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Apollo Lines up Banks for $1.6B Outerwall LBO Financing

Bank of America Merrill Lynch, Jefferies Finance, Barclays, and Credit Suisse are providing Apollo Global Management with debt financing to back the $1.6 billion buyout of Outerwall Inc.

outerwall logoBellevue, Wash.-based Outerwall announced the $52-per-share cash buyout this morning. The purchase price is a 51% premium over the closing stock pricing on March 14, before Outerwall’s board announced plans to explore a possible sale.

The board has unanimously approved the Apollo offer. The purchase is expected to close in the third quarter, pending shareholder approval.

Outerwall said it will release second quarter earnings Thursday, but it does not plan to hold a conference call to discuss results.

In April, the owner of Redbox and Coinstar kiosks reported first-quarter earnings that beat expectations.

Earlier this year agencies lowered the company’s credit ratings on deteriorating performance in the physical rental business. S&P Global Ratings lowered Outerwall’s corporate credit rating in February by two notches to BB–, from BB+. Similarly, Moody’s downgraded Outerwall to Ba2, from Ba3.

Separately, the company this morning declared a quarterly dividend of $0.60 per share of common stock to be paid on Sept. 6. — Kelly Thompson

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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In Shadow of Brexit, Burgeoning European LBO Loan Market Proceeds with Caution

european lbo loan volume

U.K. buyouts accounted for only €2.33 billion of LBO volume across the leveraged loan market in 2016’s first half, versus €14.4 billion of supply for non-U.K. buyouts, according to LCD, an offering of S&P Global Market Intelligence.

Note the €14.4 billion is the largest first-half volume for non-U.K. LBOs since the turn of the decade, indicating that sponsors were either keen to raise financing ahead of the June 23 U.K. Brexit vote, or were simply not perturbed by it.

Sponsors expect LBO activity to continue into the second half of 2016, although the U.K.’s decision to leave the European Union has left market participants in a brave new world of financing, and the biggest obstacle to a pick-up in LBOs will be new valuations. – Nina Flitman

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UFC Sets Leveraged Loan, High Yield Bond Backing Private Equity Buy of Co.

Financing for the $4 billion purchase of professional mixed martial arts organization UFC by WME IMG, Silver Lake Partners, KKR, and MSD Capital will include a $1.3 billion, seven-year covenant-lite term loan B and $500 million of unsecured notes, sources said. As expected, UFC will be financed on a stand-alone basis and will not result in a refinancing of talent agency WME IMG’s debt, sources said.

UFC logoGoldman Sachs will be left lead on the loan deal and is expected to commence pre-marketing of the transaction shortly, while Deutsche Bank will be left lead on the bond deal, sources said. As noted earlier, the financing package has been underwritten by Barclays, Credit Suisse, Deutsche Bank, Goldman Sachs, and KKR Capital Markets.

WME IMG will also serve as UFC’s operating partner. Silver Lake Partners and KKR will join WME IMG as new strategic investors, along with MSD Capital, L.P. and MSD Partners, L.P., which will provide preferred equity financing, sources said.

UFC produces more than 40 live events annually and is the largest Pay-Per-View event provider in the world, broadcast in over 156 countries and territories, to nearly 1.1 billion television households worldwide, in 29 different languages. UFC continues to capitalize on digital distribution platforms via its wholly owned subscription over-the-top service, FIGHT PASS, delivering exclusive live events, thousands of fights on demand, and original content to viewers around the globe.

UFC parent Zuffa in 2014 repriced its then $475 million TLB due 2020 to L+300, with a 0.75% LIBOR floor. — Chris Donnelly

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Golub Capital backs Roark Merger of PetValue/Pet Supermarket with Hefty Unitranche Loan

Golub Capital was sole bookrunner and joint lead arranger on a $605 million unitranche loan that financed the merger of Pet Valu and Pet Supermarket, which are both portfolio companies of Roark Capital. Additional details of the financing were not available.

Golub is administrative agent on the loan. It is largest agented loan in the firm’s history.

The transaction combines longtime Roark portfolio company Pet Valu, acquired in 2009, with Pet Supermarket, which the private equity firm bought last year. Golub also provided debt financing for the latter acquisition. The combined business, called Pet Retail Brands, will have 930 stores in the U.S. and Canada and will generate around $1 billion in system-wide sales, according to the sponsor. Pet Valu and Pet Supermarket will continue to operate as independent brands.

Pet Retail Brands is a specialty retailer of premium pet food, supplies and services. The company will remain headquartered in Markham, Ontario, while Pet Supermarket operations will continue to be based in Sunrise, Fla. — Jon Hemingway

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M&A, LBO Leveraged Loan Issuance Remains in Check During 2nd Quarter

M&A loan volume US

M&A leveraged loan volume declined slightly in 2016’s second quarter, to $56.4 billion from $65.3 billion in the previous three months, according to LCD.

In general, M&A activity has been lackluster, as high equity prices, stiff competition for deals, and regulatory constraints keep a lid on activity.

As for LBOs, private equity shops maintained the unspectacular pace established in the first quarter of the year, logging $18.1 billion in leveraged loan buyout loan volume during the second quarter. – Staff reports

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This story is part of analysis, written by Kerry Kantin, which first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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Leveraged Loans: Lions Gate Eyes $4.6B Of Financing Backing Starz Acquisition

J.P. Morgan, Bank of America Merrill Lynch, and Deutsche Bank have committed debt financing in connection with Lions Gate’s planned $4.4 billion acquisition of Starz, which is expected to close by the end of the year.

starzThe total committed financing package totals $4.6 billion and includes $3.6 billion of secured and unsecured financing and a $1 billion revolver. Lions Gate also plans to refinance roughly $1.7–1.9 billion of debt at Lions Gate and at Starz and fund the cash portion of the deal with bank and bond financing. Pro forma leverage, excluding synergies, is expected to be roughly 5–5.5x as of Dec. 31, 2016. Lions Gate’s existing convertible notes and Starz capital leases will remain in place.

In the secondary market, the Lions Gate 5% fixed-rate second-lien term loan due 2022 popped up to a 101/102 market, from 99/99.5 yesterday, sources said. There is $400 million outstanding under the loan, which is currently callable at 102. J.P. Morgan is administrative agent.

Starz, meanwhile, has a $1 billion revolver due April 2020 that, as of March 31, had a borrowing capacity of $609 million. Pricing on the revolver is tied to a leverage-based grid, at L+150–225. Bank of Nova Scotia is administrative agent.

Santa Monica, Calif.–based Lions Gate is rated BB–/Ba3 and trades on the New York Stock Exchange under the ticker LGF. Englewood, Colo.–based Starz is rated BB/Ba2 and trades on the Nasdaq under the symbol STRZA. — Richard Kellerhals/Kerry Kantin

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Diamond Resorts Nets Financing for $2.2B Purchase by Apollo

Apollo Management has agreed to purchase Diamond Resorts International for $30.25 per share, or roughly $2.2 billion, backed by financing commitments from Barclays, Royal Bank of Canada, and Jefferies. PSP Investments Credit USA LLC is also providing debt financing commitments, sources said.

diamond resorts logoThe all-cash offer represents a premium of approximately 26% over Diamond Resorts’ closing share price on June 28, 2016, and a premium of roughly 58% over the closing share price in February

The transaction is conditioned upon satisfaction of the minimum tender condition which requires that shares representing more than 50% of the company’s common shares be tendered and the receipt of certain regulatory approvals and other customary closing conditions.

Diamond Resorts last approached the loan market in late 2015 with a $150 million add-on to its $455 million covenant-lite first-lien term loan due May 2021 (L+450, 1% LIBOR floor). There was roughly $574.6 million outstanding under the loan at March 31, 2016. The issuer also has roughly $601 million of other debt via securitization notes and funding facilities.

Diamond Resorts International operates a network of more than 420 vacation destinations located in 35 countries throughout the continental U.S., Hawaii, Canada, Mexico, the Caribbean, South America, Central America, Europe, Asia, Australasia and Africa. — Chris Donnelly

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Dell Software Group Nets Financing for EMC Buyout

Credit Suisse and RBC Capital Markets are providing an undisclosed amount of debt financing to back Francisco Partners and Elliott Management’s purchase of Dell Software Group, sources said.

dellPublished reports put the software unit’s purchase price at north of $2 billion. Dell Software provides advanced analytics, database management, data protection, endpoint systems management, identity and access management, Microsoft platform management, network security, and performance monitoring.

Details of the new financing haven’t emerged, but the software group’s two principal businesses, Quest Software and SonicWALL, are both well known to the leveraged finance markets.

A planned $2 billion buyout of Quest by Insight Venture Partners in 2012 was backed by an $820 million senior secured term loan, a $75 million senior secured revolving credit, and a $300 million senior unsecured bridge, all provided by J.P. Morgan, RBC Capital Markets, and Barclays. The company was later sold to Dell instead, and its purchase of SonicWALL occurred around the same time.

Credit Suisse arranged a $155 million first-lien term loan and a $105 million second-lien term loan to support the $717 million buyout of SonicWALL by an investor group led by Thoma Bravo that includes Teachers’ Private Capital back in 2010.

Dell, meanwhile, is expected to use proceeds from the asset sale to repay debt stemming from its recent acquisition of EMC Group, specifically a portion of its $3.2 billion, three-year term loan A-1, which is held by the deal’s underwriters and other commercial banks. —Chris Donnelly

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Revlon Eyes $3B in Leveraged Loan, High Yield Bond Debt for Elizabeth Arden Buy

Revlon disclosed that it has entered into a commitment letter with Citigroup and Bank of America Merrill Lynch providing a $1.8 billion leveraged loan, a $400 million asset-based revolver, and up to $400 million of a senior unsecured bridge loan in connection with the planned $870 million acquisition of Elizabeth Arden. Additionally, Revlon is seeking to privately place $400 million of senior unsecured notes.

The debt financing will be used to fund the acquisition as well as refinance Revlon’s and Elizabeth Arden’s debt. As of March 31, 2016, Revlon had $647.7 million outstanding under its B term loan due 2017 (L+250, 0.75% LIBOR floor) and $649.5 million outstanding under its B term loan due 2019 (L+300, 1% floor).

Revlon

Wikipedia

In the secondary, Revlon’s loans have been up around par. Holders of Revlon 5.75% notes due 2021 have held on to the debt, trade data show. The paper last changed hands at par on June 10, and trading on the notes was light leading up to the announcement. Elizabeth Arden’s 7.375% notes due 2021 saw greater gains. The paper, also not an active mover in the secondary market, changed hands at 102.25 on Friday morning, down slightly from the 102.75 price on Thursday afternoon. Prior to this, however, the notes last sold on May 26 at 72 and a quarter, trade data show.

Revlon’s existing 5.75% notes, which totaled $492.7 million as of March 31, though, will remain outstanding.

Elizabeth Arden, meanwhile, as of March 31, had $42.5 million in borrowings and $3.4 million in letters of credit outstanding under its $300 million revolver due December 2019, $25 million in outstanding borrowings under its second-lien revolver, and $350 million outstanding under its 7.375% senior notes due March 2021.

Revlon expects pro forma leverage will be roughly 4.2x net by the end of 2016.

Revlon and Elizabeth Arden yesterday announced that they have signed an agreement under which Revlon will acquire the outstanding shares of Elizabeth Arden for $14 per share. The acquisition is expected to close by the end of 2016.

New York–based Revlon sells beauty and personal care products. The company’s shares trade on the NYSE under the ticker REV. Elizabeth Arden, which is based in Miramar, Fla., also sells beauty products. Elizabeth Arden’s shares trade on the Nasdaq under the ticker RDEN. Elizabeth Arden is rated CCC+/Caa1. — Richard Kellerhals/Jakema Lewis

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Protection One Readies $1.45B of LBO Loans

A Credit Suisse-led arranger group has accelerated the deadline to Thursday, June 18 at noon EDT, from June 23, for the $1.45 billion first- and second-lien financing backing Apollo Management’s purchase of Protection One and ASG Security, according to sources.

The financing is structured as a $1.055 billion, six-year first-lien term loan; a $300 million, seven-year second-lien term loan; and a $95 million revolver. The term loans will be covenant-lite.

Price talk is at L+400, with a 1% LIBOR floor, and a 99 offer price on the first-lien term loan, and L+875, with a 1% floor, and a 98 OID on the second-lien. First-lien lenders are offered six months of 101 soft call protection, while the second-lien would include 102, 101 hard call premiums in years one and two, respectively.

At talk, the first-lien offers a yield to maturity of about 5.3%, while the second-lien would yield about 10.55%.

Credit Suisse, Barclays, Deutsche Bank, Jefferies, RBC Capital Markets, and Goldman Sachs are arranging the transaction.

Apollo last month agreed to purchase both Protection One and ASG Security and merge the two businesses. The purchase prices of the transactions were not disclosed, but the combined company is expected to generate annual revenue in excess of $500 million, according to Protection One. Closing is expected in mid-2015.

Protection One, a business and home security company, is currently owned by GTCR.

Protection One’s existing loans will be refinanced in connection with the transaction. The issuer has in place a $687 million term loan and a $55 million revolver, according to a recent S&P report. The existing term loan due March 2019 (L+325, 1% floor) is governed by a leverage test. – Richard Kellerhals/Kerry Kantin