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Epiq Systems Eyes $1.3B of Debt for Buyout by OMERS, Harvest Partners

Bank of America Merrill Lynch, Goldman Sachs, Antares Capital, and Golub Capital have agreed to provide roughly $1.3 billion of debt financing to back the acquisition of Epiq Systems by OMERS Private Equity, the private equity arm of OMERS pension plan, and funds managed by Harvest Partners, a middle market private equity fund, according to an Epiq Systems statement.

Epiq SystemsEpiq Systems this morning announced that it had entered into an agreement to be acquired for $16.50 per share in cash, representing a total value of roughly $1 billion, including assumed debt. The acquisition is expected to close in the fourth quarter of 2016.

Upon completion of the acquisition, Epiq will become a privately held company and will be combined with DTI, a legal process outsourcing company majority-owned by OMERS and managed by OMERS Private Equity.

In April 2015, Epiq Systems obtained a $75 million fungible add-on to its B term loan due August 2020 (L+375, 0.75% LIBOR floor). As of March 31, there was roughly $366 million outstanding under the B term loan, $19 million outstanding under its $100 million revolver due 2018, and roughly $12 million outstanding under its capital leases.

Kansas City, Kan.–based Epiq is a global provider of integrated-technology solutions for the legal profession. Corporate issuer ratings are B+/B1. The company’s shares currently trade on the Nasdaq under the ticker EPIQ. — Richard Kellerhals

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Diamond Resorts Rolls out $600M High Yield Bond Offering Backing Apollo LBO

Diamond Resorts is offering $600 million of eight-year (non-call three) unsecured notes, sources say. Bookrunners on the deal are RBC Capital Markets (left), Barclays, and Jefferies.

A roadshow for the offering will run Aug. 1–4, sources noted. The proceeds will be used to back Apollo Management’s $2.2 billion purchase of Diamond Resorts. Apollo in late June agreed to acquire the company for $30.25 per share. At the time the deal was announced, the company said closing was expected over the next few months.

Take note, the issuer is also shopping a $1.2 billion seven-year term loan B and a $100 million revolver to fund the buyout. Price talk for the loan has been set at L+500, with a 1% LIBOR floor and a 99 offer price.

Expected ratings for the notes are CCC+/Caa1. On July 25, S&P Global Ratings lowered its corporate credit rating for Diamond Resorts to B from B+, noting the incremental leverage and the company’s financial sponsor ownership.

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. — Staff reports

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Leslie’s Poolmart Readies $780M Leveraged Loan Backing Recap/Dividend

Sole arranger Nomura is launching with a lender meeting at 11 a.m. EDT tomorrow a $780 million, seven-year covenant-lite B term loan for Leslie’s Poolmart, according to sources.

leslies poolmartProceeds from the loan, along with $420 million of unsecured notes that will be placed privately and cash on hand, will be used to refinance the company’s outstanding debt as well as fund a dividend to shareholders.

The pool supplies company, which is controlled by CVC Capital Partners and Leonard Green & Partners, last tapped the loan market in November 2013 for a repricing of its term loan due October 2019, reducing the coupon to L+325, with a 1% LIBOR floor, from L+400, with a 1.25% floor. At the time of the 2013 repricing, there was $610.5 million outstanding under the TLB. — Kerry Kantin 

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US Leveraged Loan Issuance: $11.1B Last Week

high yield bond issuance

U.S. leveraged loan issuance totaled $11.1 billion last week, following up on the $14.2 billion the previous week, according to LCD, an offering of S&P Global Market Intelligence. Year-to-date loan issuance totals $236 billion, compared to $264 billion during the same period one year ago. – Staff reports

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Polyconcept Readies $435M Leveraged Loan Backing LBO by Charlesbank

Goldman Sachs, RBC Capital Markets, and Natixis are launching a with a lender meeting on Thursday, July 28, at 10 a.m. EDT their $435 million term loan B backing Charlesbank Capital Partners’ purchase of Polyconcept, a value-added supplier of promotional products, according to sources.
polyconcept logoThe financing package includes an $88 million ABL revolver and a $435 million seven-year first-lien term loan, sources said. A second-lien term loan will be privately placed.

Polyconcept last tapped the loan market in 2013 with a first- and second-lien loan package to refinance existing debt. The financing package included a cross-border first-lien term loan split between a $255 million U.S. dollar tranche and a €46 million euro piece, as well as a $125 million privately placed second-lien term loan.

Polyconcept, headquartered in New Kensington, Pa., develops and distributes promotional, lifestyle, and gift products. The company is currently owned by Investcorp. — Chris Donnelly

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Lower Middle-market Pricing Tightens on Slow Pipeline, Surge of New Platforms

Pricing in the lower middle market is starting to erode amid heated competition for mandates, despite this segment’s traditionally more stable nature.

An analysis of six BDC portfolios that target the lower middle market shows that first-lien rates have fallen significantly year-over-year, according to LCD, an offering of S&P Global Market Intelligence.

The yield on new-issue, floating-rate first-lien debt averaged 8.82% in the first quarter, down from 11.04% in the first three months of 2015 across the six BDCs: Alcentra Capital (ABDC), Capitala (CPTA), Garrison (GARS), Harvest Capital (HCAP), Monroe Capital (MRCC), and Triangle Capital (TCAP).

Yields on middle market second-lien debt contracted less severely, to 10%, from 10.50%, in the same period.

middle market loan yields

Lending this far down the spectrum takes investors to EBITDA depths of roughly $30 million or less, below the traditional middle market marker of $35–50 million. Those brackets aren’t set in stone, but many lenders would agree the two tiers split about there.

Three of the six BDCs target companies generating up to $30 million of EBITDA, while TCAP goes a bit wider, to borrowers generating $35 million. HCAP targets much smaller businesses—typically those with no more than $15 million of EBITDA. MRCC provides a broad catchall of companies with revenue between $10 million and $2.5 billion, but most of the portfolio skews toward the lower end of the range.

Lower middle market rates remain perched well above the 6–7% levels across the upper bands of the middle market, but pricing at the bottom of the stack is expected to deflate in the months ahead unless the M&A machine kicks back into gear.

Gross new-issue volume in the first quarter was $61.86 million for the six BDCs, roughly half of the $121.67 million total in 1Q15.

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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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GreensLedge Prices $433M Anchorage Credit Funding CDO

GreensLedge Capital Markets today priced a $433 million CDO for Anchorage Capital Group, according to market sources.

Natixis Securities Americas was also a co-lead manager on the transaction.

Pricing details are as follows:

Anchorage CDO 2016-07-22

Similar to Fortress’s $633.6 million FDF Limited II, which priced on April 15, the transaction can hold up to 65% in second-lien loans and unsecured bonds.

The transaction will close on Aug. 29 with a non-call period ending on Oct. 28, 2018 and a reinvestment period ending on Oct. 28, 2021. The legal final maturity is on Oct. 28, 2033. — Andrew Park

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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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US Leveraged Loan Funds See Another Cash Inflow, Though ETF Withdrawals

U.S. leveraged loan funds recorded a net inflow of $69 million in the week ended July 20, according to the Lipper weekly reporters only. This is the second infusion of cash to the asset class after four weeks of outflows for a total inflow of $206 million over the two weeks.

Today’s reading was mixed, however, with inflows of $85 million to mutual funds against outflows of $16 million from  ETFs.

us loan fund flowsWhatever that might suggest about fast money, market timing, and hedging strategies, this week’s inflow narrows the trailing four-week average to negative $84 million per week, from negative $118 million a week ago.

Year-to-date outflows from leveraged loan funds now total $5.4 billion, based on outflows of $6 billion from mutual funds against inflows of $670 million to ETFs, or inverse 12%, according to Lipper.

The change due to market conditions this past week was positive $205 million on total assets of $62.3 billion at the end of the observation period, for a gain of approximately 0.3% for the week. ETFs represent about 10% of the total, at $6.5 billion. — Matt Fuller

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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.