million to the first-lien from the second-lien. Yielding about 7.21% to maturity, Crosby’s second-lien is the tightest second-lien backing an acquisition or LBO from a single-B rated borrower to print since the credit crisis, according to LCD. Terms:

Borrower Crosby Worldwide
Issue $560 million first-lien term loan
UoP Fund KKR LBO
Spread L+300
LIBOR floor 1.00%
Price 99.875
Tenor seven years
Call protection six months 101 soft call
YTM 4.08%
Corporate ratings B/B2
Facility ratings B/B1
S&P recovery rating 3
Financial covenants none
Bookrunners MS, UBS, KKR, DB, Miz, HSBC
Admin agent MS
Px Talk L+325/1%/99.5
Notes Includes a step to L+275 @ 4.5x net leverage; upsized by $30 million
Borrower Crosby Worldwide
Issue $90 million second-lien term loan
UoP Fund KKR LBO
Spread L+600
LIBOR floor 1.00%
Price 99.875
Tenor eight years
Call protection 102, 101
YTM 7.21%
Corporate ratings B/B2
Facility Ratings CCC+/Caa1
S&P recovery rating 6
Financial covenants none
Arrangers MS, UBS, KKR, DB, Miz, HSBC
Admin agent MS
Notes Decreased by $30 million
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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 

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Dell sets price talk on LBO bonds after shift of $1.25B to loan market

Price talk is 5.5-5.75% for Dell‘s $2 billion offering of seven-year (non-call three) first-lien notes, while a coordinated, $1.25 billion second-lien issue is being pushed into the loan market, instead of being arranged as an eight-year (non-call three) bond deal, according to sources. With that update out to accounts, bookrunners are taking recommitments through 12:00 p.m. EDT on Monday, with pricing to follow, the sources add.

The price guidance comes at the wider end of early market whispers and it swaps to floating-rate equivalents of roughly L+340. Arrangers haven’t firmed the revised structure on the loan, which has been significantly oversubscribed ahead of Monday’s deadline, but market participants indicate second-lien bonds would move into the first-lien term loan, likely in both the U.S. and Europe.

Ratings are BB+/Ba2 on the first-lien debt, with a 1 recovery rating, indicating expectations for very high (i.e. 90% to 100%) recovery in the event of default. Note that the bond deal structure includes a special 103 prepayment option for up to 10% annually, a 40% equity clawback option for three years, at par plus coupon, and a typical change-of-control put, at 101, according to sources.

Lead bookrunner Credit Suisse rolled out the long-awaited LBO bond deal earlier this week, with joint bookrunners Barclays, Bank of America, RBC, and UBS. Issuance is under Rule 144A for life, and the issuer entity is technically Denali Borrower.

Proceeds will be used to pay down a like-sized bridge financing that was sold earlier this year, according to sources. As reported, Credit Suisse was administrative agent on the first-lien bridge, while Barclays was administrative agent on the second-lien bridge. Bank of America Merrill Lynch. RBC Capital Markets, and UBS were underwriters. Details of the coordinated loan financing at launch are available for subscribers here.

With some $5 billion of annual EBITDA, Dell is expected to be leveraged into the low-2x area on a secured basis and into the 3x area total, market sources said.

Silver Lake has committed to provide $1.4 billion of equity. In addition, certain of the MD investors have entered into a rollover and equity financing commitment letter, dated as of Feb. 5, 2013, pursuant to which such MD investors have committed to roll-over approximately 273 million shares of the company’s common stock. CEO Michael Dell has additionally committed to invest up to $500 million in cash. Lastly, MSDC Management, L.P. has committed to provide $250 million of equity. – Matt Fuller/Chris Donnelly

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Dell sets price talk as $5.5B LBO loan package hits syndication

dell logoA Bank of America Merrill Lynch-led underwriter group has set price talk of L+375, with a 1% LIBOR floor and a 99 offer price on Dell Inc.’s $4 billion, 6.5-year TLB as the LBO deal launched to investors this afternoon, sources said.

The accompanying $1.5 billion, five-year TLC is talked at L+275-300, with a 1% floor, and offered at 99.5. The amortizing TLC has a three-year weighted average life. Both tranches include six months of 101 soft call protection.

The term loans arranged by Bank of America Merrill Lynch, RBC Capital Markets, Barclays, Credit Suisse, and UBS sit behind a $2 billion asset-based revolver, a portion of which is expected to be drawn at closing, sources said.

Standard & Poor’s lowered Dell to BB-, while assigning BB+ first-lien and BB second-lien ratings. The first-lien debt has received a 1 recovery rating, while the second-lien notes received a 2 recovery rating. Moody’s today assigned Ba3 issuer and Ba2 first-lien ratings, along with Ba3 ratings to the planned second-lien notes.

The financing will include an incremental facility set at $2 billion initially, plus additional amounts up to a ratio set at 0.25x inside closing first-lien leverage. The deal includes 50 bps MFN protection, subject to a sunset provision of 18 months.

Arrangers earlier this year sold down a strip of high-yield bridge debt, including a $2 billion first-lien senior secured bridge loan and a $1.25 billion second-lien bridge loan. The first-lien loan has an initial one-year maturity and a seven-year final maturity, while the second-lien will have a one-year initial and eight-year final maturity. Both loans are expected to be refinanced in the high-yield bond market.

Of note, Credit Suisse will be administrative agent on the first-lien bridge, while Barclays is administrative agent on the second-lien bridge. Bank of America Merrill Lynch. RBC Capital Markets and UBS are underwriters.

In addition, the leads have committed to provide customer-financing programs: a $1.9 billion term commercial-receivables-financing facility and a $1.1 billion revolving consumer-receivables-financing facility, according to SEC filings. Microsoft has committed $2 billion of subordinated debt.

With some $5 billion of annual EBITDA, Dell is expected to be leveraged into the low-2x area on a secured basis and into the 3x area total, market sources said.

BAML will have a left lead role on the loan transaction.

Silver Lake has committed to provide $1.4 billion of equity. In addition, certain of the MD Investors have entered into a rollover and equity financing commitment letter, dated as of Feb. 5, 2013, pursuant to which such MD Investors have committed to roll-over approximately 273 million shares of the company’s common stock, and CEO Michael Dell has additionally committed to invest up to $500 million in cash. Lastly, MSDC Management, L.P. has committed to provide $250 million of equity. – Chris Donnelly

 

 

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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

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M&A loan volume lags in 2Q after LBO-driven 1Q

M&A leveraged loan volume

The volume of U.S. leveraged loans backing M&A-driven activity sagged in the second quarter, to $31.1 billion (including $26.9 billion of institutional tranches) from a post-credit crunch high of $46.8 billion/$37.4 billion in the first quarter, when the market absorbed several jumbo LBO loans, including Heinz, DuPont Performance Coatings, Albertsons, Apex Tool, and McGraw-Hill Education.

In the year to date, new-issue M&A loan activity is a mixed bag. Overall M&A loan volume receded to $78.2 billion in the first half, from $85.5 billion during the prior six months.

(The stratospheric M&A loan volume of 2007, of course, represents the peak of the overheated, pre-Lehman market.)