LCD News Today: Nov. 30, 2021

Primary leveraged loan market

The leveraged loan primary market was back in full swing today, with 18 issuers pitching transactions, while additional names were announced for launch Wednesday. While the majority of these new deals are supporting either M&A or buyouts, there are also some opportunists in the mix launching refinancings and recapitalizations.

On the M&A front, the anticipated deal for II-VI Inc. (BB-/Ba3/BB) was officially rolled out today. The company's $2.8 billion term loan B due 2028 is part of the financing package backing the $7 billion acquisition of Coherent. Price talk for the J.P. Morgan-led seven-year covenant-lite TLB is L+275, with a 0% Libor floor and an original issue discount in the range of 99-99.5. Proceeds from the J.P. Morgan-led deal, along with a new term loan A and senior unsecured debt, will be used to finance the acquisition and refinance debt.

A Goldman Sachs-led arranger group went out with price talk on the $925 million first-lien and $275 million second-lien term loans for Madison Safety & Flow LLC that will be used to fund the acquisition of Safe Fleet and to refinance Madison Safety's existing debt. The seven-year first-lien term loan is talked at a margin of 375-400 bps over the secured overnight financing rate, plus a credit spread adjustment, with a 0.5% floor and an OID of 99. Price talk for the eight-year second-lien term loan is 675-700 bps over Sofr, plus a credit spread adjustment, with a 0.5% floor and an OID of 98.5. The credit spread adjustments for both tranches are 10 bps for the one-month rate, 15 bps for the three-month rate and 25 bps for the six-month rate.

Arrangers set price talk on Brook & Whittle Ltd.'s $478 million first-lien term loan financing comprising a $378 million funded tranche and a $100 million delayed-draw facility. The seven-year covenant-lite term loan is talked at L+450 with a 0.50% floor and an OID of 99. Credit Suisse is leading the deal to finance Genstar Capital's acquisition of the B-/B3 rated company from TruArc Partners. Additional financing includes a privately placed $169 million second-lien term loan.

Lead arrangers Macquarie and Nomura launched the $875 million first-lien term loan for Mediaocean LLC that will finance the buyout of the B/B2 rated company by CVC Capital Partners and TA Associates. Price talk for the seven-year term loan is L+350-375, with a 0.5% floor and an OID of 99. Additional financing includes a $125 million second-lien tranche that has been preplaced ahead of launch.

A Jefferies-led arranger group released price talk on the $385 million first-lien and $80 million second-lien term loan financing backing the buyout of Smart Start LLC. Price talk for the seven-year first-lien term loan is L+425-450, with a 0.5% floor and an OID of 99. The eight-year second-lien term loan is talked at L+750-775, with a 0.5% floor and an OID of 98. Apollo announced Nov. 8 that it was acquiring Smart Start via its Apollo Impact platform.

Primary leveraged loan stories/links

LBO/M&A
II-VI launches $2.8B term loan for Coherent deal; commitments due Dec. 7
Mediaocean launches $875M term loan for buyout; commitments due Dec. 9
Brook & Whittle sets talk for $478M 1st-lien term loan; commits due Dec. 14
Smart Start offers price talk for $385M 1st-lien, $80M 2nd-lien term loans
Madison Safety & Flow outlines talk for $925M 1st-lien, $275M 2nd-lien loans
Southwestern Energy launches $550M term loan for M&A; commitments due Dec. 7
Aveanna Healthcare launches $415M 2nd-lien term loan; commitments due Dec. 8
FullBloom lines up $385M term loan for buyout; lender call today
Cowen launches $150M add-on term loan for acquisition; commitments due Dec. 8
Sharp to issue $465.5M term loan to back spinout; lender call Dec. 1
Cloudmed sets price talk for $213M add-on term loan; commitments due Dec. 8
AIT Worldwide Logistics launches $210M add-on term loan; commitments due Dec. 9
PODS sets price talk on $150M add-on term loan; commitments due Dec. 2
Authentic Brands to launch $1.675B 1st-lien, $500M 2nd-lien term loans
Paragon Films preps launch of 1st-lien, 2nd-lien term loans for buyout
Cast & Crew to launch $250M add-on term loan for acquisition; Dec. 1 lender call

Refinancing/Recap
LegalShield sets talk on $950M 1st-lien, $300M 2nd-lien term loans for recap
BlueTriton Brands launches $250M add-on term loan; commitments due Dec. 2
US Radiology Specialists launches $450M add-on term loam, $784M repricing
WideOpenWest to launch $730M term loan refinancing; lender call Dec. 1
Installed Building Products preps launch of $500M term loan; lender call Dec. 1

Secondary leveraged loan market

It was another rocky day in the secondary market, with loans tumbling again after a dismal start to the week for the asset class. The S&P/LSTA Leverage Loan Index returned negative 0.13% in yesterday's session, the worst daily return for the index so far in 2021. Yesterday's plunge came just one trading session after what was previously the second-largest decline for the index in 2021.

WestJet Airlines Ltd.'s first-lien term loan due December 2026 (L+300, 1% Libor floor) slipped another quarter point today to 96.375/97.625, despite Moody's raising the outlook on the issuer to positive from negative, as airline issuers have been among the hardest hit in the recent market turbulence. The rating agency noted that "the positive outlook reflects our expectation that WestJet will be able to sustain good liquidity and that continued recovery in domestic air travel demand will strengthens WestJet's operating performance over the next 12-24 months."

Also in ratings news, Moody's upgraded loan issuer Certara Inc.'s corporate rating to B1 from B2 while also raising the rating on its first-lien term loan one notch to B1, reflecting its expectation that the company will maintain its improved credit metrics given strong operating performance and debt repayments following its IPO in December 2020. The issuer currently has a first-lien term loan due August 2026 (L+350, 0% Libor floor) that is quoted at 99.75/100.25.

Elsewhere, movie theater operator Cinemark Holdings Inc.'s first-lien term loan due March 2025 (L+175, 0% Libor floor) was quoted down over a point amid the market softness today to a 95.25/96.25 level, from 96.5/97.25 yesterday. Also in the entertainment and leisure industry, Live Nation Entertainment Inc.'s first-lien term loan due October 2026 (L+175, 0% Libor floor) dropped nearly a point to 97/98, from 97.875/98.75 yesterday.

Investors yesterday received allocations of the $290 million, six-year covenant-lite first-lien term loan for Golden West Packaging Group LLC that priced wide of talk at L+525, with a 0.75% Libor floor and an original issue discount of 99 via lead arranger Citizens. The term loan freed to a 99.25/99.75 market. Proceeds from the deal will be used to refinance existing debt and fund a tuck-in acquisition. The issuer will also have a $30 million, five-year revolving credit facility.

Secondary leveraged loan stories/links
Golden West Packaging completes $290M term loan for refinancing, M&A; terms

Primary high-yield market

U.S. high-yield supply was again sidelined today as omicron variant fears battered the equity markets. November wraps with $31.4 billion in issuance, the fourth-highest volume for the month on record, according to LCD. Year-to-date volume at nearly $455 billion is tracking 12% ahead of the comparable period in 2020.

Spread compression was observed Monday following notable moves wider at last week's close. The average option-adjusted spread tightened to T+342, a 9-basis-point decline, per Nov. 29 closing levels for the S&P U.S. Issued High Yield Corporate Bond Index. Similarly, the average yield to worst declined 5 bps, to 4.65%.

Meanwhile, supply currently on the shadow calendar appears nearer to hitting the market. II-VI Inc. has launched a $2.8 billion term loan transaction in connection with its announced acquisition of Coherent Inc. Financing will also include senior unsecured debt. Southwestern Energy Co. is also eyeing bonds to accompany a $550 million term loan B underway to back its purchase of GEP Haynesville and refinance existing fixed-rate debt.

Primary high-yield stories/links
High-yield forward calendar

Secondary high-yield market

After rebounding from Friday lows in a busy Monday session, bond prices were unchanged to 0.25 points lower at the close, tracking slumping equities after Federal Reserve Chair Jerome Powell said a faster pace of tapering might be warranted and inflation should no longer be referred to as transitory.

Indications for the CDX HY 37 tested 107.50 today, or the lowest level for an on-the-run contract in more than a year, since the sessions surrounding the 2020 presidential election, and down more than two handles from a November high at 109.72 on Nov. 5.

Reopening names were back in the red, giving up yesterday's gains after Moderna CEO Stéphane Bancel said existing vaccines are likely to be less effective against the emerging omicron variant. Among the most actively traded issues of the session were American Airlines Group Inc.'s 5.75% notes due 2029, which were down a point on the day and 2 points on the week, at 104.5, and Carnival Corp. & PLC's 6% 7.5-year senior notes, also due 2029, which dropped 1.5 points to Friday's 96.5 low.

Eking out fractional gains today were The Hertz Corp.'s 5% eight-year notes, which opened a point higher, at 99, after dipping below 97 on Friday. Those bonds ended the session with a half-point gain, at 98.5.

R. R. Donnelley & Sons Co. bonds also advanced after Chatham Asset Management sweetened its buyout offer in an effort to outbid Atlas Holdings LLC. RRD management yesterday reaffirmed its commitment to Atlas' offer, nudging the borrower's April print of 6.125% senior secured notes due 2026 half a point higher. Today's news added another half point to leave the bonds around 109.75 at the close, versus their Nov. 8 peak of 111.

Short-dated senior First Quantum Minerals Ltd. bonds were on the move after the company announced the partial redemption of its 7.25% senior notes due April 2023 at $101.813%, and it said it could use a combination of cash, debt and new bonds to take out front-end maturities as it aims to cut gross debt to $2 billion in the first half of 2022. The borrower's most pressing 7.25% senior notes due April 2023 were up 0.875 points at 101.875, while the most active 6.875% 2027 bonds, which are not currently callable, were half a point lower in mixed trading, at 103.75, for a yield of about 5.12%.

High-grade market

Issuers retreated in the face of risk-off sentiment this morning amid concerns over vaccines' efficacy against new COVID-19 variants, capping November issuance at $107.06 billion, when excluding SAS and hybrid deals from the count. That is the second-highest November total under LCD criteria, trailing only the $113.5 billion printed in November 2017.

For reference, trailing November totals were roughly $87 billion in 2020, $93 billion in 2019 and $88 billion in 2018.

The breadth of offerings also swelled this month relative to trailing years. The 145 high-grade tranches priced in November compare with 96 in 2020 and 104 in each of the 2019 and 2018 periods. The 165-tranche total priced in November 2017 remains the high-water level for the calendar month.

Highlighting the nervous tone at month-end, the CDX IG 37 index jumped more than 3 basis points today, moving above 58 bps, rivaling the prior 2021 peak closes on March 23-24. That marked a big intramonth swing from a fourth-quarter low of 49.4 bps on Nov. 5.

Distressed stories/links
Q3 global corporate defaults down by 38 versus last year – S&P Global Ratings
Fridson: High-yield market's default rate forecasting record

CLO market stories/links
BofA Securities prices $364M Battalion CLO XVI refinancing
Global CLO Roundup: Europe sets all-time issuance marks; deal wave sweeps US
BofA prices $507M reset of CIFC Funding 2019-V