Ascensus to be acquired by Genstar, Aquiline

Middle-market private equity firms Genstar Capital and Aquiline Capital Partners have teamed up to buy Ascensus from J.C. Flowers & Co., according to a statement. The acquisition is subject to regulatory approvals and other customary closing conditions and is expected to wrap up in the fourth quarter.

Ascensus has existing loans that date to a November 2013 placement via lead arrangers BMO Capital Markets and Golub Capital. At the time Ascensus issued a $200 million first-lien term loan due 2019 (L+400, 1% LIBOR floor) and a $92 million second-lien term loan due 2020 (L+800, 1% floor).

Existing facility ratings are B/B1 on the first-lien debt and CCC+/Caa1 for the second-lien debt. Current corporate ratings are B/B2.

Dresher, Pa.-based Ascensus provides retirement services, including record-keeping and administrative services, supporting more than 40,000 retirement plans and 3.3 million 529 college savings accounts. It also administers more than 1.5 million IRAs and health savings accounts. – Jon Hemingway



Poll shows 81% of middle market leaders mulling M&A over next 3 yrs

In a survey of nearly 700 leaders of privately owned middle market companies, 81% say they are interested in some form of M&A activity over the next three years.

Middle market investment bank Harris Williams & Co. partnered with Inc. to carry out the survey, for which owners, partners, and managers at middle market companies were questioned about future growth plans.

Asked about choice of a potential buyer, the preferred choice was for a public or private corporation that is a strategic buyer. The second ranked response was split between a private equity firm and employees.

“M&A is top of mind for high-growth companies and new, high-quality assets will continue to come to market as these companies explore their options for the next phase of the business,” the survey results said.

“With the current M&A market at its strongest since 2007, the supply of high-quality companies coming to market continues to show great promise. While some business leaders intend to buy or merge with another company to drive further growth, 51.8% indicated that they anticipated selling their business.”

Of the respondents, 25% said they have a detailed exit strategy planned. The largest group, or 43%, reported that their strategy was still evolving, and 30% said they did not yet have one, the survey said. – Abby Latour

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Sirius Computer nets B+/B1 ratings as buyout credit launches

Sirius Computer Solutions has drawn ratings of B+/B1 ahead of this morning’s launch by Credit Suisse, Barclays, and Citi of the $655 million first- and second-lien financing backing Kelso & Co.’s roughly $830 million purchase of a majority stake in the business. The first-lien loan is rated B+/Ba3, with a 3H recovery rating, while the second-lien debt has drawn B-/B3 ratings, with a 6 recovery rating.

The financing includes a $445 million, seven-year first-lien term loan; a $150 million, eight-year second-lien term loan; and a $60 million revolver. The term loans will be covenant-lite.

Kelso is acquiring a majority stake in the IT-services provider from Thoma Bravo, which acquired a controlling stake in the business in 2006, and Harvey Najim, the company’s founder. Closing is expected in the fourth quarter.

The transaction includes $261 million of sponsor-contributed and roll-over equity.

Sirius last tapped the loan market in April via Wells Fargo for a $35 million add-on, proceeds of which were earmarked to fund an acquisition. Alongside the add-on, the issuer repriced its 2012 vintage term loan, originally $260 million, to L+525, with a 1% floor, from L+575, with a 1.25% floor.

San Antonio, Texas-based Sirius provides customers with hardware, software, and services that support data storage, network security, network access, application development, and web hosting. – Chris Donnelly/Kerry Kantin


IGeneX receives unitranche debt for management buyout of company

IGeneX received unitranche debt and preferred equity from Balance Point Capital Partners and 4C Capital. Proceeds backed a management buyout of the company.

IGeneX, based in Palo Alto, Calif., provides clinical testing and laboratory services for Lyme disease and other tick-borne illnesses.

Balance Point Capital Partners invests in mezzanine and unitranche debt, as well as equity capital, of U.S. lower middle market companies generating annual EBITDA of $2-$25 million.

Among the firm’s investments are game and toymaker Patch Products, baby care products company HALO Innovations, gourmet food product company Food Evolution; and radio broadcasters Digity Media and Connoisseur Media. – Abby Latour

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Battle heats up over management fees from TICC Capital

A fight is heating up over lucrative management fees from TICC Capital.

TICC Capital is a business development company that invests in debt through syndicated bank loans and debt and equity of CLOs. It is managed by TICC Management, which collects a 2% base fee annually, as well as an incentive fee. As of June 30, $5.3 million was due to TICC Management in advisory fees for the quarter, in line with the fee for the same quarter a year earlier.

In early August, TICC Capital announced an affiliate of Benefit Street Partners would acquire TICC Management. Benefit Street Partners is the credit investment arm of Providence Equity Partners. UBS Investment Bank advised TICC Management on the transaction.

Soon after, NexPoint Advisors submitted a proposal to the board of TICC Capital for a management agreement that would cut advisory fees by an estimated $35 million and include a $10 million investment in TICC Capital shares. NexPoint later sweetened its offer. NexPoint is an affiliate of Highland Capital Management.

Benefit Street Partners followed up with a revised offer, saying the base fee would be cut to 1.5% annually, from 2%, permanently. The offer would include an investment in TICC Capital of at least $20 million through common stock purchases over the next year. Benefit Street Partners would transition TICC Capital’s strategy to private debt investments.

A special committee for TICC Capital’s board of directors unanimously supported the new agreement with Benefit Street, a Sept. 3 statement said.

Now, a new party has entered the fray.

TPG Specialty Lending unveiled a stock-for-stock bid for TICC Capital Corp., saying the offer was superior to the competing proposals from Benefit Street Partners and NexPoint.

Under terms of the offer, released today, TICC stockholders would receive common stock of TPG Specialty Lending equivalent to $7.50 in value, or a 20% premium to TICC Capital’s Sept. 15, 2015, closing stock price. TPG Specialty Lending shares, which trade on NYSE under the ticker symbol TSLX, eased $0.12 today, to $17.23, while the broader market indices were higher.

TPG Specialty Lending publicized its offer today, after proposing the offer privately to the special committee of TICC Capital’s board. TPG Specialty Lending added that the TICC special committee had rejected the offer.

But TPG Specialty Lending has urged the board to reconsider, arguing the transaction would result in long-term value for both shares, in addition to the immediate premium for TICC stockholders.

“TSLX remains fully committed to pursuing this transaction for the benefit of all stockholders and urges the special committee to enter into constructive discussions with TSLX pursuant to its fiduciary duties,” TPG Specialty Lending said in a statement today.

At a special meeting of TICC shareholders on Oct. 27, TPG Specialty Lending said it intends to solicit support to block the Benefit Street Partners’ proposal.

“We agree with NexPoint that stockholders should reject the Benefit Street Partners proposal. However, the NexPoint proposal is equally flawed as both transactions provide returns only for external managers and offer no immediate value to stockholders,” TPG Specialty Lending said in a statement.

Shares in TICC Capital closed higher today, at $6.87, up nearly 10%, in firmer market conditions. Still, they are trading at a discount to net asset value, which was $8.60 per share as of June 30. – Abby Latour

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International Medical Group to be acquired by ABRY Partners

ABRY Partners has agreed to buy insurance firm International Medical Group from existing sponsors Altaris Capital Partners and Galen Partners, according to the company. Details of the transaction were not disclosed.

Altaris and Galen have controlled the company since 2012.

International Medical Group, founded in 1990, provides international medical insurance and travel insurance. The company is headquartered in Indianapolis, Ind., and has a European subsidiary that is based in the U.K. – Jon Hemingway


DigiCert secures debt financing to back buyout by Thoma Bravo

Jefferies and Fifth Street Asset Management agreed to provide the debt financing for Thoma Bravo’s majority acquisition of DigiCert from TA Associates. Details of the acquisition and the financing were not disclosed.

TA Associates, which bought the company in 2012, will retain a minority stake in the business.

DigiCert, based in Lehi, Utah, provides SSL certificates and SSL management tools for small and large companies in various industries. The company provides digital certificates to over 115,000 customers in more than 180 countries. – Jon Hemingway


Prospect Capital investment in USG Intermediate outlined in 10-Q

Prospect Capital’s investment in USG Intermediate in the recent fiscal quarter included a $21.6 million L+650 (1% LIBOR floor) term loan A due 2020 and a $21.7 million L+1,250 (1% LIBOR floor) term loan B due 2020, a 10-Q showed.

USG Intermediate received a total of $48.5 million of first-lien term loans and a revolver from Prospect Capital in the June quarter. The investment included equity.

At closing of the deal, $43.5 million of the debt was funded. Proceeds were for business expansion.

USG Intermediate is a direct marketing company that uses direct mail, print media, digital media, television direct response, and telemarketing channels to sell collectible items.

Prospect Capital, a BDC, lends to and invests in privately held middle-market companies. Shares trade on the Nasdaq under the ticker PSEC. – Abby Latour

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Caesars examiner probe expanded to include 2008 LBO

The bankruptcy court overseeing the Chapter 11 proceedings of Caesars Entertainment Operating Co. has expanded the scope of the investigation by the court appointed examiner in the case to specifically include the company’s 2008 LBO, according to an Aug. 19 entry on the court docket.

The court’s order follows a negotiated agreement among key parties in the case with respect to the scope of the probe, including the company, the unsecured creditors’ committee, the ad hoc committee of first-lien bank lenders and the ad hoc committee of first-lien noteholders.

According to the agreed-upon court order, the 2008 LBO will now be among the “challenged transactions” within the scope of the examiner investigation.

The examiner appointment
As reported, the Chicago bankruptcy court on March 12 ordered the appointment of an examiner to investigate certain pre-petition transactions entered into by the company. The scope of the investigation was defined as those transactions that had already been subjected to challenge by second-lien lenders in the case as potential fraudulent conveyances intended to transfer assets away from the company to CEC or other units of CEC, while leaving CEOC saddled with debt.

The 2008 LBO was not among those transactions.

The broad scope of the examiner appointment, however, also included “any other transactions involving the debtors, to the extent those transactions suggest potential claims belonging to the estates, including causes of action against any current officers or directors of the debtors, and former officers or directors of the directors, or any affiliates of the debtors, and … any apparent self-dealing of conflicts of interest involving the debtors or their affiliates,” and invited the examiner of parties to the case to seek modifications to the scope if they deemed it necessary.

On March 24, the bankruptcy court named New York lawyer Richard Davis as the examiner.

According to a June 30 motion filed by the company, while the 2008 LBO was not specifically identified as one of the transactions that Davis should investigate, “for clarity the debtors seek to expand the scope of the examiner’s investigation to expressly include the LBO.”

According to the company, at least one party had raised questions regarding potential LBO claims in the case “which if unresolved may impede the debtors’ efforts to reach a consensual plan.”

The company also asserted that Davis’ conclusions with respect to the potential strengths and weaknesses of the potential LBO claims would, “like the other transactions he is investigating … be particularly helpful in assisting the parties in plan negotiations.”

The unsecured creditors’ committee in the case, however, opposed the motion, calling it a “tactical maneuver to frustrate” the committee’s efforts to bring lien challenges in the case.

The committee said it had been investigating, and “already [had] identified several grounds to challenge certain of the pre-petition liens.” More specifically, the panel said, “one such ground is that the pre-petition liens were granted by subsidiaries for no value while they may have been insolvent or under-capitalized.”

The committee said that its raising of these potential challenges – and a hope of curtailing them — was the impetus behind the company’s motion to expand the scope of Davis’ investigation.

Examiner’s report
Meanwhile, earlier this month Davis separately filed his third interim report on his progress with the bankruptcy court. As is typical for such investigations, Davis said he has faced numerous issues with respect to discovery of documents and other evidence.

In the report, Davis said that unless the discovery issues were resolved by Aug. 17, “it would be difficult for” him to file a final report within the timeframe currently contemplated by the current restructuring-support agreement in the case – namely, by Nov. 15, or by Dec. 15, “at the latest.”

It is unclear what further effect, if any, the expansion of the scope of the investigation might have on the current timing of Davis’ report. – Alan Zimmerman


Loan defaults set to hit 6-month high with Samson Resources Ch 11 filing next month

The default rate of the S&P/LSTA Leveraged Loan Index will increase to 1.27% by principal amount next month, from 1.17%, when Samson Resources via Samson Investment Company files for bankruptcy, tripping a default on its second-lien secured loan. The default rate by issuer count will tick up to 0.77%, from 0.67%, according to LCD.

The default rate would be at a six-month peak, or the highest level since 3.79% as of March 31, although that was including Energy Future Holdings, which is no longer counted in the default rate due to the rolling-12-month basis. Excluding EFH, the default rate post-Samson would hit its highest level since February 2014 when it was 1.86%, according to LCD.

Privately held, KKR-controlled Samson on Friday announced publicly that it has entered into a restructuring support agreement with certain lenders holding 45.5% of the company’s second-lien debt, and with its sponsor on a proposed balance sheet restructuring that “would significantly reduce the company’s indebtedness and result in an investment of at least $450 million of new capital.”

Under the terms of the RSA, second-lien lenders, including Silver Point, Cerberus and Anschutz, have agreed to invest at least $450 million of new capital to provide liquidity to the balance sheet post reorganization and permanently pay down existing first-lien debt, the company said.

As a result, the company said it would not make the interest payment due today under its sole outstanding corporate issue, the $2.25 billion of 9.75% unsecured notes due 2020, but instead would use the 30-day grace period triggered by its non-payment “to build broader support for the restructuring and continue efforts to document and ultimately implement the reorganization transaction as part of a Chapter 11 filing.” The debt is worthless, trading below 1 cent on the dollar, down from around 30 in March, and a par context a year ago before the bear market mauling in oil.

The Samson loan default would not be particularly large, as the second-lien term loan was originally $1 billion in the Index. However, it’s notable as the second largest loan default this year, or since Caesars Entertainment kicked off the New Year in mid-January with the sixth largest default on record, at $5.36 billion across four tranches in the Index, according to LCD.

Assuming no other defaults leading up to Samson next month, it would become sixth loan-issuer default in the Index this year, following rival coal credits Alpha Natural Resources earlier this month, Patriot Coal in May, and Walter Energy in April, as well as exploration-and-production company Sabine Oil & Gas in April. Meanwhile, the eight ex-Index defaults this year are Altegrity, Allen Systems, American Eagle Energy, Boomerang Tube, Chassix, EveryWare, Great Atlantic & Pacific Tea, and Quicksilver Resources.

The shadow default rate for the Index is currently at 0.72%, down from 0.82% last month, but nearly triple the 0.29% rate in April. There is $5.51 billion of Index outstandings on the shadow list, and that includes Samson since its hiring of Kirkland & Ellis and Blackstone Group in February. This rate includes loans that are paying default interest but which are still performing, loan issuers that have bonds in default, and issuers that have hired bankruptcy counsel or that have secured a forbearance agreement.

There are five loan issuers on the shadow list that are publicly known. Beyond Samson, it’s Gymboree, Dex Media, Millennium Health, and Vantage Drilling, all of which are consulting advisors. – Matt Fuller

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