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Charter sets meeting tomorrow to launch $7.4B of leveraged loans for M&A, 3-part with Comcast and Time Warner

charter_communications_logoCharter Communications is launching $7.4 billion of incremental institutional term loans via a lender meeting tomorrow at 2:00 pm EDT, sources said. The funding will come as new tranche G and H loans, which are expected to have different maturities, the sources added.

Goldman Sachs, Bank of America Merrill Lynch, Credit Suisse, and Deutsche Bank have underwritten term debt totaling up to $8.4 billion and a $500 million revolver in connection with Charter’s purchase of certain assets of Comcast Corp. The remaining $1 billion of that commitment will be a $1 billion revolver that’s not on offer to the market, sources noted.

The cable operator has in place a $1.5 billion TLE due 2020 and a $1.2 billion TLF due 2021, both of which are priced at L+225, with a 0.75% LIBOR floor.

In April, Charter and Comcast announced a three-part plan that would grow Charter’s subscriber base and help with regulatory hurdles for Comcast’s $45 billion acquisition of Time Warner Cable.

According to regulatory filings, following the completion of Comcast’s merger with Time Warner Cable, Charter will acquire roughly 1.4 million existing Time Warner Cable subscribers, increasing its video customer base from 4.4 million to roughly 5.7 million and making Charter the second largest cable operator in the U.S.

Charter and Comcast also agreed to transfer assets involving roughly 1.6 million former Time Warner customers and 1.6 million Charter customers in a tax-efficient exchange, improving the geographic presence of both companies. Additionally, Comcast will spin off a new entity composed of cable systems serving roughly 2.5 million Comcast customers to its shareholders, with Charter acquiring approximately 33% of the equity of the spin-off in exchange for 13% of the equity of a new holding company of Charter.

The three-part plan is contingent upon completion of the Comcast and Time Warner merger. – Staff reports

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KeyCorp buys middle market investment bank Pacific Crest

keyIn a drive to become the leading middle market corporate and investment bank, KeyCorp said it acquired Pacific Crest Securities.

Pacific Crest Securities, which is a technology-focused investment bank and capital markets firm, will become part of KeyBanc Capital Markets. The transaction is expected to close in the third quarter if regulators approve the deal.

Pacific Crest Securities, based in Portland, Oregon, employs 170 and has expertise in internet and digital media, software and systems, communications, semiconductors, and clean technology. – Abby Latour

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

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July 2014 European Leveraged Loan Market Analysis – Video, Slides

This is S&P Capital IQ’s monthly loan market update. In this post, we concentrate on the trends at work in the European leveraged loan market during 2014 so far, including an increase in M&A financing and some signs of heating in the market. We’ll also touch on the question of whether some slowdown is to be expected.

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Out of the €45 billion of leveraged loan issuance so far this year, M&A-related deals contributed €25 billion, more than double what was raised in the first half of last year. This total was boosted by some jumbo corporate M&A deals, most recently  the cross-border financing for Jacobs Douwe Egberts. Among sponsor-backed buyouts, LCD tracked an increase in the number of asset sales by corporates and families, bringing some welcome debut borrowers to the loan market.

Eur2ELLI

Institutional investors continued to show strong appetite for leveraged loans during the second-quarter, and heavy repayments on existing loans spurred them on. In fact repayments reached a record quarterly high of €16.6 billion, based on the S&P European Leveraged Loan Index, as the chart shows.

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Adding to institutional demand, there was lively issuance of new-generation CLOs, particularly during June, including some new managers entering the 2.0 market, and sources say the pipeline for further CLO issuance in the second half of the year looks healthy.

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Through much of the year so far, there has been relatively little complaint from buyside firms about leverage multiples, and indeed first-lien leverage is pretty much flat on last year at around 3.7 times EBITDA. But second-lien tranches are appearing more frequently, and this helped drive total leverage a little higher, to 4.9x. Some arrangers argue leverage is unlikely to spiral up and up because this would result in deals coming to market with low single-B ratings, these often being hard to shift in syndication.

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Instead, the market is showing its aggression in other ways – particularly in the use of covenant-lite loans. €10 billion of cov-lite paper – a record – has been raised this year, meaning that roughly one in three euros sold to fund managers had no maintenance covenants. The ELLI Index now includes a 13% cov-lite portion, the highest in its history – although a long long way behind the U.S., where the trend started.

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However, from the point of view of yields, Europe looks less aggressive than it did earlier in the year as this chart suggests. Behind the scenes, yields on domestic European deals were flat from the first quarter to the second. But in line with the weaker technical picture in the U.S. market, cross-border yields widened in recent months, dragging the average out too.

Looking ahead, some kind of summer slowdown is likely, but arrangers say they are pitching on some aggressively structured deals and will be looking out for signs of pushback among investors if terms get too heated.

 

The video is available here.

The URL for the video:

PDF slides of the video on Slideshare is available here.

URL for the slides:

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.

– Ruth McGavin

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Sprint eyes roughly $20B bridge loan to back bid for T-Mobile

sprint logoSprint has obtained commitments from several banks providing a roughly $20 billion bridge loan to back the company’s effort to acquire T-Mobile, sources said. The banks will launch the deal soon, sources added.

Earlier this week, reports emerged regarding Sprint’s interest to purchase rival wireless provider T-Mobile in a deal that would total $32 billion. SoftBank, which completed its roughly $21.6 billion acquisition of Sprint in July 2013, would hold a controlling interest in the combined company.

S&P earlier this week disclosed that Sprint’s rating would likely be no higher than BB- after the merger and that SoftBank’s ratings would be lowered to BB, from BB+. S&P expects SoftBank’s consolidated debt to EBITDA – consolidating Sprint and T-Mobile, and including the acquisition and spectrum auction cash requirements – would be around mid-5x or higher in fiscal year 2014 annualized, which is above the current 5x threshold for SoftBank’s current rating. Sprint is currently rated BB-/Ba3.

Regulatory hurdles, though, could be an issue for Sprint. In a report earlier this week, S&P said that the combination of Sprint and T-Mobile would face intense regulatory scrutiny and wouldn’t be approved by the FCC and Department of Justice. In 2011, the FCC rejected AT&T’s $39 billion bid to acquire T-Mobile, suggesting that it wanted to maintain four nationwide wireless carriers. Sprint’s acquisition of T-Mobile would leave the U.S. with three national carriers. – Richard Kellerhals

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Gates Global on deck for tomorrow with cross-border LBO loan

A Credit Suisse-led arranger group has scheduled a bank meeting for 10:00 a.m. EDT tomorrow, June 5, to launch a cross-border loan package backing the Blackstone Group’s purchase of industrial manufacturer Gates Global, according to sources.

The loan financing includes a $2.49 billion term loan, a €200 million ($272 million) term loan, a $125 million cash-flow revolver, and a $325 million asset-based RC. The seven-year term loans will be covenant-lite. The revolvers will mature in five years.

Credit Suisse, Citigroup, Morgan Stanley, Goldman Sachs, and Deutsche Bank, UBS, and Macquarie are arranging the transaction, while Citi will be left lead on the adjoining bond deal.

Commitments on the loan will be due on Thursday, June 19, sources added.

Blackstone in early April agreed to acquire Gates for $5.4 billion. Gates, which makes transmission belts and fluid-power products, is a division of global engineering firm Tomkins/Pinafore, which Onex Corp. and the Canada Pension Plan Investment Board jointly acquired in 2010 for roughly $5 billion.

For reference, Pinafore currently has roughly $1.3 billion outstanding under its B loan, according to a regulatory filing. –

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Ortho-Clinical $2.175B loan backing Carlyle Group LBO rises atop par on entering trading

ortho_lgAccounts this morning received allocations of the $2.175 billion B term loan for Ortho-Clinical Diagnostics, which advanced to 100.375/100.875 after breaking for trading at 99.25/100.25, from issuance at 99, according to sources. The seven-year loan is priced at L+375, with a 1% LIBOR floor. Proceeds from loan, along with a $1.3 billion issue of 6.625% notes due 2022, will be used to fund The Carlyle Group’s purchase of the laboratory instruments and diagnostic products business from Johnson & Johnson. Barclays, Goldman Sachs, Credit Suisse, UBS, and Nomura arranged the loan. The loan cleared wide of original talk, among other investor-friendly changes, though the adjoining bond deal was upsized by $150 million to reduce the sponsor’s equity check by a like amount. A $350 million, five-year revolving credit rounds out the financing. Terms:

Borrower Ortho-Clinical Diagnostics
Issue $2.175 billion B term loan
UoP LBO
Spread L+375
LIBOR floor 1.00%
Price 99
Tenor seven years
YTM 5.02%
Call protection 12 months 101 soft call
Corporate ratings B/B2
Facility ratings B/B1
S&P recovery rating 3
Financial covenants none
Bookrunners Barc, GS, CS, UBS, Nom
Admin agent Barc
Sponsor Carlyle
Price talk L+350/1%/99-99.5
Notes Ticking fee of 375 bps payable 31 days after allocations
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Avago $4.6B loan backing LSI acquisition enters secondary north of issue price

avago-technologies_200x200Accounts this afternoon received allocations of the covenant-lite $4.6 billion B term loan for Avago Technologies, which broke for trading at 100/100.5, from issuance at 99.5, according to sources. The seven-year loan is priced at L+300, with a 0.75% LIBOR floor. Deutsche Bank, Barclays, Bank of America Merrill Lynch, and Citigroup arranged the loan, which cleared tight to original talk. The publicly traded semiconductor manufacturer will use proceeds to support its $6.6 billion acquisition of LSI Corp. The senior secured financing also includes a $500 million revolver, while Avago is also planning to fund the deal with a $1 billion investment from Silver Lake Partners, which would be in the form of a seven-year 2% convertible note, with a conversion price of $48.04 per share or preferred stock. The company will also use $1 billion of cash from the combined balance sheet to fund the transaction. Terms:

Borrower Avago Technologies
Issue $4.6 billion B term loan
UoP Fund acquisition of LSI
Spread L+300
LIBOR floor 0.75%
Price 99.5
Tenor seven years
YTM (once funded) 3.89%
Call protection 12 months 101 soft call
Corporate ratings BB+/Ba2/BB+
Facility ratings BBB-/Ba1/BBB-
S&P recovery rating 2
Financial covenants none
Arrangers DB, Barc, BAML, Citi
Admin agent DB
Price talk L+325/0.75%/99
Notes Ticking fee of 150 bps kicks in on June 1, stepping to 300 bps July 1; includes a 24-month MFN sunset provision
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Men’s Wearhouse $1.1B loan backing Jos A Bank buy rises on entering secondary

menswearhouseThe $1.1 billion covenant-lite term loan for Men’s Wearhouse ticked to 99.625/100.125 after breaking secondary late this afternoon at 99.5/100, from issuance at 99, according to sources. The seven-year loan is priced at L+350, with a 1% LIBOR floor. J.P. Morgan and Bank of America Merrill Lynch arranged the deal, which cleared at the tight end of talk. Proceeds back the publicly traded retailer’s planned $1.8 billion acquisition of Jos. A. Bank. Since the deal isn’t expected to close until the third quarter, lenders will be paid a ticking fee of half of the drawn spread beginning in June; the fee steps up to the full drawn spread in July. The issuer is also putting in place a $500 million, five-year asset-based revolver. The financing for the merger is also expected to include a $600 million issue of unsecured notes, which have been bridged, SEC filings show. BAML is expected to be left lead on the bond deal. Terms:

Borrower Men’s Wearhouse
Issue $1.1 billion delayed-draw TLB
UoP Finance acquisition of Jos. A. Bank
Spread L+350
LIBOR floor 1.00%
Price 99
Tenor seven years
YTM 4.76%
Call protection 12 months 101 soft call
Corporate ratings B+/Ba3
Facility ratings B+/Ba2
S&P recovery rating 3
Financial covenants none
Arrangers JPM, BAML
Admin agent JPM
Price talk L+350-375/1%/99
Notes Ticking fee of 175 bps kick
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Avago cuts pricing on $4.6B M&A term loan amid oversubscription

A Deutsche Bank-led arranger group this morning cut pricing on Avago Technologies‘ $4.6 billion M&A term loan to L+300, with a 0.75% LIBOR floor, at 99.5, sources said. The 101 soft call premium has been extended to 12 months from six months, sources said.

Investors earlier oversubscribed the loan line with talk of L+325, with a 0.75% LIBOR floor and a 99 offer price, according to sources. As revised, the loan will yield 3.89% to maturity, down from 4.24% at initial guidance.

Recommitments are due by close of business today. Allocations are expected on Wednesday.

Additional changes include a ticking fee that kicks in at 150 bps on June 1, rising to 300 bps on July 1. MFN has been added with a 24 month sunset, and a Luxco borrower has been added to what was previously a Cayman Islands borrower, sources explained.

The seven-year B term loan is part of the financing for Avago’s $6.6 billion acquisition of LSI Corp. The financing also includes a $500 million, five-year revolver.

Issuer ratings have firmed at BB+/Ba2/BB+, and the term loan is rated BBB-/Ba1/BBB-, with a 2 recovery rating from Standard & Poor’s. The loan is being arranged by Deutsche Bank, Barclays, Bank of America Merrill Lynch, and Citigroup.

As reported, Avago is also planning to fund the deal with a $1 billion investment from Silver Lake Partners, which would be in the form of a seven-year 2% convertible note with a conversion price of $48.04 per share or preferred stock. Deutsche Bank is acting as lead manager. Avago also intends to put $1 billion of cash into the transaction.

Avago is acquiring LSI for $11.15 per share. Including the SLP note, gross debt/LTM EBITDA is 3.8x.

Avago manufactures semiconductor devices. LSI Corp. makes storage and networking products. – Chris Donnelly/Richard Kellerhals

 

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Gilday joins MS as co-head of Euro lev. & acquisition finance

Ian Gilday is expected to start a new role this summer at Morgan Stanley as co-head of European leveraged and acquisition finance, alongside Matt Naber, according to market sources. Gilday brings 12 years’ experience in risk management, team building, and origination across the leveraged finance markets.

The hire further builds Morgan Stanley’s leveraged financing platform, and follows the hire of Yannick Perreve last year to spearhead the bank’s leveraged finance sponsor business in Europe. Emanuela Cisini also joined the leveraged finance team last July as executive director, while Richard Stiens was promoted to managing director within the team.

LCD reported earlier this week that Gilday had left his previous role at Goldman Sachs, having spent nine years at the bank. Most recently, Ian worked as head of EMEA CLO origination for the bank, a role he started last June, and prior to that he was head of syndicate and leveraged capital markets for the EMEA region. Before joining Goldman, Gilday spent five years in Merrill Lynch’s European leveraged finance team. –Sarah Husband