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ExamWorks nets financing for buyout by Leonard Green

Bank of America Merrill Lynch, Barclays, and Deutsche Bank have committed to provide the debt financing that will back the roughly $2.2 billion buyout of NYSE-listed ExamWorks by Leonard Green & Partners. Details of the financing are not yet available.

The private equity firm would pay $35.05 per share, according to the company. The acquisition, which was announced this morning, is expected to be completed in the third quarter, subject to shareholder approval and customary closing conditions.

ExamWorks has $500 million outstanding of 5.625% notes due 2023. That deal priced in April 2015 via a Bank of America Merrill Lynch–led bookrunner group with proceeds earmarked to refinance existing debt. The B–/B3 notes changed hands last week in a 103.25-103.5 context, trade data shows.

Atlanta, Ga.–based ExamWorks is a provider of independent medical examinations, peer reviews, bill reviews, Medicare compliance, case-management, and other related services. The company recorded $140.7 million of adjusted EBITDA in 2015 on revenue of $819.6 million. Existing corporate ratings are B+/B2. — Jon Hemingway

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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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Leveraged Loans: Purchase Price Multiples on European LBOs Rise

european LBO purchase price multiple

LBOs in Europe are getting more expensive for private equity sponsors.

The average purchase price, as a multiple of trailing EBITDA, reached 10x in 2016’s first quarter, more than any full-year average, according to S&P Global Market Intelligence LCD.

The multiples paid on these buyouts fall across a wide range. Many of the deals that came to market in the first quarter were bought for an unremarkable multiple, in the 8–9x area, but a good handful of transactions topped 10x — some by a fair margin. – Ruth McGavin

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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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Southcross Holdings emerges from Chapter 11

Southcross Holdings, the parent company of Southcross Energy Partners, has emerged from Chapter 11, the company announced yesterday.

As reported, the bankruptcy court overseeing the company’s Chapter 11 on April 11 confirmed the company’s reorganization plan and approved the adequacy of its disclosure statement following a combined hearing.

As also reported, the company filed a prepackaged Chapter 11 on March 28 in Corpus Christi, Texas (see “Southcross Holdings files prepack Ch. 11 with new $170M investment,” LCD News, March 28, 2016). The reorganization plan will result in the elimination of almost $700 million of funded debt and preferred equity obligations, along with a new $170 million equity investment from the company’s existing equity holders, EIG Global Energy Partners and Tailwater Capital.

Among other things, under the company’s contemplated reorganization plan, an $85 million DIP from existing equity holders is to be converted into one-third of the equity of the reorganized company. DIP lenders are also to provide an additional exit investment of $85 million for an additional one-third of the reorganized equity. The company’s term lenders are slated to receive, among other things, the remaining one-third of the reorganized equity. — Alan Zimmerman

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Russell Investments Readies $700M Leveraged Loan Backing LBO

Barclays, Macquarie, and Credit Suisse have scheduled a lender meeting for Thursday, April 14 to launch a $700 million senior secured financing backing TA Associates and Reverence Capital Partners’ planned acquisition of Russell Investments, according to sources.

The financing comprises a $650 million, seven-year B term loan and a $50 million, five-year revolving credit.

TA Associates and Reverence Capital in October agreed to purchase the asset manager from the London Stock Exchange Group in a transaction valued at $1.15 billion. At the time the deal was announced, the firms said they expected the deal to close in the first half of 2016.

Russell Investments, which is headquartered in Seattle, had over $241 billion in assets under management as of Dec. 31, 2015, according to its website. — Kerry Kantin

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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Risk-off (LBO Edition): Ultra-High Leveraged Loans Sit Out 2016’s First Quarter

highly leveraged loans

It was risk-off in the U.S. leveraged loan market during 2016’s first quarter – for LBOs with ultra-high debt, anyway – as more restrictive lending regulations and unfriendly market technicals kept a lid on aggressive buyout deals.

So far this year there have been no LBOs structured with a debt multiple of 7x or more, according to S&P Global Market Intelligence LCD.

In comparison, roughly 4% of LBOs completed in 2015 featured leverage starting at 7x or more, while 15.5% of LBOs had that debt structure in 2014. (That’s the most since the market collapse of 2008/09.) – Staff reports

This analysis – along with a host of other charts and tables – 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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LBO Market: Purchase Price Multiples, Equity Contributions Remain High

LBO stats

Leveraged buyouts continue expensive to private equity firms, as purchase price multiples increased from already lofty levels during the first three months of the year. What’s more, sponsors have been required to kick in a substantial equity percentage to get a transaction done, according to S&P Global Market Intelligence LCD.

Market players expect these trends to persist as regulatory pressures and fragile leveraged loan market technical conditions continue to discourage highly geared deals, creating an environment that is more conducive to better-rated transactions from strategic issuers (you can read about strategic vs PE/platform deals here).

This story – along with numerous other charts detailing 1Q U.S. leveraged loan activity – 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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TruGreen Launches $560M Leveraged Loan Backing Scotts Merger

Arrangers J.P. Morgan, Credit Suisse, ING, Natixis, Rabobank, and Goldman Sachs earlier today launched their first-lien financing backing the merger of Clayton Dubilier & Rice–controlled TruGreen with Scotts Miracle-Gro Co.’s Scotts LawnService business, setting price talk on the term loan of L+575, with a 1% LIBOR floor, offered at 98-98.5, sources said.

The financing includes a $560 million B term loan and a $146 million revolving credit. A $200 million second-lien term loan has been placed privately and carries a 12% coupon, sources said. The first-lien term loan includes six months of 101 soft call protection and would yield roughly 7.22–7.32% to maturity.

The RC will be governed by a springing maximum first-lien test of 5.25x that will step down to 5x for the quarter ended Dec. 31, 2016, and will become effective when revolver utilization is 30%, according to Standard & Poor’s.

According to published reports, Scotts Miracle-Gro would receive $200 million in cash as it adds the Scotts LawnService business to the joint venture, taking a 30% stake. The combined company would operate under the TruGreen name, sources said.

Commitments are due on April 8.

TruGreen was spun off from CD&R-owned ServiceMaster in early 2014, using a restricted-payments basket in ServiceMaster’s credit agreement that, in effect, allowed CD&R to take the asset as a dividend. At the time, TruGreen had been underperforming and was seen as a potential stumbling block to ServiceMaster’s planned initial public offering.

A thorough process—including a solvency opinion and capital surplus analysis—showed that a spin-off was in the company’s best interests. The company’s capital surplus was adequate to make the planned distribution, and leverage would stay at 7.6x after a spin-off, the company said at the time. An analysis for the board valued TruGreen as a dividend at $399 million, the high end of a $352–402 million valuation range of a financial advisor, and within a $484 million term loan restricted payment threshold. The restricted-payment threshold for the distribution under indentures for 7% and 8% notes is $549 million.

Now, TruGreen is valued at $815 million in the transaction as CD&R sells the company out of one of its funds and reinvests into a newer fund, according to sources. TruGreen is rated B/B2. The first-lien loan is rated B/B1, with a 3H recovery rating. —Chris Donnelly

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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Quorum Health Preps $880M Leveraged Loan Backing Spin-Off

An arranger group led by Credit Suisse plans to launch on Tuesday, March 29, at 1 p.m. EDT, an $880 million term loan B forQuorum Health Corp., backing its spin-off from Community Health Systems, sources said. The issuer also will put in place a $100 million, five-year revolver. The six-year TLB is talked at L+500–525 with a 1% LIBOR floor, and is offered at 98.5.

The term loan includes six months of 101 soft call protection. Commitments will be due on Friday, April 8. At current guidance the loan would yield roughly 66.73-6.99% to maturity.

In addition to Credit Suisse, underwriters include UBS, Bank of America Merrill Lynch, Citigroup, J.P. Morgan, Wells Fargo, RBC Capital Markets, and SunTrust Robinson Humphrey.

The loan is expected to carry a net secured leverage covenant. The issuer also is expected to tap the bond market for $400 million. The issuer is rated B/B2, while the term loan is rated B/B1, with a 3H recovery rating.

Based on its preliminary assessment of its results of operations, QHC expects net operating revenues for the year ending Dec, 31, 2016, to range from $2.2–2.3 billion, and expects adjusted EBITDA for the year ending December 31, 2016, to range from $265–$275 million.

As previously disclosed, on Aug. 3, 2015, CHS announced its plans to form Quorum Health by spinning off to its stockholders a group of 38 hospitals and Quorum Health Resources, LLC, a hospital management advisory and consulting business. The spin-off is intended to be tax-free to CHS and its stockholders and is expected to close during the second quarter of 2016. QHC will be an independent, publicly traded company and its common stock has been authorized for listing on the New York Stock Exchange under the symbol QHC. — Chris Donnelly

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.