21 Jan, 2021
LCD News Today: Jan. 21, 2021
By LCD News
Primary leveraged loan market
In a signal that the repricing wave is indeed gathering steam, American Bath Group LLC and KIK Custom Products Inc. are targeting loans placed in November and December, respectively, and are paying the 101 soft call premium to do it.
The temptation is clear as both would shave off 100 basis points from existing pricing under the current proposals. American Bath (B-/B3) is looking to reduce the spread and floor on the $1.2 billion covenant-lite term loan B due December 2027 that backed its buyout by Centerbridge Partners. Price talk is L+375 with a 0.5% Libor floor, whereas the existing loan pricing is L+450 with a 0.75% floor and with a leverage-based margin step-down of 25 bps. KIK Custom (B-/B3), another Centerbridge portfolio company, placed its $900 million TLB last month in a dividend recapitalization at pricing of L+450 with a 0.75% floor but is now also seeking a reset to L+375 with a 0.5% floor. Credit Suisse leads the deal for ABG, and Barclays is left lead on KIK Custom.
Likewise, Epicor Software Corp. launched a repricing of its approximately $1.92 billion TLB due July 2027 issued last summer that would lower pricing to L+325-350 with a 0.75% floor, from L+425 with a 1% floor. KKR Capital Markets is leading that deal.
First-lien and second-lien term loans for B/B2 rated Careismatic Brands are set to price tight to talk after issuer-friendly revisions were made to spread, floor and original issue discounts. First-lien pricing settled at L+325 with a 0.5% floor and a 99.75 OID. That is revised from guidance at launch of L+375-400, with a 0.75% floor, offered at 99.5. For the second-lien, pricing is L+725 with a 0.5% floor and an issue price of 99, from L+750-775 with a 0.75% floor and an issue price of 98.5. Partners Group is acquiring the business from New Mountain Capital and UBS is leading the financing. The first-lien totals $605 million following a $30 million shift from the second-lien, which was downsized to $110 million.
In new business, Whole Earth Brands Inc. launched a $375 million seven-year term loan B via joint lead arrangers and joint bookrunners TD Securities and Truist Securities at L+450, with a 1% floor, offered at 99. Proceeds will be used to fund the company's acquisition of Wholesome Sweeteners for $180 million and refinance existing credit facilities. Pro forma for the transaction, total net leverage is at 3.9x.
Primary leveraged loan market stories/links
Whole Earth Brands launches $375M term loan for acquisition
Epicor launches $1.92B term loan repricing; commitments due Jan. 26
Precisely sets price talk on repricing of $748M, $606M term loans
First Advantage tightens talk on $100M add-on term loan, adds repricing
Careismatic Brands tightens pricing on term loans, revises tranche sizes
Vestcom International upsizes incremental term loan to $120M
American Bath Group launches $1.2B term loan repricing; lender call today
KIK Custom Products returns to market with $900M term loan repricing
Investors have received allocations of Truck Hero, Inc.'s $1.055 billion seven-year covenant-lite term loan B that priced tight to talk at L+375, with a 0.75% Libor floor and an offer price of par via a Jefferies-led arranger group. The term loan broke at 100.5/101.25. Proceeds from the transaction will be used to back the acquisition of the company by an L Catterton-led consortium.
Additionally, the $1.095 billion first-lien term loan due 2028 (L+325, 0.75% Libor floor) backing Clearlake Capital's acquisition and subsequent merger of PrimeSource Building Products Inc. and Dimora Brands Inc. broke to a 99.75/100.25 market after pricing tight to talk at an OID of 99.5 via a Deutsche Bank-led arranger group.
In company news, Bumble Inc. has filed a Form S-1 registration with the Securities and Exchange Commission for a proposed initial public offering of a yet-to-be-determined size. The company said in the filing that it intends to use net proceeds from the offering to repay indebtedness under its term loan credit facility. The company currently has a first-lien term loan due January 2027 (L+275, 0% Libor floor) that totaled $572.1 million as of Sept. 30, 2020, and is quoted at 100.125/100.625. The issuer also has an incremental first-lien term loan due January 2027 (L+325, 0.5% Libor floor) that totaled $275 million when it was issued in October 2020.
Meanwhile, S&P Global Ratings upgraded PETCO Animal Supplies Inc.'s issuer and first-lien term loan ratings today to B-, from CCC+, following the completion of the company's IPO. The company raised approximately $939 million in the public offering after it priced at $18.00 per share on Tuesday and reduced debt by approximately $1 billion. The issuer's first-lien term loan due January 2023 (L+325, 1% Libor floor) is quoted at 99.875/100.125, from around 99.625/100 at the end of last week.
Elsewhere, the LSTA released its 2020 secondary trading summary today, with trading volume hitting an annual record of $772 billion during the year, a 4% increase year over year. The trading volume was buoyed in 2020 by the volatile market in March. Trading volume reached a staggering $119.3 billion in March, 57% higher than the previous monthly record. However, volumes slowed toward the end of the year, with trading volume in December totaling just $51.2 billion, below the monthly average for the year of just under $60 billion.
Secondary leveraged loan market stories/links
Truck Hero allocates $1.55B term loan for buyout; terms
PrimeSource wraps $1.095B term loan for buyout; terms
An additional $2 billion-plus of U.S. high-yield issuance was poised to wrap today as borrowers continue accessing the market while costs are at all-time lows. Through Jan. 20, the average yield to worst for existing issues per the S&P U.S. Issued High Yield Corporate Bond Index was 4%. Fresh prints are also establishing new tights, with an average 5.06% yield for deals in 2021, LCD data shows.
This backdrop has crafted an opportune environment to pitch riskier credits.
Of note, US LBM Holdings Inc. today cleared $400 million of six-year holdco pay-in-kind, or PIK, toggle notes to yield 7.875%. The bonds sport a 7.75% coupon and priced with an OID of 99.364. Guidance had circulated with an 8%-8.25% all-in yield, inclusive of an OID of up to 1 point, and whispers were in the mid-8% area. The deal comes after the company last month completed a bond and loan financing to support Bain Capital Private Equity's acquisition of a majority stake in US LBM from Kelso. Using proceeds of the PIK toggle notes, the company will return capital to shareholders. New issue ratings are CCC+/Caa2/CCC-.
Murphy Oil USA, Inc., Ineos Quattro, Beasley Broadcast Group Inc. and Brundage-Bone Concrete Pumping Holdings Inc make up today's new-issue sum, leaving year-to-date volume at $32.6 billion.
Colgate Energy Partners III LLC remains underway with its effort to include bonds in the company's capital structure. Pricing for the $300 million of seven-year senior notes is expected on Jan. 22, with proceeds earmarked to repay existing debt and make a dividend payment. Issue ratings are B/B3.
NGL Energy Partners LP is now in next week's queue with $2.05 billion of five-year senior secured notes to repay debt. Initial price thoughts are circulating at 7.75%-8%.
Primary high-yield market stories/links
Brundage-Bone Concrete Pumping prices upsized 2nd-lien notes to yield 6%; terms
Murphy Oil USA unsecured bonds price at par to yield 3.75%; terms
US LBM prints $400M of pay-in-kind notes to yield 7.875%; terms
Ineos Quattro completes cross-border bond offering; terms
NGL Energy offers $2.05B of secured notes to repay debt
Traders reported strong two-way flows today as the week's $12 billion of new issuance made its way through the high-yield market and the forward calendar continued to build. Some pointed to a softening among new issues as evidence of indigestion as U.S. high-yield funds reported their third straight week of redemptions, as about $905 million exited the asset class. Markets in the CDX HY 35 straddled 109 at the close, extending a narrow range from 108.72-109.33 in place since Dec. 23, following a dip from the pandemic-era peak close at 109.57 on Dec. 4.
Netflix Inc. bonds again were the big mover of the day. The borrower's most actively traded 4.875% senior unsecured notes due 2030 picked up another 3 points to establish a new high trade at 120.875 and push week-on-week gains to 7.5 points. The 2030 bonds were among 10 constituents of LCD's 15-bond sample of liquid high-yield issues to post gains this week, pushing the average bid for the sample 85 bps higher, to 108.40% of par.
Bonds backing United Airlines Holdings Inc. moved fractionally lower as United Airlines Holdings' shares slumped after the carrier posted its fourth straight quarterly loss and management said it did not expect to make any progress on reducing its debt pile until 2023. The company swung to a net loss of $1.9 billion in the fourth quarter from a $641 million profit a year earlier and reported an almost 70% drop in revenue to $3.41 billion. The most active of the company's bonds today, the 4.875% senior unsecured notes due 2025, shed half a point to trade at 98.125 on the lows after hitting a pandemic-era high at 99.5 on Dec. 14.
Energy names came off the boil after U.S. President Joe Biden made good on his campaign promise to freeze new drilling permits and leases across federal lands. The news, combined with an unexpected inventory build this week, brought oil off its recent highs and pared gains among affected borrowers. Occidental Petroleum Corp.'s bonds were down across the stack: The 6.125% notes due 2031 gave up a 2.215-point intraweek gain to trade back at 113 after establishing a new post-shutdown high yesterday just north of 115.
Bucking the downward trend, NGL Energy Partners LP's 7.5% notes due 2026 surged 7.5 points to a pandemic-era high of 83.5 after the company moved to push out its debt wall with a new $2.05 billion offering of senior secured notes. NGL also reinstated its fiscal 2021 guidance and provided an outlook for fiscal 2022 that included a forecast of 15% adjusted EBITDA growth.
Secondary high-yield market stories/links
NGL Energy bonds surge on debt-refinancing plans despite sector-wide softening
High-grade market
Nonfinancial issuers again held to the sidelines today ahead of earnings, but financial-sector issuance drove issuance near consensus forecasts for the week as the funding-cost proposition remains scintillating for issuers eyeing refinancing and the return of excess capital to shareholders. Issuance today totaled $4.95 billion from four financial issuers, lifting issuance for the week (ex-SAS and hybrids) to $23.25 billion.
Citigroup Inc., which this week bested EPS forecasts for the fourth quarter in part due to a release of credit-loss reserves, today placed $2.5 billion of 1.122% senior fixed-to-floating six-year (non-call five) notes due Jan. 28, 2027, at T+68. That compares with a comparably structured offering last April of higher-coupon 3.106% six-year (non-call five) fixed-to-floating notes due April 8, 2026, at T+275.
Bank of New York Mellon Corp., which in the fourth quarter netted the lowest ever coupon (0.35%) for new-issue three-year notes, returned today to place $1.2 billion across new five- and 10-year notes. Rounding out the slate today were deals for aircraft lessor Aircastle Ltd. ($750 million) and middle-market lender Antares Holdings LP ($500 million). Notably, the Aircastle deal marked the fifth placement so far in January by an aircraft lessor, as the sector eyes a potential aviation revival in 2021.
Pricing execution remains stellar for issuers, which continue to net pricing spreads near to through comparable secondary indications amid voracious demand for spread product. Meanwhile, prospective borrowers sidelined ahead of earnings still are not paying much of a price for waiting to enter the primary market.
The yield for the S&P U.S. Investment Grade Corporate Bond Index edged lower over the latest week, closing at 1.80% on Jan. 20, to remain within 7 basis points of the pandemic-era low recorded in the opening sessions of 2021. That reflected upbeat risk sentiment, with the index OAS at T+90 on Jan. 20, or the low since early 2018. For reference, those metrics at the same point last January were 2.70% and T+93.
High-grade market stories/links
HG bonds: Bank of New York Mellon places 2-part offering post-earnings; terms
Citigroup prints 2027 notes post-earnings
Antares Holdings places 2026 notes for refinancing
Aircastle latest aircraft lessor to tap bond mart
Distressed news stories/links
Speedcast lenders settle row, clearing path for Centerbridge deal, plan approval
Peabody Energy downgraded by S&P Global Ratings to CC after debt exchanges
OHL announces debt restructuring plan
US LBM prints $400M of pay-in-kind notes to yield 7.875%; terms
NGL Energy offers $2.05B of secured notes to repay debt
CLO news stories/links
BNP Paribas prices $402M KKR CLO 29
JPM prices $850M Madison Park Funding XLVIII CLO for CSAM
BofA Securities prices reset of Euro-Galaxy V CLO for PineBridge