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CORE Entertainment files Ch. 11 as American Idol popularity wanes

CORE Entertainment, the owner and producer of American Idol, has filed for bankruptcy as the once-popular television show concluded its final season.

The company’s debt included a $200 million 9% senior secured first-lien term loan due 2017 dating from 2011, and a $160 million 13.5% second-lien term loan due 2018. U.S. Bank replaced Goldman Sachs as agent on both loans, which stem from Apollo’s buyout of the company, formerly known as CKx Entertainment, in 2012.

Principal and interest under the first-lien credit agreement has grown to $209 million, and on the second-lien loan to $189 million, court documents showed.

A group of first-lien lenders consisting of Tennenbaum Capital Partners, Bayside Capital, and Hudson Bay Capital Management have hired Klee, Tuchin, Bogdanoff & Stern and Houlihan Lokey Capital as advisors. Together with Credit Suisse Asset Management and CIT Bank, these lenders hold 64% of the company’s first-lien debt.

Crestview Media Investors, which holds 34.8% of first-lien debt and 79.2% under the second-lien loan, hired Quinn Emanuel Urquhart & Sullivan and Millstein & Co. as advisors.

The debtor also owes $17 million in principal and interest under an 8% senior unsecured promissory note.

CORE Entertainment, and its operating subsidiary Core Media Group, owns stakes in the American Idol television franchise and the So You Think You Can Dance television franchise.

The company’s business model relied upon continued popularity of American Idol and So You Think You Can Dance. In late 2013, the company sold ownership of most of rights to the name and image of boxer Muhammed Ali, and of trademarks to the name and image of Elvis Presley and the operation of Graceland, and failed to acquire assets to offset the loss of that revenue.

The bankruptcy filing was blamed on the cancellation of American Idol by FOX for the 2017 season. Following a decline in ratings, FOX said that the 2016 season would be the show’s final one.

The filing was today in the U.S. Bankruptcy Court for the Southern District of New York. — Abby Latour

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Littlejohn-backed Interior Specialists to acquire HD Supply unit

Interior Specialists, Inc. (ISI), a portfolio company of Littlejohn & Co., has agreed to buy the Interior Solutions unit of Nasdaq-listed HD Supply for an undisclosed amount. The transaction is expected to close in the second quarter, according to the company.

Further details regarding the transaction were not disclosed.

The acquired business, formerly known as Creative Touch Interiors, is a provider of design center management and installation services to homebuilders.

ISI last summer closed on a $74.3 million term loan to support another acquisition and to refinance existing debt. Garrison Investment Group was lead arranger on the transaction, and as of Dec. 31, BDC Garrison Capital was holding $10.2 million of a first-lien term loan due June 2020, priced at L+800 with a 1% floor. PennantPark Investment Corp. ($25.4 million) and PennantPark Floating Rate Capital ($6.8 million) are also in the loan.

Interior Specialists, based in Carlsbad, Calif., is a new construction interior finishing contractor that supplies and installs flooring, cabinetry, countertops, window coverings, and builder construction options, including appliances, to the residential and commercial builder trades. Littlejohn acquired ISI in 2014. — Jon Hemingway

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Mid-States Supply bought by Staple Street in bankruptcy court sale

Middle-market private equity firm Staple Street Capital has acquired Mid-States Supply Company through a bankruptcy court sale.

The buyer was the stalking-horse bidder in a Section 363 bankruptcy court auction. The purchase price was $25 million in cash, with a negative adjustment for working capital, plus certain liabilities, court documents showed.

The company filed Chapter 11 in February in the Western District of Missouri.

The bankruptcy court documents said Mid-States Supply Company initially owed $45 million under a credit agreement with Wells Fargo dating from 2011, a loan which eventually increased to $60 million. However, this amount had shrunk to $16 million by the time of the asset-sale closing, and was not assumed by the buyer.

SSG Advisors and Frontier Investment Banc Corporation were hired as investment bankers for the sale process.

Kansas City, Mo.–based Mid-States Supply sells pipes, valves, fittings, and controls, and provides related services to the refining, oil-and-gas, and industrial markets.

Staple Street Capital is investing from a $265 million fund, and targets $15–75 million of equity per transaction, aiming at control investments. Founders are Stephen Owens, formerly of the Carlyle Group, and Hootan Yaghoobzadeh, formerly of Cerberus Capital Management. — Abby Latour

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World Kitchen nets financing for acquisition by GP Investments SPAC

Citigroup and BMO Capital Markets have committed to provide $275 million of debt financing to support to proposed acquisition of World Kitchen by Nasdaq-listed blank check company GP Investments Acquisition Corp. (GPIAC) in a $566 million transaction. The financing will include a new B term loan and an ABL facility.

Proceeds from the loan, together with cash from GPIAC and a co-investment from GP Investments, will be used to fund the acquisition, repay roughly $242 million of existing debt, and add cash to the balance sheet. Note that existing World Kitchen shareholders will roll equity for about a 20% ownership stake.

Pro forma leverage at closing would be 3.6x, based on expected 2016 adjusted EBITDA of $78 million, and 3x on a net basis, according to an investor presentation. The company will have $43 million of cash on the balance sheet at closing.

The transaction is expected to close in July, subject to approval by GPIAC shareholders and other customary closing conditions, including regulatory approvals. At closing, World Kitchen Group will be listed on the Nasdaq under the ticker WDKN.

World Kitchen manufactures dinnerware, bakeware, storage, cookware, and cutlery and markets the products under a variety of brand names, including Pyrex, Corelle, Corningware, Snapware, Baker’s Secret, Chicago Cutlery, and Vintage Charm. Company management is guiding fiscal 2016 adjusted EBITDA of $78 million on net sales of $667 million. Those figures for 2015 were $77 million and $672 million, respectively.

World Kitchen in March 2013 placed a $190 million B term loan due March 2019 (L+425, 1.25% LIBOR floor) in a refinancing effort. The company approached the market later in the year with a $62 million add-on that funded a dividend to sponsors W Capital Partners and Oaktree Capital Management.

Existing corporate and facility ratings are B/B1, and S&P’s recovery rating on the debt is 3H.

GPIAC is a special purpose acquisition company that completed its IPO in May 2015, raising $172.5 million of gross proceeds. The company’s sponsor is GPIC, Ltd., a wholly owned subsidiary of Brazil-based private equity firm GP Investments, Ltd. — Jon Hemingway

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US Loan Fund Assets Fall to (Another) 3-Year Low. However …

US loan fund assets

Amid outflows and falling loan prices, loan mutual funds’ assets under management fell by $3.92 billion in February, to a three-year low of $107.2 billion. It was a slight improvement from January’s $4.04 billion AUM decline, and pushed the total decrease over the first two months of the year to $8 billion from 2015’s final read of $115.2 billion.

Loan funds continued to face redemptions in February in response to shaky investor sentiment across the capital markets for most of the month, as well as falling rates. After ending January at 1.94%, the 10-year Treasury yield fell to as low as 1.63% on Feb. 11, before bouncing back to 1.74% by the end of the month.

However, these funds stopped bleeding in early March. Over the first two weeks of the month, funds that report to Lipper FMI posted $232 million of inflows, from $916 million of redemptions during the same period in February and the best two-week total since July 22, 2015. What’s more, the category’s 32-week run of outflows ended with a $55 million inflow during the first week of the month. –Steve Miller

This story first appeared on www.lcdcomps.com, 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.

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Leveraged Finance Fights Melanoma benefit planned for May 24

The fifth annual Leveraged Finance Fights Melanoma benefit and cocktail party is planned for May 24 at the Summer Garden and Sea Grill at Rockefeller Center. Funds raised at the event will support the Melanoma Research Alliance (MRA), the world’s largest private funder of melanoma research, which was founded in 2007 by Debra and Leon Black under the auspices of the Milken Institute.

Since this event was launched in 2012, the leveraged finance community has come together and generously supported over $5 million of cutting-edge cancer research. These funded studies have accelerated advances in immunotherapy treatments that have led to breakthroughs like anti-PD-1 agents which are being used to treat melanoma, were recently approved to treat lung cancer, and are now being tested in other tumors including bladder, blood, and kidney cancers.

The event co-hosts are Brendan Dillon from UBS; Lee Grinberg from Elliott Management; George Mueller from KKR; Jeff Rowbottom from PSP Investments; Cade Thompson from KKR; and Trevor Watt from Hellman & Friedman. Attendees include the biggest names in leveraged finance, from all of the top banks, many investment houses, several law firms, select issuers, and some private equity sponsors. As with the prior events, LCD is a proud sponsor.

Due to ongoing operational support from its founders, 100% of donations to MRA go directly to support research programs working toward a cure for melanoma, the deadliest type of skin cancer. Since MRA began its work, 11 new treatments have been approved by the FDA.

Funds raised from prior year events have supported six MRA research awards at institutions spanning the U.S. These projects focus on targeted and immunotherapy treatments, which boost the immune system to fight off cancer more effectively. The studies address critical research questions to advance the development of new therapies for melanoma patients and inform progress against cancer as a whole.

“We’re making tremendous breakthroughs in understanding and treating melanoma, including several new therapies that could be game-changers for the entire field of oncology,” said Jeff Rowbottom, LFFM co-host and MRA board member. “The Leveraged Finance Fights Melanoma events have supported important research that is enabling innovations in the way we treat cancer.”

The objectives for the 2016 LFFM event are to increase awareness, to raise funds to further advance research, and to save lives. Melanoma awareness and early detection are vital when it comes to combating the disease; if melanoma is detected early—before it has spread beyond the skin—it is almost always treatable. Past events have led to many members of the leveraged finance community seeing dermatologists for skin checks and even to the discovery and treatment of several early stage melanomas.

Tickets are $300. For further information about the event and to purchase tickets, please visitcuremelanoma.thankyou4caring.org/lffm2016. Those seeking information about the event and sponsorship opportunities can contact Rachel Gazzerro of MRA at (202) 336-8947 or RGazzerro@curemelanoma.org. — Staff reports

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More middle-market companies expect M&A activity in 2016, poll shows

More middle-market companies plan to pursue mergers or acquisitions in 2016 versus the last time the poll was taken, a survey from Capstone showed.

The result was part of an annual survey by Capstone of 55 business leaders of middle-market companies, generating revenue of $5 million to more than $500 million, across 36 industries. Business leaders include CEOs, owners, and C-level executives.

According to the respondents, the number of middle-market companies certain of engaging in M&A activity in 2016 increased to 24%, from 19% going into 2014, the last time the poll was taken, according to the report entitled “State of Middle Market M&A 2015.”

In addition, the proportion of those surveyed who are more than 50% certain of engaging in M&A activity in 2016 increased to 29%, from 22% two years ago, the report showed.

Conversely, the share of those unlikely to, or definitely not engaging in M&A dropped, the poll results showed.

Capstone is an M&A advisory firm based in McLean, Va. The full report is available here: http://capstonestrategic.com. — Abby Latour

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Harte Hanks inks $110M credit facility to refinance 2016 facility

Harte Hanks disclosed that it has obtained a $110 million senior secured credit facility to replace the company’s previous credit facility that was set to expire in August 2016.

The new five-year facility includes a $45 million term loan and a $65 million revolver.

Wells Fargo acted as sole lead arranger and is administrative agent.

Pricing on the revolver is tied to availability, at L+200–250. The interest rate on the term loan is at 7.22%.

The facility is covered by a leverage covenant set at 2.25x through 2016 and at 2x thereafter. It’s also covered by a fixed-charge-coverage covenant set at 1x.

As of Sept. 30, the company had roughly $69 million outstanding under its previous term loan due August 2016 and no amounts outstanding under the prior $80 million unsecured revolver. Bank of America Merrill Lynch was administrative agent for the previous facility. Proceeds are also earmarked for general corporate purposes.

San Antonio, Texas-based Harte Hanks provides marketing services in the U.S. — Richard Kellerhals

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WhiteHorse cuts fair value of RCS Capital loan in 4Q

WhiteHorse Finance cut the fair value of a loan to now-bankrupt RCS Capital in the recent quarter, an SEC filing showed.

Financial-services company RCS Capital has filed for Chapter 11 since the end of the quarter, saying the filing was part of its previously announced strategic initiative to transform itself into a Cetera Financial-only independent financial advisory retail business.

Fair value on the second-lien loan due 2021 (L+1,050, 1% floor) was lowered to $7.3 million as of Dec. 31, from $20.75 million as of Sept. 30. The loan was moved to non-accrual.

“As stockholders and managers, we were disappointed by the developments at RCS, but we are leveraging HIG Capital’s significant experience with workouts and distressed investing to maximize the return on our holding,” CEO Jay Carvell said in an earnings call today.

WhiteHorse Finance’s increase in realized and unrealized losses was largely due to $13.3 million of unrealized depreciation due to RCS Capital, the company said.

Under the company’s contemplated reorganization plan, first-lien lenders, with an allowed claim of about $550 million, would receive, in satisfaction of the first $50 million their claims, 38.75% of the reorganized company’s stock. In exchange for the remainder of their claims, first-lien lenders would receive $500 million of new second-lien debt.

Second-lien lenders, with a total claim of about $155 million, would receive in exchange for an allowed secured claim of $50 million, 38.75% of the reorganized company’s stock. The remainder of the second-lien claim, $105 million, would become a deficiency claim that would receive its share of the unsecured claims distribution, subject to certain restrictions. — Abby Latour

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IT’SUGAR nets $21M loan from New Mountain Finance

IT’SUGAR received a $21 million first-lien term loan due 2019 (L+950) from New Mountain Finance Corp. in the most recent fiscal quarter.

The investment also included equity warrants, New Mountain’s10-K for the year ended Dec. 31 showed. IT’SUGAR is a portfolio company of middle market consumer brand firm Star Avenue Capital.

IT’SUGAR is a specialty retailer selling candy and gifts, including bags, accessories, baby products, jewelry, and headphones. It is the exclusive home for the world’s largest boxes of Nerds, Laffy Taffy, Gobstoppers, Sweetarts, and Pop Rocks.

The Deerfield Beach, Fla.–based company was founded by CEO Jeff Rubin and operates more than 80 locations around the U.S. and in London, Dubai, and Grand Cayman.

New Mountain Finance is a BDC that invests in debt, and some equity, targeting high-quality defensive growth companies. New Mountain Finance Advisers BDC manages investment activities. Shares trade on NYSE under the ticker NMFC. — Abby Latour

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