HG bonds: Drawbridge places 2026 notes for refi purposes; terms

Drawbridge Special Opportunities Fund LP and co-issuer Drawbridge Special Opportunities Finance Corp. today completed a $400 million offering, at par pricing, of 3.875% five-year senior notes due Feb. 15, 2026 at T+342, sources said. The new issue, which was announced yesterday, was printed on the wide end of price talk in the 3.75% area.

The issuer is a hedge fund launched and managed by The Fortress Group, which is focused on investments in public and private credit, primarily in the U.S. and Western Europe, but also in Australia, Asia and elsewhere on an opportunistic basis.

Yesterday, S&P Global Ratings assigned a BBB profile to the new bond placement and noted that the transaction will be debt for debt, with the fund primarily using net proceeds to fund a tender or redeem its senior unsecured notes due in 2021. Remaining net proceeds will be used to repay borrowings on the fund's senior secured credit facility.

"Our ratings on Drawbridge reflect the fund's strong funding profile, moderate leverage, and diversified investment portfolio with a strong record of returns. Conversely, the ratings also reflect the company's opportunistic investment strategy and illiquid portfolio. Our negative outlook reflects the potential that Drawbridge's leverage, as measured by stressed assets to recourse liabilities, could come under pressure and fall below 1.75x over the next 12 months. As of Sept. 30, this metric was 1.84x, down from 2.24x as of Dec. 31, 2019, as a result of both lower stressed assets and greater recourse debt," the agency said on Jan. 19. Terms: