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European Leveraged Loan Primary Market Stoic in Face of Brexit

While European leveraged loan players have been stunned by Brexit, the U.K.’s decision to leave the European Union on Thursday, there is a sense of stoic pragmatism that the market will remain relatively stable over the coming few months. For the moment though, participants have spent the morning trying to get some clarity amid turbulence in wider markets.

“This is not a great day to be able to take a balanced perspective,” said one banker. “We need to take at least the weekend to see the wider issues, but it’s too early yet.”

european leveraged loan returns

European leveraged loan returns

Although equity markets have plunged this morning — and sterling has dipped to its lowest level against the dollar in more than 30 years — in the loan secondary market bids are off only 1.5–3 points, though sources note the full impact of the referendum result has not yet been felt here.

“There are still names out there in the secondary market trading at par, and there are still buyers out there buying,” said one banker. “At the moment this is an FX story, but it’s not yet a loan market story — that won’t emerge for the next few weeks.”

Others agree that the loan market will hold its nerve in the coming few weeks, but that more time will be needed to get a full view of the prospects for new issuance and investor appetite. “We will find stability, it’s just a question of when,” said a senior banker in London. “Deals will get done. There’s not a huge market dislocation, we just have to take this day by day.”

In the immediate future though, a raft of potential opportunistic transactions that had been lined up to be launched last week has already been shelved. A number of sponsors were said to have been waiting until after the voting results to officially sign up for and mandate opportunistic deals, but arrangers say those deals that had been prepared are being put back into cold storage.

“We discussed an opportunistic refinancing yesterday,” said one banker. “That’s off the table, of course, as it was subject to an acceptable [Remain] outcome to the referendum. There were a lot of opportunistic issuers that wanted to benefit from the momentum in the market post-referendum. They were anticipating that Monday would be a very bullish day, and would be the right time to tap the market.”

But while opportunistic transactions are off the table, market participants are stoic, and remain hopeful that the European leveraged loan market will remain stable in the longer term. “There won’t be any dividend recaps launched today, but the market will recover,” said one investor in London. “People will still want yielding assets.”

Another fund manager agrees: “In the cold light of day, it is a long runway to anything actually happening. The uncertainty doesn’t help, but I don’t see a vast impact on earnings profiles.”

Others sources agree that in the long term, the loan market remains a stable option for investors and issuers, and that new-money transactions that are well-structured and positively priced will continue to get traction. In recent weeks, some arrangers are understood to have negotiated slightly better terms on their economic flex to help address the risk of a Leave vote, but it’s too early to know whether there will be a marked change in clearing yields.

Market participants are optimistic that new deals will soon come to the market to test appetite, although sources note that smaller transactions that rely on European commercial bank support will likely be easier territory than those that rely on institutional demand, given the potential distraction of relative-value plays elsewhere.

“The big picture will be that the wider markets are going to be very volatile,” said one account manager. “But at a micro level, the question is simply whether you want to lend to a company or not. There will be no real impact on European-only businesses.”

With only €1.75 billion of volume (of which €950 million is institutional debt) in the forward calendar, according to LCD, an offering of S&P Global Market Intelligence, there are few deals that have been pencilled in to face the new market paradigm in the coming few weeks.

The two largest deals in the pipeline are the financing backing the acquisition of Bilfinger B&F by EQT, and the senior and second-lien financing package to support Partners Group’s takeover of Foncia. The latter provides services for the residential real-estate market and is regarded as a strongly French prospect, while Bilfinger Building and Facility operates in Germany, Austria, and Switzerland, but also has operations in the U.K.
Following these deals, the auctions now out in the market could be more impacted by the Brexit vote, if sponsors become uncertain over valuations or financing costs, leading to deadlines being extended. “There are auctions coming through with deadlines in the next couple of weeks,” said one banker. “Will we want to hold people to that? I expect the market to be more pragmatic than that.” — Nina Flitman

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Citi Names Raja as Head of EMEA High Yield Trading

Citi have announced that Amit Raja has become Head of EMEA High-Yield Trading, in addition to his current responsibilities as Global Head of Distressed Trading and EMEA Head of Par Loan Trading, effective immediately.

This follows news that David Cohen, the now previous Head of EMEA Flow Credit Trading, will be leaving Citi. To ensure continuity, Cohen will continue to manage the investment-grade trading desk until the end of June, and is involved in the succession process. Cohen joined Citi in New York in 2010. — Luke Millar

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Capital Southwest new deals total $35M in 4Q; sees market pick up

Capital Southwest originated $34.6 million in six new investments in the recent quarter when the flow of middle market deals slowed generally.

Since the end of the quarter, the volume of upper middle market deals has increased, and terms and spreads have tightened significantly, Capital Southwest CEO Bowen Diehl in an earnings call today for the company’s fiscal fourth quarter ended March 31.

Similarly, the number of deals in the lower middle market decreased late in the March quarter and early in the June quarter. Lower middle market deals traditionally take longer to close and real-time pricing terms and structural trends are far less transparent.

Diehl said risk premiums on lower middle market deals have tightened in the past few months.

“In the past several weeks, however, we have experienced a considerable pick-up in our pipeline of quality, lower middle market deals,” said Diehl.

Among the new deals in the quarter ended March 31 were Chandler Signs and Hygea Holdings. Joint venture partner Main Street Capital also added debt investments to Hygea and Chandler Signs in the quarter ended March 31.

Capital Southwest’s subordinated debt and equity investment in signage company Chandler Signs totaled $6 million. An investment in Hygea Holdings included $8 million in first lien debt and equity warrants. Hygea Holdings is a physician services provider based in Doral, Fla.

The other new investments of Capital Southwest were $5 million of first-lien debt to TaxAct, $4.6 million of first-lien debt toDigital River, $7 million of first-lien debt to Vivid Seats, and $4 million of first-lien debt to Imagine! Print Solutions.

Dallas-based Capital Southwest, an internally managed BDC whose shares trade on the Nasdaq under the symbol CSWC, has been shifting its investment portfolio to middle market loans from equity. Last year, the company spun off some assets into an industrial growth company to shareholders.

Since June 2014, Capital Southwest has exited legacy portfolio companies totaling $222 million. The company is transforming its portfolio from cash and non-yielding investments to assets that generate recurring income. The portfolio is now made up of 59% of investments that generate recurring income, up from 1% in June 2014, before the strategy change.

The investment portfolio grew to $178 million as of March 31, from $135 million as of Dec. 31.

Investments in the I-45 Senior Loan Fund increased to $36 million from $28 million at year-end. The I-45 SLF is a joint venture with BDC Main Street Capital that invests in syndicated senior secured loans to upper middle market companies. — Abby Latour

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How did ACAS become a takeover target? Answer’s in the portfolio mix

How did American Capital become a takeover target? The answer lies in the lender’s equity-heavy, low-yielding investment portfolio mix.

Ares Capital, which trades on the Nasdaq under the ticker ARCC, announced on May 23 it would buy American Capital in a $3.4 billion deal, excluding the company’s mortgage management businesses. American Capital trades on the Nasdaq as ACAS.

One of American Capital’s strategies was its trademarked One Stop Buyout, where it could invest in debt ranging from senior to junior, as well as preferred and common stock, acquiring control of an operating company through a transaction.

However, the accumulation of equity did not allow the company to maintain the steady dividend growth that investors had grown to rely on.

In November 2008, the company stopped paying dividends and began evaluating them quarterly to better manage volatile markets. At the same time, American Capital announced an expansion into European middle market investing through the acquisition of European Capital. Also that year, American Capital opened an office in Hong Kong, its first office in Asia.

The news of the dividend policy change triggered a plunge in American Capital shares. Shares have persistently traded below book value since.

At its peak, the One Stop Buyout strategy accounted for 65% of American Capital’s portfolio. It has since slashed this to under 20% of the portfolio, of which less than half of that amount is equity. It continues to sell off assets.

In a reflection of the change in investment mix, S&P Global Ratings placed Ares Capital BBB issuer, senior unsecured, and senior secured credit ratings on CreditWatch negative, as a result of the cash and stock acquisition plan.

“The CreditWatch placement reflects our expectation that the acquisition may weaken the combined company’s pro forma risk profile, with a higher level of equity and structured finance investments,” said S&P Global analyst Trevor Martin in a May 23 research note.

At the same time, S&P Global Ratings placed the BB rating on American Capital on CreditWatch positive after the news.

“The CreditWatch reflects our expectation that ACAS will be merged into higher-rated ARCC upon the completion of the transaction, which we expect to close in the second half of 2016. Also, we expect ACAS’ outstanding debt to be repaid in conjunction with the transaction,” S&P Global analyst Matthew Carroll said in a research note.

Not the first time
But Ares Capital says it has a plan. In 2010, Ares acquired Allied Capital, a BDC which pre-dated the financial crisis. On a conference call at the time of the deal announcement, management said it plans a similar strategy for integrating American Capital, of repositioning lower yielding and non-yielding investments into higher-yielding, directly sourced assets.

Ares Capital managed to increase the weighted average yield of the Allied investment portfolio by over 130 bps in the 18 months after the purchase, and reduce non-accrual investments from over 9% to 2.3% by the end of 2012, Michael Arougheti said in the May 23 investor call. Arougheti is co-chairman of Ares Capital and co-founder of Ares.

“The Allied book was a little bit more challenged, or a lot more challenged, than the ACAS portfolio is today,” Arougheti said. Ares Capital’s non-accrual investments totaled 1.3% on a cost basis, or 0.6% at fair value, as of March 31.

“Remember, that acquisition was made against a much different market backdrop. And so, while the roadmap is going to be very similar… this can be a lot less complicated that that transaction was for us.”

The failings of American Capital’s strategy reached fever pitch last November, when the lender capitulated to pressure from activist investor Elliott Management just a week after it raised an issue with the spin-off plan.

American Capital’s management had proposed in late 2014 spinning off two new BDCs to shareholders, and said it would focus on the business of asset management. However, in May last year, management revised the plan, saying it would spin off just one BDC.

But Elliott Management stepped in, announcing in November that it acquired an 8.4% stake. It later increased its stake further, becoming the largest shareholder of American Capital. The company argued that even the new plan would only serve to entrench poorly performing management, and called for management to withdraw the spin-off proposal.

American Capital listened. Within days, American Capital unveiled a strategic review, including a sale of part or all of the company.

One reason for the about-face was likely its incorporation status in Delaware, which made the board vulnerable to annual election. Incorporation in Maryland, utilized by other BDCs, is considered more favorable to management, in part because the election of boards is often staggered.

Although American Capital had shrunk its investment portfolio in recent quarters, it had participated in the market until recently.

Among recent deals, American Capital helped arrange in November a $170 million loan backing an acquisition of Kele, Inc. by Snow Phipps Group. Antares Capital was agent. In June 2015, American Capital was sole lender and second-lien agent on a $51 million second-lien loan backing an acquisition of Compusearch Software Systems by ABRY Partners. — Abby Latour

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Ares Capital grows even bigger with $3.4B American Capital purchase

Two of the largest listed BDCs are merging to form a middle market lending behemoth that will have $13 billion in investments (at fair value). The largest, Ares Capital (ticker: ARCC), announced yesterday that it’s buying American Capital (ticker: ACAS) for $3.4 billion.

The purchase will put even more miles between ARCC and its nearest competitor, now Prospect Capital (ticker: PSEC), which has $6.2 billion in assets against ARCC’s $9.3 billion. The ACAS portfolio will give ARCC another $4.7 billion in investments and expand the number of portfolio companies to 385 from 220.

With the purchase, ARCC will gain scale and flexibility to underwrite larger commitments to compete against traditional banks. Last year’s financing for American Seafoods Group whetted ARCC’s appetite for bigger names. After all, bigger deals generate bigger underwriting and distribution fees. ARCC underwrote an $800 million loan for American Seafoods, snagging a mandate that typically would’ve gone to large banks.

ARCC management yesterday said that it wants the ability to extend commitments of $500 million to $1 billion for any one transaction, with the aim of holding $250 million, whereas before ARCC would go as large as $300 million, with the aim of holding $100 million.

The ACAS purchase also will give ARCC more breathing room under its 30% non-qualifying bucket to ramp its new joint-venture fund with Varagon. The Varagon platform is replacing ARCC’s joint-venture with GE Capital, which began to wind down last year in the wake of GE Capital asset sales.

The boards of directors of both companies have unanimously approved the acquisition.

The purchase requires shareholder approvals and is contingent on the $562 million sale of ACAS’s mortgage unit to American Capital Agency (ticker: AGNC) in a separate transaction.

Elliott Management, holder of a 14.4% interest in American Capital, strongly supports the transactions and will vote its shares in favor.

Ares Management agreed to an income-based fee waiver of up to $100 million for the first ten quarters after closing.

The combined company will remain externally managed by Ares Capital Management LLC, and all current Ares Capital officers and directors will remain in their current roles.

ACAS will continue with planned asset sales ahead of closing, in collaboration with Ares. ACAS hired Goldman Sachs and Credit Suisse in January to vet buyers. Since March 31, ACAS has announced sales of over $550 million in balance sheet investments. In addition to the mortgage business, ACAS is looking to sell its European Capital assets. — Kelly Thompson/Jon Hemingway

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Senate hearing opens discussion on BDC regulation changes

A hearing by the Senate banking committee showed bi-partisan agreement for BDCs as a driver of growth for smaller U.S. companies, but exposed some rifts over whether financial companies should benefit from easier regulation.

BDCs are seeking to reform laws, including allowing more leverage of a 2:1 debt-to-equity ratio, up from the current 1:1 limit. They say the increase would be modest compared to existing levels for other lenders, which can reach 15:1 for banks, and the low-20x ratio for hedge funds.

A handful of BDCs are seeking to raise investment limits in financial companies. They argue that the current regulatory framework, dating from the 1980s when Congress created BDCs, fails to reflect the transformation of the U.S. economy, away from manufacturing.

BDCs stress that they are not seeking any government or taxpayer support.

They are also seeking to ease SEC filing requirements, a change that would streamline offering and registration rules, but not diminish investor protections.

Ares Management President Michael Arougheti told the committee members in a hearing on May 19 that although BDCs vary by scope, they largely agree that regulation is outdated and holding back the industry from more lending from a sector of the U.S. economy responsible for much job creation.

“While the BDC industry has been thriving, we are not capitalized well enough to meet the needs of middle market borrowers that we serve. We could grow more to meet these needs,” Arougheti said.

In response to criticism about expansion of investment to financial services companies, the issue of the 30% limit requires further discussion, Arougheti said.

The legislation under discussion is the result of lengthy bi-partisan collaboration and reflects concern about increased financial services investments, resulting in a prohibition on certain investments, including private equity funds, hedge funds and CLOs, Arougheti added.

“There are many financial services companies that have mandates that are consistent with the policy mandates of a BDC,” Arougheti added.

Senator Elizabeth Warren (D-MA) raised the issue of high management fees of BDCs even in the face of poor shareholder returns. Several BDCs have indeed moved to cut fees in order to better align interests of shareholders and BDC management companies.

She said that Ares’ management and incentive fees have soared, at over 35% annually over the past decade, outpacing shareholder returns of 5%, driving institutional investors away from the sector, and leaving behind vulnerable mom-and-pop retail investors. Arougheti countered by saying reinvestment of dividends needed to be taken into account when calculating returns, and said institutional investors account for 50–60% of shareholders.

Warren said raising the limit of financial services investment to 50%, from 30%, diverts money away from small businesses that need it, while BDCs still reap the tax break used to incentivize small business investment.

“A lot of BDCs focus on small business investments and fill a hole in the market. A lot of companies in Massachusetts and across the country get investment money from BDCs,” said Warren.

“If you really want to have more money to invest, why don’t you lower your high fees and offer better returns to your investors? Then you get more money, and you can go invest it in small businesses,” Warren said.

Brett Palmer, President of the Small Business Investor Alliance (SBIA), said the May 19 hearing, the first major legislative action on BDCs in the Senate, was a step toward a bill that could lead to a new law.

“There is broad agreement that BDCs are filling a critical gap in helping middle market and lower middle market companies grow. There is a road map for getting a BDC bill across the finish line, if not this year, then next,” Palmer said, stressing the goal was this year.

Technically, the hearing record is still open. The Senate banking subcommittee for securities and investment could return with further questions to any of the witnesses. Then, senators can decide what the next stop will be, ranging from no action to introduction of a bill.

Pat Toomey (R-PA) brought up the example of Pittsburgh Glass Works, a company that has benefited from a BDC against a backdrop that has seen banks pulling back from lending to smaller companies following the financial crisis, resulting in a declining number of small businesses from 2009 to 2014.

The windshield manufacturer, a portfolio company of Kohlberg & Co., received $410 million in financing, of which $181 million came from Franklin Square BDCs.

“Business development companies have stepped in to fill that void,” Toomey told the committee hearing. “For Pittsburgh Glass, it was the best financing option available to them.”

FS Investment Corp.’s investment portfolio showed a $68 million L+912 (1% floor) first-lien loan due 2021 as of March 31, an SEC filing showed.

Arougheti cited the example of OTG Management, a borrower of Ares Capital. OTG Management won a contract to build out and operate food and beverage concessions at JetBlue’s terminal at New York airport JFK, but was unable to borrow from traditional senior debt lenders or private equity firms due to its limited operating history.

Ares Capital’s investment in OTG Management included a $24.7 million L+725 first-lien loan due 2017 as of March 31, an SEC filing showed. — Abby Latour

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Default Protection Costs on Community Health Debt Soars After 1Q Earnings Miss

Debt backing Community Health Systems was under pressure this morning after the hospital operator yesterday afternoon released weaker-than-expected first-quarter results. The benchmark 6.875% notes due 2022 traded off a point, at 87.5, while the 8% notes due 2019 changed hands in large blocks two points lower, at 98.625, trade data show.

Five-year credit protection on the issuer blew out roughly 49%, to 10.875/12.875 points upfront, according to Markit. That’s essentially $388,000 more expensive, at a roughly $1.2 million upfront payment at the midpoint, in addition to the $500,000 annual payment, to protect $10 million of Community Health bonds.

Over in the leveraged loan market, the hospital operator’s debt is lower following the first-quarter report. The H term loan due 2021 (L+300, 1% LIBOR floor) slid roughly a point, to a 97.5/98 market, according to sources.

First-quarter net sales were approximately $5 billion, up from $4.9 billion in the year-ago period and in line with the S&P Global Market Intelligence consensus mean analyst estimate, filings showed. However, the EBITDA figure of $633 million in the quarter was down from $715 million last year and well below the consensus mean estimate for $700 million.

The company’s shares, which trade on the NYSE under the ticker CYH, tumbled roughly 14% on the report, to $13.53.

In addition to the results, the company surprised investors with a partial tender offer targeting $900 million of its most pressing maturity, the $1.6 billion issue of 5.125% notes due 2018. The paper jumped nearly two points on the news, to 102/102.5, versus the tender offer price of $1,023, inclusive of an early tender premium of $30 per bond. Valuation essentially represents the middle of the current call price of 102.5625 and the upcoming decline to 101.281 in August.

A conference call was scheduled for 11 a.m. EDT today.

Community Health is rated B+/B1/B+, with negative/negative/stable outlooks. The loans are rated BB/Ba2/B+, with a 1 recovery rating from S&P, while the unsecured bonds are rated B–/B3/B, with a 6 recovery rating from S&P. — Matt Fuller/Kerry Kantin

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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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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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Intelsat debt, shares edge higher on 1Q results, new bond guarantee

Intelsat debt and shares advanced today after the satellite giant reported better-than-expected first-quarter results and reaffirmed its 2016 sales and earnings outlook based on the ongoing demand for broadband data, a heavy backlog of contracts, the successful launch of a new satellite last month, and preparation for the launch of more of its next generation fleet.

Most notably, however, investors heard that that a first-lien guarantee is now in place on a previously non-guaranteed series of Intelsat Jackson 6.625% senior notes due 2022, and that CC/Caa3 paper surged six points, to 64/65, according to sources.

Other bonds at various spots in the multi-tiered issuer were mixed. The previously guaranteed Intelsat Jackson 5.5% senior notes due 2023, which are notched higher, at CCC/Caa2, slipped two points, with trades reported on either side of 63, while the same entity’s first-lien 8% notes due 2024 dipped three quarters of a point, to 103.25/103.75, according to sources and trade data.

Meanwhile, at parent Intelsat Luxembourg 8.125% notes due 2023, which are a deeper step lower, at CC/Ca, the paper advanced two points, to 28.5/29.5, according to sources. And other “Jackson” bonds were steady, like the 7.5% notes due 2021, which held 69.5/70.5, the sources added.

Over on the NYSE, the company’s shares, which trade under the symbol “I,” increased roughly 6.5% this morning, to $3.93.

In the loan market, the Intelsat’s B-2 term loan due 2019 (L+275, 1% floor) was marked 94.125/94.625 on the results, up from either side of 94 prior, albeit a 95 context a week ago, according to sources.

Revenue in the quarter was $552.6 million, which was down from $602.3 million in the year-ago first quarter, but roughly 2% higher than the S&P Global Market Intelligence consensus estimate for $542.8 million, filings showed. As for the EBITDA result, first-quarter earnings were $407.5 million, which was down from $460.5 million last year, but right in line with the S&P GMI consensus mean estimate for $408.4 million.

Looking ahead, the company left unchanged via reaffirmation its full-year 2016 outlook for revenue of $2.14–2.20 billion and adjusted EBITDA to $1.625–1.675 billion, filings show.

Recall that the abovementioned, first-lien 8% notes were issued at par last month, with B–/B1 ratings, via Goldman Sachs and Guggenheim to support general corporate purposes, including prepayment in full of an intercompany loan of $360 million that upstreamed a dividend to parent “Luxembourg.” That issuance halted access to the “Jackson” undrawn revolver and triggered the guarantee to the 6.625% notes, according to a company statement.

Luxembourg-based Intelsat completed its IPO in April 2013, but a BC Partners–led group named Serafina still owns a majority of the satellite concern’s common shares. Prior to today’s rally, the company’s market capitalization on the NYSE was approximately $400 million. — Matt Fuller/Kerry Kantin

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Cannery Casino loans edge closer to par as Boyd to buy Vegas assets

Loans backing Cannery Casino edged closer to par on news that Boyd Gaming agreed to purchase the company’s Las Vegas assets for $230 million. The sale represents the remainder of the company’s assets—recall late last year Cannery entered into a revised deal to sell The Meadows Racetrack and Casino to Gaming & Leisure Properties—and with both asset sales, the company’s first- and second-lien loans are expected to be fully repaid, according to sources.

In turn, the first-lien term loan due 2018 (L+475, 1.25% LIBOR floor) is marked a half-point higher following the news, at 99.5/100, according to sources. The second-lien term loan due 2019 (L+1,075, 1.25% floor) moved up to a 99.5 bid, from 98.75 yesterday morning, according to sources.

The Las Vegas transaction, which was announced late yesterday, is expected to close in the third quarter. NYSE-listed Boyd said it expects to fund the transaction with cash on hand. Accounting for expected synergies and operating refinements, Boyd said it expects the Cannery assets to generate $32 million in EBITDA during its first year of ownership, which implies a purchase price multiple of about 7.2x.

As reported, privately held Cannery and GLPI in December entered into an amended agreement in which GLPI will acquire the Meadows property for $440 million. At the time, the companies said closing was expected in the second half of 2016, with an outside closing date of November 2016. Cannery Co-CEO William Paulos said all net proceeds would be used to reduce debt. (For additional details, see “Cannery Casino TLs quoted higher on news of amended asset-sale deal,” LCD News, Dec. 16, 2015.)

Cannery Casino is rated B–/Caa1. The issuer’s existing loans, an originally $385 million first-lien term loan and a $165 million second-lien term loan, date back to 2012, proceeds of which were used to refinance debt. Deutsche Bank is administrative agent. — Kerry Kantin