Amid Market Turmoil, Buyout Loans Buoy Europe at Levels not Seen Since 2008

europe sponsored leveraged loan volume

Despite upheaval in the in the global economic markets and turmoil in the European leveraged loan secondary, this year’s buyout loan market is off to a swift start, with 16 deals launching to syndication in January, according to S&P Capital IQ and SNL.

By the end of the month, loan issuance to support these buyouts amounted to €5.9 billion of paper hitting the European market – the highest monthly reading since July 2008. For reference, buyout-related volume totalled just €3.2 billion from 10 transactions at this time in 2015.

All of January’s new-issue activity came from private equity backed borrowers. – Luke Millar

Follow Luke on Twitter for news and insight on the European leveraged finance market.

This story first appeared on, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here


Europe: LBO Loans Race Out of Gate to Start 2016

europe LBO buyout volume

The buyout market is off to a swift start in Europe, with an array of deals launching to syndication in the opening weeks of the year. Launches include LGC, Infinitas, Euro Garages, Webhelp, Hunkemoller, Solar Winds, Saverglass, and Armacell, while B&B Hotels, Element Materials, Solera and others are waiting in the wings.

As of Jan. 18, loan issuance to support these buyouts amounts to €3.1 billion of paper hitting the European market, which is in pursuit of the €21 billion target set in 2015 from 62 transactions. – Ruth McGavin

Follow Ruth on Twitter for leveraged loan news  and insight.

This story first appeared on, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here


Keurig Green Mountain sets pro rata pricing, nets ratings

Pricing has emerged on the pro rata component backing the $13.9 billion purchase of Keurig Green Mountain by a JAB Holding Co.–led investor group. Also, BB–/Ba3 ratings have emerged following yesterday’s launch to U.S. investors of the senior secured debt package. The secured loans have drawn BB/Ba3 ratings, with a 2H recovery rating. The rated entity is Maple Holdings Acquisition Corp.

Pricing on the pro rata component, which includes a $2.95 billion, five-year A term loan and a $500 million, five-year revolver, is tied to a leverage-based grid, at L+125–225 and at 25-45 undrawn, sources said.

As reported, arrangers J.P. Morgan, Goldman Sachs, Morgan Stanley, BNP Paribas, Citi, HSBC, and Rabobank yesterday launched to U.S. investors the cross-border financing, which also includes a $2.675 billion, seven-year B term loan, offering the domestic TLB at L+375–400, with a 0.75% LIBOR floor, at 99, for a yield to maturity of roughly 4.76–5.025%. The loans include a 101 soft call premium for six months.

The deal also includes a $275 million (roughly (€250 million), seven-year euro-denominated TLB. A London lender meeting is set for tomorrow, Jan. 21 at 11 a.m. GMT.

Commitments will be due on Tuesday, Feb. 2.

The pro rata facilities are governed by maintenance covenants, while the institutional debt is expected to be covenant-lite.

The purchase price also would include $8.5 billion of common equity.

Keurig, a maker of single-serve coffee brewers, will be privately owned and independently operated following the $92-per-share buyout. JAB separately owns a controlling stake of Jacobs Douwe Egberts, Peet’s Coffee & Tea, Caribou Coffee, Einstein Noah Restaurant Group, Espresso House and Baresso Coffee, along with other non-drinks-related businesses. — Richard Kellerhals/Chris Donnelly

This story first appeared on, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here


Petco Boosts Pricing on LBO Loan, Carves Out Floorless Tranche

A Citigroup-led arranger group this morning offered revisions to the $2.5 billion institutional loan backing CVC Capital Partners and Canada Pension Plan Investment Board’s acquisition of Petco Animal Supplies, including sweetening pricing and carving out a B-1 tranche with a higher spread but no LIBOR floor.

The arrangers boosted pricing on the seven-year term loan to L+475, with a 1% LIBOR floor and a 98 offer price, which compares with original guidance of L+450, with a 1% floor and a 98.5–99 OID, sources said. The B-1 carve-out, which will be sized at a minimum of $500 million, is talked at L+500, with no floor, also offered at 98.

At the proposed guidance, the TLB offers a yield to maturity of about 6.26%, which compares with 5.8–5.9% at the original guidance. The B-1 tranche would yield 6.12%. Note LCD’s yield calculation does not take into account the forward curve; three-month LIBOR stands at 62 bps this morning.

Commitments are due by 5 p.m. EST today, with allocations to follow tomorrow.

The arrangers sweetened other terms of the covenant-lite transaction, including extending the 101 soft call protection to 12 months, from six months initially.

Also, the free-and-clear component of the incremental facility has been scaled back to $300 million, from $500 million. Unlimited amounts are permissible up to 4.5x first-lien net leverage for pari passu debt and up to closing net leverage for junior or unsecured debt. Lenders are offered 50 bps of MFN protection, which sources note will encompass the issuance of secured notes.

The excess-cash-flow sweep opens at 50%, but the step-downs to 25% and 0% were tightened by a half-turn, to 3.5x and 3x net senior secured leverage, respectively.

With respect to the definition of EBITDA, pro forma cost savings are now capped at 20%.

As reported, Citigroup, Barclays, RBC Capital Markets, Credit Suisse, Nomura, and Macquarie have committed to provide the financing. The acquisition, which was announced in November, is expected to close in early 2016. CVC and CPPIB are acquiring the business from an owner group led by TPG and Leonard Green & Partners. Citi will be administrative agent.

The deal drew B/B2 corporate and B/B1 facility ratings, with a 3L recovery rating from S&P. The loan will include six months of 101 soft call protection.

Financing for the transaction also includes a $500 million, five-year asset-based revolver, $750 million of unsecured notes which have been taken by Goldman Sachs, along with $1.45 billion of equity, sources said. Leverage is marketed as 4.8x secured and 6.1x total.

As noted earlier, pricing on the ABL revolver has been outlined as L+125–175. Alongside this morning’s changes to the institutional loan, the accordion for the asset-based revolver was reduced to $100 million, from $250 million.

Petco last approached the loan market in early 2013 with a repricing of its then $1.2 billion covenant-lite B term loan due November 2017 to L+300, with a 1% LIBOR floor. There was about $1.17 billion outstanding on the loan as of Aug. 1, SEC filings show.

Based in San Diego, Petco is a specialty retailer of premium pet food, supplies, and services. The company operates more than 1,400 locations across the U.S., Mexico, and Puerto Rico, along with one of the leading e-commerce platforms in the pet industry. — Kerry Kantin/Chris Donnelly

This story first appeared on, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here


SolarWinds Sets $1.5B Leveraged Loan Backing LBO by Silver Lake, Thoma Bravo

Arrangers Goldman Sachs, Credit Suisse, Nomura, and Macquarie have set lender meetings next week in New York and London to launch its roughly $1.5 billion first-lien term loan financing backing Silver Lake Partners and Thoma Bravo $4.5 billion purchase of publicly traded IT-management-software provider SolarWinds. The New York meeting is set for Wednesday, Jan. 13 at 1 p.m. EST, while the London meeting kicks off on Thursday, Jan. 14 at 11 a.m. GMT.

Goldman’s mezzanine fund has taken the $580 million junior debt piece, according to sources.

The seven-year covenant-lite term loan deal has garnered early momentum via a recent early look round, sources said.

The purchase price represents a 43.5% premium to the closing price of SolarWinds’ common stock on Oct. 8, 2015, one day prior to the company’s announcement that it was exploring strategic alternatives. The transaction, which is expected to close in the first calendar quarter of 2016, is subject to approval by SolarWinds stockholders, regulatory approvals, and other customary closing conditions. — Chris Donnelly

This story first appeared on, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here


Middle market LBO loan volume fell 9% in 2015 year-on-year after weak 4Q

LBO loan volume was $5.5 billion in 2015, down roughly 9% from the 2014 tally of $6.1 billion among middle-market issuers generating $50 million or less of EBITDA, according to LCD. While down from last year, the 2015 total still represents the second highest post-crisis level. Moreover, the final tally was hampered by a weak $400 million volume total in the fourth quarter, well off the $1.7 billion average over the first three quarters of the year and the $1.5 billion quarterly average of 2014. — Staff reports

MiddleMarket volume 2015


Captek Softgel acquired by Swander Pace Capital

Captek Softgel International was acquired by Swander Pace Capital. NXT Capital provided senior debt, and Triangle Capital provided mezzanine debt, sources said.

Prairie Capital and Skyline Global Partners previously owned Captek.

California-based Captek manufactures and distributes softgels for vitamin, mineral and supplement globally.

Swander Pace Capital is a private equity firm specializing in middle-market consumer companies in North America and Britain. — Abby Latour

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


Third Ave’s liquidating debt fund holds concentrated, inactive paper

The leveraged finance marketplace is abuzz this morning ahead of a conference call to address to a plan of liquidation for the Third Avenue Focused Credit mutual fund following big losses this year, mild losses last year, heavy redemptions, and now a freeze on withdrawals. The news was publicly announced last night by the fund, and there will be a call at 11 a.m. EST for shareholders with lead portfolio manager Thomas Lapointe, according to the company.

Market sources yesterday relayed rumors of a near-$2 billion redemption from the asset class, and as one sources put forth, “the odd thing was it was difficult to trace the money that left, what was sold, and where it went.”

That was followed up by last night’s whopping, $3.5 billion retail cash withdrawal from mutual funds (72%) and ETFs (18%) in the week ended Dec. 9, according to Lipper, although it’s not entirely clear if that figure—the largest one-week redemption in 70 weeks—can be linked to Third Avenue. (LCD subscribes to weekly fund flow data from Lipper, but cannot see inside the aggregate observation.)

Nonetheless, it’s worthy of a dive into the open-ended fund, which trades under the symbol TFVCX. The fund shows a decline of 24.5% this year, versus the index at negative 2.94%, after a 6.3% loss last year, versus the index at positive 2.65%, according to Bloomberg data and the S&P U.S. Issued High Yield Corporate Bond Index.

It’s an alternative fixed-income fund that’s “extremely concentrated,” and “hardly representative of a ‘high yield’ or ‘junk bond’ fund,” outlined Brean Capital’s macro strategist Peter Tchir in a note to clients this morning. He highlighted that Bloomberg analytics show a portfolio that’s almost 50% unrated, nearly 45% tiered at CCC or lower, and just 6% of holdings rated BB or B.

The holdings are all fairly to extremely off-the-run, hence the trouble selling assets to meet redemption, and thus, the liquidation. The remaining assets have been placed into a liquidating trust, and interests in that trust will be distributed to shareholders on or about Dec. 16, 2015, according to the company.

Top holdings follow, and none have traded actively or very much in size of late, trade data show:

  • Energy Future Intermediate Holdings 11.25% senior PIK toggle notes due 2018; recent trades in the Ch. 11 paper were at 107.5.
  • Sun Products 7.75% senior notes due 2021; recent trades were at 87.5, versus 90 a month ago and the low 70s a year ago.
  • iHeartCommunications 14% partial-PIK exchange notes due 2021; block trades today were at 30 and 32, from 27 last month.
  • New Enterprise Stone & Lime 11% senior notes due 2018; odd lots traded recently in the low 80s, versus mid-80s last month.
  • Liberty Tire Recycling 11% second-lien PIK notes due 2021 privately issued in an out-of-court restructuring; trades reported in the mid-60s.

Amid those any many others of a similar ilk, the fund also reports a holding in Vertellus B term debt due 2019 (L+950, 1% LIBOR floor). The chemicals credits put the $455 million facility in place in October 2014 as part of a refinancing effort, pricing was at 96.5, and it’s now at 78/82, sources said.

“Investor requests for redemption … in addition to the general reduction of liquidity in the fixed income markets, have made it impracticable for FCF going forward to create sufficient cash to pay anticipated redemptions without resorting to sales at prices that would unfairly disadvantage the remaining shareholders,” according to the company statement.

“In line with its investment approach, FCF has some investments in companies that have undergone restructurings in the last eighteen months, and while we believe that these investments are likely to generate positive returns for shareholders over time, if FCF were forced to sell those investments immediately, it would only realize a portion of those investments’ fair value given current market conditions,” the statement outlined.

Further details are available online at the Third Avenue Management website. — Matt Fuller

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


Loan technicals slide in November as supply dwarfs capital formation

In November, loan market technicals went from bad to worse as supply exceeded visible capital formation to the tune of $17.5 billion: $19.89 billion to $2.38 billion. It was the market’s biggest technical deficit since November 2007 when the prior cycle’s LBO boom crested.

As the chart illustrates, the market has experienced three successive months of technical red ink during which net new supply outran visible inflows by $32.34 billion, the largest three-month shortfall since the final quarter of 2006. — Staff reports

Loan market technicals Nov 2015




American Capital unveils strategic review, including potential sale

American Capital’s board is reviewing strategic alternatives, including a sale of part or all of the company.

For an evaluation of American Capital’s portfolio, see “American Capital portfolio shows $691M of new investments in 3Q,” LCD News, Nov. 9, 2015.

American Capital has hired Goldman Sachs and Credit Suisse Securities as financial advisors. Results of the review are expected to be announced by January 31.

At the same time, the company expanded a stock buyback program to a range of $600 million to $1 billion, from an earlier range of $300–600 million. The program runs through June 30.

The company will buy shares at prices below 85% of net asset value per share as of Sept. 30. Net asset value per share was $20.44 as of Sept. 30.

Shares of American Capital were trading at $15.56 in late morning trade on Nasdaq today, up two cents, with the overall market slightly lower.

“The Strategic Review Committee looks forward to a full independent review with the sole goal of maximizing value for shareholders,” said Neil Hahl, chairman of the independent board committee, in a Nov. 25 statement.

The review will evaluate the previously announced plan to spin off a new business development company to shareholders. — Abby Latour

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