Gladstone Capital adds GFRC Cladding Systems loan to non-accrual

Gladstone Capital added GFRC Cladding Systems to non-accrual status in the quarter ended March 31, citing declining operation performance.

The investment comprised a $4.9 million 10.5% first-lien debt due 2016, marked under one million at fair value as of March 31; $6.6 million of second-lien debt due 2016, marked at $1.9 million at fair value; and a line of credit, a Ma y 6 10-Q filing showed.

GFRC Cladding Systems designs and manufactures glass-fiber-reinforced concrete panels for commercial construction projects greater than four stories in height. It is a portfolio company of Dallas-based middle-market private equity firm Transition Capital Partners.

The other two companies on non-accrual status in the recent quarter were Sunshine Media and Heartland Communications.

Some tranches of the investment in Sunshine Media were moved to accrual status in the quarter as a result of improving profitability and liquidity.

The investment in Sunshine Media comprised first-lien debt, a line of credit, and equity. Sunshine Media, based in Chattanooga, Tenn., publishes local business-to-business custom publications with titles such asBuilder/ArchitectDoctor of Dentistry, and MD News.

The investment in Heartland Communications comprised a $4.3 million 5% term loan due 2014, a line of credit, and equity. Heartland Communications, based in Appleton, Wis., operates AM and FM radio stations in Park Falls, Eagle River, and Ashland, Wis.; and Iron River and Houghton, Mich.

As of March 31, 2015, debt of three portfolio companies on non-accrual status totaled $39.2 million on a cost basis, or 10.2% of all debt investments, and $9.2 million, or 2.8% at fair value.

As of Dec. 31, 2014, non-accrual debt on a cost basis totaled $33.6 million over two portfolio companies, or 9.4%, and $8.3 million, or 2.8%, at fair value.

Gladstone Capital, which trades on Nasdaq under the symbol GLAD, is an externally managed BDC that invests in debt and equity of small and midsize U.S. businesses. – Abby Latour

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Apax Partners to launch listed fund investing in equity and debt

Private equity group Apax Partners is to launch a listed investment vehicle that will invest in public and private debt, as well in private equity deals backed by its traditional buyout funds.

Apax Global Alpha (AGA) is hoping to raise €250 million when it debuts on the LSE next month. It has already secured commitments from a group of cornerstone investors totalling €135 million so far, Apax said.

The fund will aim to invest in private equity investments made by Apax funds, as well as committing capital to the funds themselves. It will also invest in public and private debt opportunities derived through Apax’s insights from its private equity activities, which Apax calls “derived investments”. Once fully invested, the fund will aim to be equally invested between private equity and derived investments. Debt investments will include sub-investment grade and unrated debt instruments, Apax said.

Prior to admission, the fund will acquire PCV Lux, a fund formed in 2008 as an investment vehicle for Apax employees. PCV’s NAV as of March 31, 2015 stood at €611.1 million, and PCV’s assets include investments in and commitments to four Apax buyout funds, as well as investments in debt and equities.

The fund is targeting an annualised total shareholder return of 12-15% (net of fees and expenses), including a dividend yield of 5% of NAV once fully invested. – Oliver Smiddy


Leveraged loans: 1Q earnings growth falls to post-recession lows

earnings growth - leveraged loan issuers

In the first quarter, EBITDA growth among S&P/LSTA Index issuers that file publicly dropped to a post-recession low of 5.9%, year-over-year, from 10.2% during the final three months of 2014 and 7.1% during the comparable period last year, according to data from S&P Capital IQ.

The slowdown was a result of three trends, participants say.

  • First, America’s economy cooled significantly in the first quarter. GDP inched up 0.2% – the slowest pace in a year and down from 2.2% in the fourth quarter – according to the Bureau of Commerce’s preliminary estimate. What’s more, some economists calculate the final reading is likely to be slightly negative when the larger-than-expected trade deficit is taken into account.
  • Second, a stronger dollar was a headwind to earnings in the first quarter.
  • Finally, the beleaguered energy sector subtracted roughly 0.4 percentage points from the overall EBITDA gain of S&P/LSTA Index issuers in the first quarter. For the record, Oil & Gas issuers in the S&P/LSTA Index posted a 2% year-over-year decline in EBITDA during the first quarter. Ex-energy, EBITDA across the Index climbed 6.2% during the opening three months of 2015.

This analysis is part of a longer story, available to LCD News subscribers here.

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Panter joins Oak Hill as portfolio manager

Lucy Panter has started a new role at Oak Hill Advisors, according to market sources. She has joined as a portfolio manager in the performing loan business, and her hire comes as part of Oak Hill’s drive to beef up its business lines across the board.

Panter was previously a portfolio manager at GoldenTree Asset Management, responsible for overseeing the firm’s European CLO business, and also covered the firm’s European consumer, retail, and leisure investments.

Prior to joining GoldenTree in September 2005, Panter held positions at P. Schoenfeld Asset Management, and at Goldman Sachs in New York. – Sarah Husband

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Merrill Corp adds leverage test to $510M loan refinancing

Credit Suisse and BMO Capital are adding a net total leverage test to their refinancing for Merrill Corp., sources said. Price talk and the Wednesday, May 27 deadline are unchanged.

The issuer plans a $510 million, seven-year covenant-lite term loan, talked at L+475, with a 1% LIBOR floor, at 99, to refinance its existing $364 million term loan and $225 million of holdco notes. The refinancing will close concurrently with an asset sale that would result in a debt repayment. Pro forma leverage is 4.1x, sources noted. Current leverage is 4.2x.

The term loan will include 12 months of 101 soft call protection, according to sources. At current talk, the loan would yield roughly 6.07% to maturity.

The issuer is rated B+/B2. The loan is rated BB-/B2, with a 2 recovery rating. The issuer also will place a $50 million revolver.

Merrill in March 2013 refinanced its first-lien debt as part of an out-of-court restructuring in which second-lien lenders received a combination of equity in the restructured company and the pay-in-kind holdco debt. Opco leverage has fallen to 2.6x today, from 3.4x as of March 2013, sources noted. The existing loan has a maintenance covenant.

Merrill Corp. is a global provider of customized communications services for regulated industries including banking, capital markets, insurance, legal, healthcare, energy, and other corporate markets, helping clients address confidentiality and regulatory issues. The sale of its Legal Solutions business allows Merrill to focus on its existing core businesses which had superior revenue growth, margin profile, cash-flow generation and ROI and improves the strategic overlap of the existing businesses, sources said. Additionally, it will facilitate the transition to a single, integrated sales force, streamline shared services, and reduce overall operating costs, while enhancing the credit profile of the business, they added. – Chris Donnelly


HSBC hires Morrish and Heath for loans trading team

Grieg Morrish and Mark Heath have left BNP Paribas and Commerzbank, respectively to join HSBC’s loan trading team. Both will be joining late summer.

Morrish, who will be a crossover loans trader at HSBC, joins from BNP Paribas’s secondary loans trading team. Morrish left his post at Invesco in 2011 to move to BNP Paribas. Heath was previously a senior loan trader at Commerzbank, and will be joining HSBC as a par loan trader. – Nina Flitman