Shock Doctor Sports uses $205M loan to fund merger with McDavid

Bregal Partners portfolio company Shock Doctor Sports has closed its merger with another sports-protection and performance-equipment company, McDavid. The acquisition was supported by $130 million of first-lien financing as well as $75 million of second-lien debt, according to market sources.

The arranger group includes Ares Capital, BMO, NewStar Financial, NXT Capital, and Madison Capital, sources note.

In addition to funding the acquisition, proceeds from the deal were used to refinance debt. Ares Capital was agent on the existing senior credit for Shock Doctor that backed Bregal’s buyout of the company in March of last year from Norwest Equity Partners. That financing included a term loan and revolver.

Minnetonka, Minn.-based Shock Doctor is a maker of mouth guards, impact gear, baseball equipment, insoles, performance-sports-therapy products, and performance apparels. McDavid manufactures, designs and markets sports medicine, sports protection and performance apparel for active people and athletes. The company is headquartered in Chicago, with subsidiaries in Japan and Europe. – Jon Hemingway


Summer Infant receives new loans from Bank of America

Baby-products supplier Summer Infant entered a new credit agreement that includes a $60 million revolver and a $10 million term loan due April 2020. Bank of America is agent.

The credit facility also includes a $5 million first-in, last-out FILO revolving facility due April 2018, according to an April 21 8-K filing.

Pricing on the RC is L+175-225. Pricing on the term loan and FILO facility is L+400. The loan agreement includes a 37.5-25 bps unused fee.

The loan agreement includes a 1x fixed-charge-coverage ratio for the most recent 12 months, and a leverage ratio starting from the quarter ended July 4, 2015.

The amended loan agreement replaces another one with Bank of America. That agreement included an $80 million asset-based revolver due 2018 (L+175-225) and a $10 million letter of credit. Borrowing capacity was subject to a borrowing base.

Debt under the prior Bank of America credit agreement totaled $45.8 million as of Jan. 3, 2015 and interest was L+250, according to the company’s 10-K.

Summer Infant also has a $15 million term loan due 2018 (L+1,000,1.25% LIBOR floor) with Salus Capital Partners. The company owed $12.75 million under the term loan as of Jan. 3, 2015.

Summer Infant, based in Woonsocket, R.I., sells nursery monitors, safety gates, bath products, bed rails, strollers, booster seats, travel accessories, highchairs, and infant feeding products to retailers globally. Shares trade on Nasdaq as SUMR. – Abby Latour

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Bankruptcy: Chassix says reorg still ‘on pace’ despite flak from creditor panel

Ahead of its hearing on the adequacy of its disclosure statement scheduled for tomorrow, Chassix confirmed that it “remains on pace to emerge from Chapter 11 on the same time frame as when [it] commenced these cases,” despite the filing of objections last week to its disclosure statement from the official unsecured creditors’ committee in the case and the U.S. Trustee for the bankruptcy court in Manhattan.

That time frame would see the company emerge from Chapter 11 by the end of July.

In that regard, it is worth noting that according to an amended disclosure statement filed yesterday, the company is seeking to schedule a confirmation hearing on June 30, and set a deadline for an effective plan date of July 31. That schedule represents only a slight delay from the company’s initial time frame, which sought a confirmation hearing on June 18 and set an emergence deadline of July 17.

As reported, Chassix filed for Chapter 11 on March 12, saying that it had reached agreement on a “comprehensive restructuring and recapitalization of the company” supported by 71.5% of its senior secured bondholders, 80% of its unsecured bondholders, its existing equity sponsor Platinum Equity, and all of its largest customers (including Ford, GM, FCA f/k/a Chrysler, Nissan, and BMW).

The proposed restructuring would convert roughly $375 million of the company’s senior secured notes into 97.5% of the reorganized company’s equity (subject to dilution), while holders of $158 million of the company’s unsecured notes would receive 2.5% of the new equity (subject to dilution) and warrants to purchase an additional 5%. The company’s customers, meanwhile, would provide, among other things, a “long-term accommodation” that includes about $45 million in annual price increases, and new business and programs, as well as waiving certain reorganization plan distributions, agreements that the company said were “central to the plan.”

Last week, however, the unsecured creditors’ panel filed an objection to the proposed disclosure statement, saying it had “significant concerns regarding the plan’s potentially inadequate allocation of value to unsecured creditors.”

Rather that filing a full-throated objection to the disclosure statement, however, the committee asked the company to include a letter with the disclosure statement setting out its concerns, adding that it “cannot, at this time, recommend that creditors vote in favor of, or against, the plan,” and recommending that “prior to voting on the plan, each unsecured creditor carefully review the materials provided to them, including, and especially,” the committee’s letter.

The company agreed to include the letter in the disclosure statement.

More specifically, the panel’s concerns are with the company’s enterprise and distributable valuations ($450-550 million, with a midpoint of $500 million, and range of $280-380 million, respectively), which are below the amount of secured claims and therefore, as a liquidation matter, would leave no recovery for unsecured creditors. That said, the reorganization plan does allocate 2.5% of the reorganized equity to unsecured noteholders, and $1 million in cash for general unsecured claims, with the potential for an additional $6 million for certain trade claims.

Among other things, the committee said it had concerns with the company’s valuation methodologies, financial projections, valuations of potential avoidance actions, and the claims placed in the unsecured claims pool.

The committee said it was currently investigating potential causes of action against the company’s equity sponsor, Platinum Equity, for fraudulent conveyance, breach of fiduciary duty, intentional fraud, gross negligence, and willful misconduct relating to the issuance of the company’s unsecured notes and the use of the proceeds of those notes to fund a $100 million special dividend to Platinum.

“The committee believes that at the time that the special dividend was paid, the debtors’ directors were aware, or should have been aware, of the debtors’ contractual commitments (some of which had been entered into many years prior) that would ultimately contribute to the debtors’ operational and financial difficulties in 2014.”

According to the first-day declaration filed in the case by Chassix president and CEO, J. Mark Allen, the company’s financial difficulties were precipitated by a “severe liquidity crisis” in November, 2014, arising from a “perfect storm of events,” which he described as “underpriced contracts and programs, compounded by a marked spike in the demand for automobile production in North America at a time when there was limited capacity in the machining and casting sectors.” Those circumstances, Allen said, “overwhelmed the debtors’ manufacturing facilities and capabilities,” and eventually “resulted in an onslaught of quality issues and missed release dates that significantly increased the debtors’ costs of manufacturing.”

Allen’s declaration further said, “[b]y the fourth quarter of 2014, these operational issues – which had snowballed at a rate that neither the debtors, their customers, nor any of their other constituents had anticipated – had severely impacted the debtors’ cash flows and erased any operating profit they had hoped to achieve due to the increase in production demand.”

The company has argued that any potential recoveries from claims against Platinum would not be “meaningful,” and while the proposed plan does include a purported “global settlement” of potential claims against Platinum under which the equity sponsor agreed, in exchange for full releases, “to take, or not to take, certain actions that could impact the tax attributes” of the reorganized company, the creditors’ committee called this contribution “negligible,” saying it needed to independently investigate the potential claims.

In addition, the committee also raised concerns about the procedure for creditors to consent to third party releases contained in the plan, saying the process set a death trap for creditors under which they are forced to consent to the third party releases in order to accept the plan. A subsequent objection from the U.S. Trustee for the Manhattan bankruptcy court raised a similar issue.

The company, however, responded that its process was consistent with the law. – Alan Zimmerman


Ares Management fund acquires loan portfolio from First Capital

Ares Management will expand its commercial finance platform through the acquisition of an asset-based lending portfolio from First Capital.

First Capital’s investment team will join the Ares Commercial Finance team. Loan commitments under the Ares Commercial Finance platform will total $700 million through the portfolio acquisition.

New York-based First Capital provides asset-based loans and factoring to small and middle-market manufacturing, distributing, and business services companies generating sales of at least $1 million. First Capital is a portfolio company of H.I.G Capital. – Abby Latour

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US Leveraged Loan Funds See $530M Cash Inflow; Largest in 1 Year

US leveraged loan fund flows


Bank loan mutual funds and ETFs reported a $530 million inflow for the week ending April 15, the first inflow in eight weeks, and the largest inflow in 58 weeks. This compares to an outflow of $4 million in the prior week, according to Lipper.

The week’s inflow is a combination of a $333 inflow to mutual funds along with a $197 million inflow to exchange-traded funds, so ETFs represent 37% of the total. This is the second positive reading on the ETF segment in six weeks, with the four previous representing net outflows from ETFs.

There has been a total of $777 million of inflows recorded over the last 54 weeks from just four of the individual weeks, versus $28.3 billion of outflows. With today’s inflow, the year-to-date outflow deepens to $3.3 billion, with negative 3% tied to ETFs, versus an inflow of $6.7 billion at this point last year, with positive 16% tied to ETFs.

With a strong infusion of fresh cash, the trailing four-week average was moderates to just negative $52 million, from negative $241 million last week, and negative $248 million two weeks ago. Recall that the negative four-week observation 15 weeks ago, at $1.3 billion, was the deepest in roughly 3.5 years, or since the week ended Aug. 31, 2011.

In today’s report, the change due to market conditions was a positive $177.9 million, which represents roughly a 0.2% gain against total assets, which were $93.8 billion at the end of the observation period. The ETF segment comprises $7 billion of the total, or approximately 7% of the sum. – Joy Ferguson


Newtek Business Services hires Choksi, Fifth Street finance executive

Newtek Business Services Corp. announced that Dean Choksi would join the company as treasurer and senior vice president of finance.

Previously, Choksi was executive director of finance from Fifth Street Management.

At Fifth Street Management he assisted in the raising of over $1 billion in public debt and equity, and was the primary contact for multiple lenders for their syndicated bank credit facility. Fifth Street Asset Management manages two publicly traded BDCs, Fifth Street Finance Corp. (FSC) and Fifth Street Senior Floating Rate Corp. (FSFR).

Choksi also worked at UBS Investment Bank, where he was director of U.S. equity research, and led equity coverage of consumer finance and specialty finance companies, including BDCs.

He has also held equity research roles at Barclays Capital, Lehman Brothers, RBC Capital Markets, Wells Fargo Securities, and SoundView Technology Group.

Newtek Business Services Corp., a BDC that trades on the Nasdaq as NEWT, is an internally managed BDC that provides services and financial products to small and midsize businesses, including electronic-payments processing, lending, accounts-receivable financing, web services, and data backup and storage. It converted to a BDC in November 2014.

Early this year, Newtek Business Services was added to the Wells Fargo BDC Index. – Abby Latour

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