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Hostess recap leveraged loans enter trading mart atop new-issue price

Investors this afternoon received allocations of the first- and second-lien dividend recapitalization financing for Hostess Brands. The $925 million, seven-year first-lien term loan (L+350, 1% LIBOR floor) broke to a 100.125/100.625 market, versus issuance at 99.75, while the $300 million, eight-year second-lien term loan (L+750, 1% floor) opened bid at 100.25, from issuance at 99.5, according to sources. Credit Suisse, UBS, Deutsche Bank, Morgan Stanley, RBC Capital Markets, and Nomura arranged the covenant-lite loan, which cleared tight to original talk and with a shift of $100 million from the second-lien to the first-lien. Of note, the leads also added pre-cap language to the heavily oversubscribed deal, which will be used to refinance debt and to fund an approximately $905 million dividend. The pre-cap language allows for portability within the 18 months after the deal closes provided the M&A transaction meets the following criteria: pro forma net leverage is not above 6.3x, the deal has a minimum enterprise value of $2 billion, and the deal will be financed with a minimum of 30% equity, sources noted. Hostess is controlled by Apollo Global Management and Dean Metropoulos. Terms:

Borrower Hostess Brands
Issue $925 million first-lien term loan
UoP Dividend recapitalization
Spread L+350
LIBOR floor 1.00%
Price 99.75
Tenor seven years
YTM 4.62%
Call protection six months 101 soft call
Corporate ratings B/B2
Facility ratings B+/B1
S&P recovery rating 2H
Financial covenants none
Leverage 6.3x net total
Bookrunners CS, UBS, DB, MS, RBC, Nom
Admin agent CS
Sponsor Apollo, Dean Metropoulos
Price talk L+350-375/1%/99.5
Notes Upsized by $100 million; with a step to L+325 @ 4x senior secured leverage
Borrower Hostess Brands
Issue $300 million second-lien term loan
UoP Dividend recapitalization
Spread L+750
LIBOR floor 1.00%
Price 99.5
Tenor eight years
YTM 8.87%
Call protection 102, 101 hard call
Corporate ratings B/B2
Facility ratings CCC+/Caa1
S&P recovery rating 6
Financial covenants none
Leverage 6.3x net total
Bookrunners CS, UBS, DB, MS, RBC, Nom
Admin agent CS
Price talk L+750-775/1%/99
Sponsor Apollo, Dean Metropoulos
Notes Scaled back by $100 million

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