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Shock Doctor Sports uses $205M loan to fund merger with McDavid

Bregal Partners portfolio company Shock Doctor Sports has closed its merger with another sports-protection and performance-equipment company, McDavid. The acquisition was supported by $130 million of first-lien financing as well as $75 million of second-lien debt, according to market sources.

The arranger group includes Ares Capital, BMO, NewStar Financial, NXT Capital, and Madison Capital, sources note.

In addition to funding the acquisition, proceeds from the deal were used to refinance debt. Ares Capital was agent on the existing senior credit for Shock Doctor that backed Bregal’s buyout of the company in March of last year from Norwest Equity Partners. That financing included a term loan and revolver.

Minnetonka, Minn.-based Shock Doctor is a maker of mouth guards, impact gear, baseball equipment, insoles, performance-sports-therapy products, and performance apparels. McDavid manufactures, designs and markets sports medicine, sports protection and performance apparel for active people and athletes. The company is headquartered in Chicago, with subsidiaries in Japan and Europe. – Jon Hemingway

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Murray Energy sweetens loan pricing for scaled-back Foresight Energy purchase

Deutsche Bank and Goldman Sachs this morning offered a reworked structure of their loan deal for Murray Energy as the issuer scaled back its planned investment in Foresight Energy’s general partnership, sources said. Changes to the loan include a short-dated carve-out, as well as sweetened pricing.

Murray this morning announced changes to the transaction, reducing its ownership percentage in Foresight such that the deal now allows Foresight to keep its debt stack in place, sources said. Murray will now pay roughly $1.37 billion for a 34% stake in Foresight’s general partnership, and a 50% interest, as before, in the limited partnership. Murray originally planned to purchase an 80% interest in the GP.

Arrangers are now floating revised loan terms on the back of that announcement. They have carved out a $300 million, two-year B-1 term loan, which is talked at L+600, with a 1% LIBOR floor, and is offered at 99. The balance is now a $1.7 billion, B-2 term loan. The loan, previously $1.825 billion, has been scaled back to five years, from six years, and pricing has been increased to L+650, with a 1% LIBOR floor, and offered at 97.

The longer-dated term loan includes 102 and 101 hard call premiums in years one and two, respectively. The short-dated tranche includes a 101 soft call premium for 12 months.

Commitments will be due later this week, sources added.

By contrast, the longer-dated loan was launched at $1.675 billion at talk of L+575, with a 1% floor and a 98 offer price, although the issuer tweaked the loan’s size as its $1.55 billion bond deal was launched to investors, sources said.

The issuer a week ago launched the bonds as $1.55 billion, two-part second-lien bond deal while revising covenants on both the loan and bonds deals. The issuer was seeking five- and eight-year tranches, each with the now-common short call schedules, with two and three years of protection, respectively, and both with first call premiums of par plus 75% coupon. Guidance was 10.25-10.5% and 10.75-11%, respectively, sources noted. The bond deal was expected to price late last week, but remained up in the air amid whispers of widening talk, sources added.

The bonds are now expected to total $1.3 billion, sources said.

Among the covenant changes foisted last week, the drop down trigger on cash consideration was tightened 75% at greater than 2.5x (from 3x), stepping to 50% at less than 2.5x. LP units can now be received as cash below 2x, instead of 2.75x. The excess-cash-flow sweep was bolstered to 75% above 2.5x, rather than 3.25x, and 50% above 2x, rather than 2.5x. The permitted acquisitions basket was trimmed to $50 million, from $100 million, and the asset-sale basket as reduced to $100 million annually, from $150 million.

The last week’s changes also firmed other elements of documentation that hadn’t been outlined previously. For example, the leverage covenant will be set at 3x through Dec. 30, 2015, stepping down over time. As well the incremental basket has been set at $150 million plus additional amounts subject to first-lien net leverage of 1.5 x. – Chris Donnelly

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LifeTime Fitness nets leveraged loan backing LBO by Leonard Green

Deutsche Bank, Goldman, Sachs, Jefferies, BMO Capital Markets, RBC Capital Markets, Macquarie Capital, and Nomura will provide debt financing for the acquisition of Life Time Fitness by Leonard Green & Partners and TPG.

The transaction announced earlier today is valued at more than $4 billion. Other key investors include LNK Partners and Life Time CEO Bahram Akradi, who will remain in his role and has committed to make a rollover investment of $125 million in Life Time common stock.

Under the terms of the merger agreement, the investors will acquire all of the outstanding shares of Life Time Fitness common stock for $72.10 per share in cash. This price represents a significant premium to Life Time’s closing share price of $41.60 on Aug. 22, 2014, the last trading day prior to the announcement that the issuer was exploring a potential conversion of real estate assets into a real estate investment trust.

Life Time had total debt of roughly $1.2 billion at year-end 2014, according to an SEC filing. EBITDA for the fourth quarter of 2014 was $86.8 million compared to $80.4 million in the year-ago equivalent period. For 2014, EBITDA was $374.3 million compared with $351.8 million in the prior-year period.

The merger is subject to approval from Life Time’s shareholders and other customary closing conditions. The transaction is currently expected to close in the third quarter of 2015. – Staff reports

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Valeant adds underwriters as interest builds in $4.55B institutional loan backing Salix buy

Valeant Pharmaceutical’s $4.55 billion institutional term loan is seeing strong momentum a day after the deal’s official launch, sources said. The deal, which backs Valeant’s $14.5 billion acquisition of Salix Pharmaceuticals, has also drawn a large group of underwriters, investors were told at yesterday’s lender meeting.

The Deutsche Bank-led arranger group now includes HSBC, Bank of Tokyo-Mitsubishi UFJ, DNB Capital Markets, SunTrust Robinson Humphrey, Barclays, Morgan Stanley, RBC Capital Markets, and Citi. Senior management agents include BMO Capital Markets, CIBC, SMBC, and TD Securities. Barclays is administrative agent.

The seven-year institutional loan is talked at L+350, with a 0.75% LIBOR floor and a 99 offer price. Of note, a $1.8 billion portion of the new institutional loan (designated tranche F-2) will be available as a delayed draw to deal with the repayment of Salix’s convertible issues.

The loan pays a ticking fee of the full spread plus LIBOR floor after 30 days. The remaining $2.75 billion tranche F-1 will be funded at closing. Accompanying $1 billion TLA, which is also being syndicated, is delayed draw and pays 25 bps from closing.

Investors are offered six months of 101 soft call protection.

Commitments are due on Friday, March 13.

The senior secured financing includes a $1 billion, five-year A term loan and a $4.55 billion, seven-year institutional tranche. Like the existing loans, the new deal will be governed by secured-leverage and interest-coverage covenants. At current talk the institutional loan would yield roughly 4.5% to maturity. According to a commitment letter filed with the SEC, pricing on the new TLA is tied to a leverage-based grid from L+175-225, opening at L+225.

The issuer is also roadshowing $9.6 billion of bonds to back the purchase.

Pro forma net secured leverage is 2.2x, and net total leverage is 5.5x, sources noted.

Existing loans include 50 bps of MFN protection. As of Sept. 30, Valeant had $182.3 million outstanding under its A-1 term loan due April 2016 (L+225, no LIBOR floor), $166.3 million outstanding under its A-2 term loan due April 2016 (L+225, no LIBOR floor), roughly $1.81 billion outstanding under its A-3 term loan due October 2018 (L+225, no LIBOR floor), roughly $1.09 billion outstanding under its series D-2 B term loan due February 2019 (L+275, with a 0.75% LIBOR floor), $837.5 million outstanding under its series C-2 B term loan due December 2019 (L+275, with a 0.75% LIBOR floor), and roughly $2.54 billion under its series E-1 B term loan due August 2020 (L+275, 0.75% floor).

Valeant does not expect any change to its credit ratings as a result of the transaction. The company is currently rated BB-/Ba3.

The transaction, which is expected to close in the second quarter of 2015, is subject to customary closing conditions and regulatory approval.

Valeant Pharmaceuticals, which is based in Laval, Canada, makes a broad range of pharmaceutical products. The company trades on the New York Stock Exchange under the ticker VRX with a market capitalization in excess of $68 billion. – Staff reports

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Blue Coat nets financing for $2.4B buyout by Bain Capital

Jefferies will provide debt financing to back Bain Capital’s $2.4 billion purchase of Blue Coat Systems, which was announced earlier today, sources said.

Jefferies also led the issuer’s existing loan deal. Blue Coat in early 2014 repriced its covenant-lite term loan B due May 2019 to L+300, with a 1% LIBOR floor, and upsized it to $746 million. In June 2013, the issuer tapped the market via Jefferies and Goldman Sachs for a $330 million, second-lien term loan to finance a dividend. That loan cleared at L+850, with a 1% floor, and is callable at 102 through June, when the premium falls to 101, according to sources.

Thoma Bravo and an investor group that includes Teachers’ Private Capital purchased Blue Coat for $1.3 billion in early 2012, investing roughly $500 million in cash.

Sunnyvale, Calif.-based Blue Coat sells security software to businesses to protect against malware and control employee access to the Internet. – Chris Donnelly 

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3 months after shelving loan C&J Energy revives financing backing Nabors merger

Arrangers Citigroup, Bank of America Merrill Lynch, Wells Fargo, and J.P. Morgan are reviving their M&A loan deal for C&J Energy Services. A lender call is set for Wednesday at 11:00 a.m. EST. The deal backs the merger with a unit of Nabors Industries.

Of note, the purchase price declined from $2.86 billion at the time of the June announcement, to $1.5 billion, due to a $250 million reduction in cash, to $688 million, and declines in C&J’s share price. The issuer would have roughly $1.1 billion of debt at closing, and would be leveraged at roughly 2.2x. Nabors would own 53% of the merged business, and C&J shareholders would own 47%.

Arrangers haven’t provided an updated financing plan following the purchase price reduction.

The loan deal backing C&J Energy’s with the Nabors Industries completion and production-services business originally totaled $675 million and was split between a $300 million, five-year TLB-1 and a $375 million, covenant-lite seven-year TLB-2. The TLB-1 included total-leverage, secured-leverage, and interest-coverage tests, and was talked at L+350-375, with a 0.75% LIBOR floor, offered at 99, for a yield to maturity of 4.57-4.82%. The covenant-lite TLB-2 had been talked at L+375-400, with a 1% floor, at 99, to yield 5.02-5.28%.

That structure was later revised to a $640 million, five-year TLB that was talked at L+400, with a 1% LIBOR floor, offered at 98, with total-leverage, secured-leverage, and interest-coverage tests. In addition to the four arrangers, the line-up included senior co-managers Capital One and Comerica, and co-managers Amegy, DNB, Nova Scotia, and Regions. Bank of America is administrative agent.

The issuer is rated BB-/Ba2, with a stable outlook from both agencies. The loans are rated BB+/Ba1, with a 1 recovery rating.

C&J Energy Services is an independent provider of premium hydraulic fracturing, coiled tubing, wireline, pumpdown, and other complementary oilfield services with a focus on complex, technically demanding well completions. – Chris Donnelly

 

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Valeant outlines leveraged loan amendment related to $14.5B Salix purchase

Valeant this morning launched a slate of proposed changes to its credit facility that will be used to facilitate financing of its $14.5 billion acquisition of Salix Pharmaceuticals, according to an SEC filing. The company has asked lenders to waive total leverage and interest coverage tests that govern incremental borrowings.

That request is part of a larger slate of changes, and lenders are offered a 25 bps fee to approve. As reported, Deutsche Bank, HSBC, Bank of Tokyo-Mitsubishi UFJ, DNB Capital Markets, and SunTrust Robinson Humphrey have committed to provide a $1 billion, five-year incremental A term loan, a $4.55 billion, seven-year incremental B term loan, and a $9.6 billion unsecured bridge loan to finance the transaction, according to filings.

In addition to waiving the 5.25x total leverage and 3x minimum interest coverage tests to allow solely for the incremental loans to help finance the acquisition, Valeant is seeking covenant changes through the first quarter of 2016, including a modification of the interest coverage ratio to 2.25x, allowing for the incurrence of $750 million of additional unsecured debt, waiving of the 5.25x leverage governor in connection with any incremental borrowings, and altering the consolidated EBITDA definition to allow for add-backs of restructuring charges and fees and expenses tied the Salix purchase. The amendment package would also:

  • Waive mandatory prepayments from equity issuance used in the Salix deal or 2014 excess cash flow proceeds of roughly $250 million;
  • Modify the restricted payments covenant so that refinancing of Salix’s convertible notes and settlement of related warrants won’t be deemed RPs;
  • Permit the administrative agent under the credit agreement to enter into certain intercreditor agreements;
  • Increase cash netting from $350 million to $600 million;
  • For future permitted acquisitions change the no default and pro forma compliance conditions to the incremental from “at closing” to “at signing,” and waive incremental total leverage ratio conditions so that only the senior secured leverage ratio applies.

 

Ahead of this morning’s call, Valeant’s institutional loans were pegged in a 99.5/100 context, essentially unchanged from yesterday though off from levels bracketing par prior to yesterday’s M&A announcement, sources said.

Note the existing institutional loans include 50 bps of MFN protection. As of Sept. 30, 2014, Valeant had $182.3 million outstanding under its A-1 term loan due April 2016 (L+225, no LIBOR floor), $166.3 million outstanding under its A-2 term loan due April 2016 (L+225, no LIBOR floor), roughly $1.81 billion outstanding under its A-3 term loan due October 2018 (L+225, no LIBOR floor), roughly $1.09 billion outstanding under its series D-2 B term loan due February 2019 (L+275, with a 0.75% LIBOR floor), $837.5 million outstanding under its series C-2 B term loan due December 2019 (L+275, with a 0.75% LIBOR floor), and roughly $2.54 billion under its series E-1 B term loan due August 2020 (L+275, 0.75% floor). According to the commitment letter, pricing on the new TLA is tied to a leverage-based grid from L+175-225, opening at L+225. Pricing on the new TLB, meanwhile, is outlined at L+350, with a 0.75% LIBOR floor.

Pricing on the bridge loan would open at L+575, increasing 50 bps every 90 days. Note that market conditions at the time of syndication typically dictate actual price talk. The incremental TLA would amortize at a rate of 5% in the first year, 10% in the second, and at 20% thereafter. As reported, Valeant plans to acquire all of the outstanding common stock of Salix for $158 per share in cash in a transaction valued at $14.5 billion. As a result of the need to draw-down inventories, EBITDA will be artificially low in 2014 and 2015, resulting in initial pro forma net leverage of roughly 5.6x. Valeant said it is committed to reducing its net-leverage ratio to below 4x by the second half of 2016. Valeant does not expect any change to its credit ratings as a result of the transaction.

The company is currently rated BB-/Ba3. The transaction, which is expected to close in the second quarter of 2015, is subject to customary closing conditions and regulatory approval. NYSE-listed Valeant Pharmaceuticals, which is based in Laval, Canada, makes a broad range of pharmaceutical products. Salix Pharmaceuticals is based in Raleigh, N.C and is rated B/B1. – Staff reports

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PetSmart trims pricing anew on TL; recommits due Tuesday

A Citigroup-led arranger group today cut pricing for a second time on the $4.3 billion covenant-lite B term loan backing BC Partners’ acquisition of PetSmart, lowering the spread by an additional 25 bps, to L+400, according to sources.

The 1% LIBOR floor and 99.5 offer price are unchanged from yesterday’s reverse-flex, but note that original guidance was for pricing of L+450-475, with a 1% floor and a 99 OID.

With today’s change, the loan offers a yield to maturity of about 5.19%, versus 5.45% after yesterday’s reverse-flex and 5.8-6.07% at the initial guidance.

Recommitments are due by 5:00 p.m. EST on Tuesday, Feb. 17, and sources note that no new commitments are being accepted. Allocations are expected in the latter half of next week.

Citigroup, Barclays, Deutsche Bank, Nomura, Jefferies, RBC Capital Markets, and Macquarie are arranging the loan; Natixis is a co-manager on the financing.

Though the LBO is expected to close the week of March 9 (the shareholder vote is slated for March 6), a ticking fee of the full spread and floor would kick in on Friday, March 20, should closing be delayed, sources noted.

Ratings are at B+/B1 corporate and BB-/Ba3 on the term loan, with a 2 recovery rating.

The transaction, which was announced in December, is valued at about $8.7 billion, which represents a 9.1x multiple of PetSmart’s adjusted EBITDA for the 12 months ended Nov. 2, according to the company.

Leverage is being marketed at 4.5x net secured, 6.3x net total, sources said.

The transaction includes an incremental facility of $800 million, plus the amount of voluntary prepayments of the TLB plus an unlimited amount up to net first-lien leverage at closing (including capital leases and borrowings under the ABL), subject to 50 bps MFN protection, sources noted.

The issuer is also seeking to put in place $1.9 billion of eight-year (non-call three) unsecured notes via a Barclays-led bookrunner group. A roadshow runs through next Thursday, for pricing thereafter.

The debt financing also provides for a $750 million asset-based facility.

The consortium, including funds advised by BC Partners, alongside several of its limited partners, including La Caisse de dépôt et placement du Québec and StepStone, will pay $83 per share in cash for PetSmart. Longview Asset Management, which owns or manages about 9% of PetSmart’s outstanding shares, has committed to vote in favor of the transaction and will participate in the consortium, retaining roughly one third of its current stake, the company said.

The sponsors, excluding Longview, will kick in up to $1.83 billion of equity; Longview will roll over approximately three million of its current shares, the filing notes.

The Phoenix-based retailer operates approximately 1,387 pet stores in the U.S., Canada, and Puerto Rico. – Staff reports

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Dollar Tree readies $7B leveraged loan backing Family Dollar buy

Arrangers J.P. Morgan, Wells Fargo, Bank of America Merrill Lynch, RBC Capital Markets, and US Bank have scheduled Dollar Tree’s M&A loan deal for launch with a lender meeting on Monday, Jan. 26, at 2:00 p.m. EST, sources said.

The financing backing the purchase of Family Dollar is now structured as a $1.25 billion, five-year revolver, a $500 million, five-year term loan A, and a $5.2 billion, seven-year term loan B.

The underwriting group now includes PNC, TD Securities, Capital One, Regions Bank, Citizens Bank, Bank of Tokyo-Mitsubishi UFJ, SunTrust Robinson Humphrey, SMBC, HSBC, Fifth Third, and Huntington National.

The original commitment called for $5.4 billion of term debt and $2.8 billion in new senior unsecured notes, sources said. Earlier, Dollar Tree said it would also use $569 million of available cash and a $240 million revolver draw to back the acquisition.

Family Dollar shareholders approved the transaction earlier this week, and closing is expected in March.

The combination of Dollar Tree and Family Dollar would create the largest discount retailer in North America by number of stores.

Chesapeake, Va.-based Dollar Tree operates variety stores in the U.S. and Canada. – Chris Donnelly/Richard Kellerhals

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Pabst to be acquired by Russia’s Oasis Beverages, PE firm TSG nets minority stake

pabst2UBS is leading the debt financing that will back the acquisition of Pabst Brewing Company by Oasis Beverages, according to sources. Private equity firm TSG Consumer Partners will take a minority stake in the business. No other details of the acquisition or the financing were disclosed.

Oasis is a beer and beverage company with operations in Russia, Ukraine, Kazakhstan, and Belarus. Current Oasis chairman and founder Eugene Kashper will serve as the CEO of Pabst.

Current owner C. Dean Metropoulos & Co. acquired Pabst in 2010 from Kalmanovitz Charitable Foundation for $250 million, according to S&P Capital IQ.

Pabst Brewing’s portfolio includes iconic brands such as Pabst Blue Ribbon, Lone Star, Rainier, Ballantine IPA, Schlitz, Old Style, Stroh’s and Old Milwaukee. The company was founded in 1844 and is based in Los Angeles, Calif. – Staff reports