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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 15,000 customers in more than 180 countries. – Jon Hemingway

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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

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

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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

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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

Follow Matthew on Twitter @mfuller2009 for leveraged debt deal-flow, fund-flow, trading news, and more.

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Alex Toys, maker of Slinky, expanded loan from THL Credit for acquisitions

THL Credit increased an investment in Alex Toys in the fiscal second quarter to fund two acquisitions.

Alex Toys received a $13.2 million second-lien term loan and a $1 million equity investment in the quarter ended June 30, THL Credit said in a statement.

THL Credit’s debt investment in Alex Toys comprised a $30.2 million second-lien term loan due 2019 (L+1,000) as of June 30, up from a $17 million second-lien term loan due 2019 (also at L+1,000) as of March 31.

In May 2015, Alex Toys acquired Buzz Bee Toys, as well as France-based toymakers Janod and Kaloo.

Alex Toys sells branded toys, sports balls, educational activity kits, games, science kits, construction sets, and novelty products under brands such as POOF, Slinky, Scientific Explorer, Ideal, ZOOB, Backyard Safari, Zillionz, Shrinky Dinks, and Ruff Stuff.

THL Credit is an externally managed business-development company that trades on the NASDAQ under the ticker TCRD. – Abby Latour

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

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SunGard leveraged loans, bonds to be refinanced as part of Fidelity deal

Loans backing SunGard Data Systems are steady this morning at 99.875/100.375 following news that Fidelity National Information Services has agreed to acquire the company for $9.1 billion, according to sources.

SunGard’s debt is slated to be refinanced in connection with the transaction. As of June 30, the company had $400 million outstanding under its TLC due 2017 (L+375) and $1.918 billion under its TLE due 2020 (L+300, 1% LIBOR floor). The company also has three tranches of high-yield bonds outstanding totaling some $2.21 billion, SEC filings show.

The transaction, which was announced this morning, is expected to close by the end of the fourth quarter.

FIS management said on a conference call today that it plans to finance the transaction with 45% cash and 55% stock. At closing, it expects total debt will be $11.5 billion. Pro forma leverage is expected to be about 3.7x at closing, though the company said it plans to pay down debt “expeditiously” with an aim to reduce leverage to about 2.5x in 24 months after closing.

“Retention of our investment-grade credit ratings is very important to us and we have structured the consideration mix in a manner that supports our investment-grade ratings,” CFO James W. Woodall said on today’s call, according to a transcript provided by S&P Capital IQ.

As of June 30, Fidelity National had just over $5 billion of debt outstanding, SEC filings show.

FIS is currently rated BBB/Baa3, though S&P today revised its outlook on the company to negative in light of the SunGard acquisition.

“The rating outlook revision reflects our view that the planned acquisition of SunGard will result in weaker credit measures than previously anticipated,” S&P credit analyst Jenny Chang said in today’s report.

Meanwhile, agencies placed B+/B2 SunGard’s ratings on review for an upgrade. SunGard was acquired about 10 years ago by a consortium of Silver Lake Partners, Bain Capital, Blackstone, Goldman Sachs Capital Partners, KKR, Providence Private Equity, and Texas Pacific Group. – Kerry Kantin

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Mid-market corporate auctions in Europe to watch

Inflexion Private Equity has emerged as the frontrunner to acquire Quilvest-owned sushi chain Yo! Sushi, according to reports. Quilvest mandated Canaccord Genuity to run the process, which attracted several financial sponsors understood to include 3i Group and Morgan Stanley Private Equity, as well as Inflexion. Inflexion has subsequently won exclusivity after the final round of bidding, and is expected to acquire the company for roughly £100 million.

The auction of Dutch lingerie retailer Hunkemöller has taken an interesting twist, with U.S.-based private equity group Sycamore Partners reportedly submitting a last-minute bid that could trump offers from rival buyout groups CVC Capital Partners, Apax Partners, and The Carlyle Group, according to reports. The company, which is owned by PAI Partners, is valued at roughly €440 million.

Corsair Capital is understood to be close to launching a formal sale process for ATM company NoteMachine, according to market sources, who suggest Jefferies is likely to run the auction, which could begin in September or early October.

NoteMachine – which Corsair acquired in 2012 from buyout peer Rutland Partners – could fetch roughly £320 million. The business is backed by a £120 million unitranche loan provided by GE Capital and Ares Capital Europe joint venture the ESSLP, upsized last June from an existing £76.5 million facility.

Health and safety consultancy Santia is also set for the auction block, with turnaround investor and current owner Better Capital mandating PwC in recent weeks to advise on strategic options for the business. In Better Capital’s most recent financial statements, Santia carried a NAV of £40 million as of March 31, 2015 – up from £36.2 million a year earlier.

After a flurry of deals already in the sector this year, two more travel agents are soon to carry ‘for sale’ signs. Equistone Partners Europe is eyeing an exit for Audley Travel, according to reports, and has mandated Rothschild to run the auction. The business could be valued at more than £200 million.

Inflexion is also understood to be eyeing a realisation of its investment in On the Beach, which carries a £250 million valuation. The firm is reportedly exploring an IPO of the business, but could yet run an auction process.

Polish national airline LOT has attracted the interest of private equity group Indigo Partners, according to reports. Indigo, an experienced airline investor, is reportedly looking to buy a stake in the carrier and invest several hundred million zloty to help Warsaw, the airline’s home city, become a hub for the Central and Eastern Europe region.

In Ireland meanwhile, private equity group CapVest is lining up financing to support a bid for plastics and environmental services company One51. CapVest made a preliminary approach to the firm’s board regarding a €288 million (or €1.80 per share) offer for the Irish company. The firm generated EBITDA of €21.9 million last year, on revenue of €276.5 million. – Oliver Smiddy

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Cast & Crew accelerates deadline to Friday on LBO credit

RBC Capital Markets, Credit Suisse, Deutsche Bank, and Societe Generale have accelerated the commitment deadline on their first- and second-lien financing backing Silver Lake’s purchase of Cast & Crew Payroll, LLC, to 5 p.m. EDT on Friday, July 31, from Aug. 4.

Arrangers haven’t revised price talk. As noted earlier, the first-lien term loan is talked at L+375-400, with a 1% LIBOR floor, and a 99-99.5 offer price, sources said. The second-lien term loan is talked in a range of L+775-800, with a 1% floor, offered at 99, sources said.

The covenant-lite deal includes a $270 million, seven-year first-lien term loan and a $95 million, eight-year second-lien term loan, along with a $65 million, five-year revolver, sources said. The first-lien term loan includes six months of 101 soft call protection and would yield roughly 4.93-5.28% to maturity. The second-lien term loan includes 102 and 101 call premiums in years one and two, respectively, and would yield roughly 9.23-9.5%.

The transaction would leverage Cast & Crew at roughly 4.4x through the first-lien debt and about 6x total. Equity will compose roughly 50% of capitalization, according to sources. The issuer is rated B/B3. The first-lien debt is rated B+/B2, with a 2H recovery rating. The second-lien debt is rated CCC+/Caa2 with a 6 recovery rating.

Private equity firm ZM Capital is the seller. In 2012, a consortium led by ZM Capital, including VSS, Emigrant Capital, and other ZMC affiliates, bought the company. ZM Capital invests in media, entertainment, and communications companies.

The issuer, which does business as Cast & Crew Entertainment Services, based in Burbank, Calif., provides payroll services and production accounting to the entertainment industry, including film and television studios, and live-event venues. – Chris Donnelly/Abby Latour

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Antares Capital seeks $13.9B credit package in purchase by CPPIB from GECC

Credit Suisse, Deutsche Bank, and Citigroup are holding a lender meeting on Monday, July 27, at 11 a.m. EDT to launch the syndication of $13.9 billion of debt facilities in connection with Canada Pension Plan Investment Board’s purchase of Antares Capital from General Electric Capital Corp.

Financing will include two credit facilities: A $3.2 billion holdco credit facility and a $10.7 billion asset-based credit facility. The holdco senior secured credit facilities will include a $2 billion, five-year revolving credit and a $1.2 billion, five-year amortizing A term loan. Pricing on the senior secured holdco credit facilities will be tied to a ratings-based grid. The holdco facilities will carry two maintenance covenants, a total-net-asset-value test and an adjusted-asset-ratio test. The term loan will amortize at 5% in year one, 7.5% in year two, 10% in year three, and 12.5% each in years four and five with the balance due at maturity, according to sources.

The lead arrangers are also syndicating $10.7 billion of seven-year senior secured asset-backed credit facilities, comprised of a $3 billion asset-based revolving credit and a $7.7 billion, asset-based secured term loan. The asset-backed credit facilities will be secured by a portfolio of predominately first-lien senior secured term loans originated by Antares Capital. The facilities will have an equity cushion of 20% of the total portfolio value, with additional protections from traditional cash-trapping mechanics, revaluation events, and events of default that will provide remedies to the lenders.

Proceeds from the two credit facilities will be used to fund CPPIB’s announced acquisition of Antares Capital’s middle market sponsor finance business, including its integrated origination, underwriting and distribution platform, and to fund future growth.

CPPIB is contributing approximately $4 billion of equity to the transaction, according to sources. The business would be on a strong footing going forward; AAA rated CPPIB is one of the largest 10 managers of retirement funds globally, with about C$265 billion of assets under management.

Commitments will be due on Aug. 12, sources said.

GE Capital has long reigned as the dominant player in the middle market lending, defined by LCD as lending to companies that generate EBITDA of $50 million or less, or $350 million or less by deal size, although definitions vary among lenders.

Going forward, Antares Capital will operate as an independent business, and retain the name. Managing partners David Brackett and John Martin, who have led Antares since its formation, will continue to lead the stand-alone business. The sale is expected to close in the third quarter.

The sale accounts for $11 billion of ending net investment. GE Capital has announced sales of roughly $55 billion in all, and plans to complete $100 billion of sales this year. GE announced in April it would divest GE Capital, including its $16 billion sponsor finance business. GE Antares specializes in middle market lending to private-equity backed transactions. – Chris Donnelly

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AssuredPartners’ buyout by Apax backed by BAML, RBC, MS

Bank of America Merrill Lynch, RBC Capital Markets, and Morgan Stanley have provided committed debt financing to back Apax Partners’ acquisition of insurance brokerage AssuredPartners from GTCR.

Sources indicate the debt financing will be U.S.-focused.

AssuredPartners is one of the largest insurance brokerage firms in the U.S. It was formed in 2011 as part of a strategic partnership between private equity firm GTCR and the company’s CEO and COO. It has offices in more than 30 states, the District of Columbia, and London. – Nina Flitman