3 Mar, 2021

LCD News Today: March 3, 2021

Primary leveraged loan market

Arrangers today launched a pair of buyout term loans for Watlow Electric Manufacturing Co. and Trillium Flow Technologies amid a fresh batch of mostly refinancing related transactions, including deals for Denali Water Solutions LLC, Cowen Inc., Vertex Aerospace LLC, EyeSouth Partners LLC and The Kenan Advantage Group Inc.

A BMO Capital Markets-led arranger group set price talk on the $515 million first-lien term loan backing the buyout of Watlow Electric Manufacturing by Tinicum at L+400-425, with a 0.50% Libor floor and an original issue discount of 99.5. Financing also includes a $50 million revolving credit facility and the transaction is expected to close in the first quarter of 2021.

Meanwhile, Flow Control Group is out with price talk on a $625 million first-lien term loan and $110 million second-lien term loan that will back the acquisition of the company by KKR and fund deals under letters of intent. Price talk on the seven-year covenant-lite first-lien term loan has been set at L+375-400, with a 0.50% Libor floor, and is offered at an original issue discount of 99.5. The first-lien facility is split between a $525 million funded tranche and a $100 million delayed-draw tranche. The eight-year covenant-lite second-lien term loan is guided at L+700-725, with a 0.50% Libor floor and an original issue discount of 99. Flow Control Group, or Fluid Flow Products Inc., distributes mission-critical flow control and industrial automation products and related services to more than 10,000 customers and 2,000 suppliers in North America.

A UBS-led arranger group launched the $395 million term loan B for Denali Water Solutions LLC, setting price talk at L+450-475 with a 0.75% Libor floor, offered at 99. Proceeds will be used to back the acquisition of Organix Recycling and the refinancing of the company's existing credit facility. Denali, acquired by TPG Growth in January 2020, is a provider of specialty waste and environmental recycling and disposal services in the U.S. The company performs daily organic waste collection, processing, recycling and disposal for municipal, industrial food processing and downstream industrial customers.

Sole lead arranger Morgan Stanley launched a $300 million first-lien term loan for Cowen Inc. following a lender call this morning, setting price talk at L+325, with a 0.75% Libor floor and an original issue discount of 99.5. Proceeds from the transaction will be used to refinance the issuer's existing debt and pay related fees, expenses and any original issue discount. Cowen is a diversified financial services firm offering investment banking services, research, sales and trading, prime brokerage, global clearing, commission management services and investment management.

Sole lead arranger Jefferies set price talk on the $375 million funded first-lien term loan and the $65 million delayed-draw first-lien term loan for EyeSouth Partners ahead of a lender call this afternoon at L+450, with a 0.75% Libor floor and an original issue discount of 99.5. The delayed-draw tranche, which will be sold as a strip, will be available for 18 months and will have a ticking fee of 50% of the margin from days 46-90, stepping to 100% of the margin after 90 days. Proceeds from the transaction will be used to refinance debt and finance near-term acquisitions. EyeSouth, backed by Shore Capital Partners, provides practice management services to a network of affiliated ophthalmology practices, specializing in essential treatments for eye health conditions.

Elsewhere, sole lead arranger Barclays revised terms on the $355 million incremental first-lien term loan for Ultra Clean Holdings Inc. and will now reprice its existing $273 million first-lien term loan, resulting in a single $628 million tranche. Price talk on the revised transaction tightened to L+375, with a 0% Libor floor and the original issue discount on the incremental term loan remains at 99.5 while the repricing is offered at par. There is also a margin step-down to L+350 at corporate ratings of BB-/Ba3. The repricing will lower the spread on the existing covenant-lite first-lien term loan from its current L+450, with a 0% Libor floor. Proceeds from the transaction, along with $21 million of cash on hand, will be used to finance the company's acquisition of Israel-based Ham-Let, which was announced in mid-December 2020. Ultra Clean is a provider of production tools, modules and subsystems for the semiconductor and display capital equipment industries.

A Nomura-led arranger group tightened price talk on the $810 million covenant-lite term loan B that backs a refinancing for Leslie's Poolmart Inc. to L+275, with a 0.50% Libor floor and an original issue discount of 99.75, from initial talk of L+300 and an OID of 99.5 at launch. There is a margin step-down to L+250 that will be triggered at 2.75x net first-lien leverage. Proceeds will be used to refinance the company's existing covenant-lite TLB due August 2023 that is currently priced at L+350, with a 0% floor. Leslie's Poolmart operates as a specialty retailer of swimming pool supplies with more than 900 store locations.

Lead arranger Credit Suisse has set final terms on the $325 million fungible add-on first-lien term loan for Warner Music Group Corp., with allocations expected today. The new covenant-lite incremental facility finalized at the tight end of talk at L+212.5, with a 0% Libor floor and an offer price of par. The add-on will be fungible with the issuer's covenant-lite first-lien term loan, which is priced at L+212.5 with a 0% Libor floor, and totaled $820 million when it was issued in January 2021 to refinance its previous term loan due November 2023. Proceeds from the transaction will be used to refinance existing senior notes. Warner Music Group is a New York City-based entertainment and record-label conglomerate.

And a J.P. Morgan-led arranger group revised terms of the ADS Tactical Inc. transaction, downsizing the proposed term loan B to $475 million, from $700 million, and flexing price talk wider, among other changes. The maturity of the TLB has been cut to five years from seven years, and call protection was revised from six months of soft call to a hard call of 102 over the first two years. Price talk is now L+575 with a 1% Libor floor and an issue price of 98. Price talk had originally been cast at L+425-450 with a 0.75% floor and an offer price of 99. Proceeds will be used to refinance existing first-lien debt, to fund a dividend and to pay related fees and expenses. The proposed dividend was cut to $100 million. ADS Tactical is a provider of value-added logistics and supply chain solutions.

Primary leveraged loan stories/links

Watlow launches $515M term loan backing buyout; commitments due March 15

Flow Control Group launches $625M 1st-lien, $110M 2nd-lien term loans for buyout

Denali Water Solutions sets price talk for $395M term loan; commits due March 17

Cowen launches $300M term loan for refinancing; commits due March 12

Ultra Clean revises terms for $355M add-on term loan, adds repricing

EyeSouth Partners sets talk on $375M term loan, $65M DDTL; commits due March 11

Leslie's Poolmart tightens price talk on $810M loan; recommitments due today

Warner Music Group finalizes $325M add-on term loan; allocations today

ADS Tactical revises term loan offering, cuts size to $475M

Secondary leveraged loan market

Accounts today received allocations of WellSky Corp.'s $1.125 billion, seven-year first-lien term loan that priced tight to talk at L+325, with a 0.75% Libor floor and an original issue discount of 99.5 via a BofA Securities-led arranger group. The deal broke for trading at 99.75/100.125. Proceeds from the term loan, along with a new $405 million privately placed second-lien term loan due 2029, will be used to refinance the issuer's existing first-and second-lien term loans.

TCW Group Inc. has also allocated its $582 million extended term loan B that priced at L+175, with a 0% Libor floor and an OID of 99.5 via lead arranger J.P. Morgan. The maturity was extended to February 2028, from December 2024. The term loan was quoted at 99.5/100 today in the secondary market.

Barrette Outdoor Living Inc. completed a $175 million fungible add-on to its covenant-lite term loan B due November 2027 (L+400, 0.75% Libor floor) that priced tight of talk at an OID of 99.875 via lead arranger Credit Suisse. The term loan has a 25-basis-point margin step-down at 3.65x net first-lien leverage and proceeds will be used for general corporate purposes, including acquisitions. The term loan is quoted at 100.25/100.75.

The Michaels Cos. Inc. announced today that it has signed a definitive agreement to be acquired by funds managed by Apollo Global Management in a take-private transaction valued at approximately $5 billion. The issuer currently has a $1.67 billion covenant-lite first-lien term loan due September 2027 (L+350, 0.75% Libor floor) that was quoted in a 99.875/100.625 context today. Committed debt financing for the transaction will be provided by an arranger group that includes Credit Suisse, Barclays, Wells Fargo, RBC Capital Markets, Deutsche Bank, Mizuho and BofA Securities.

Additionally, Precisely, formerly know as Syncsort Inc., has netted committed debt financing from J.P. Morgan, BofA Securities, Barclays, Credit Suisse, Goldman Sachs, Jefferies, and Morgan Stanley to back the acquisition of the majority of the company by Clearlake Capital and TA Associates. Terms of the transaction were not disclosed, but Centerbridge Partners, currently the majority shareholder of the company, will retain a minority equity stake. The company currently has a $1.304 billion covenant-lite first-lien term loan due August 2024 (L+475, 0.75% Libor floor) that is quoted around 100.125/100.625.

Secondary leveraged loan stories/links

WellSky completes $1.125B term loan for refinancing; terms

TCW Group wraps extension of $582M term loan; terms

Barrette completes $175M add-on term loan; terms

Michaels agrees to acquisition by Apollo in $5B take-private deal

Precisely nets committed debt for acquisition by Clearlake, TA Associates

Primary high-yield market

Issuance remains steady for U.S. high-yield bonds as the market eyed an additional $2.6 billion in new prints by Wednesday's close. The supply pipeline continues to flow freely, and weekly volume through March 5 is currently projected to exceed $12 billion.

Today's intraday sum boosts monthly volume to $8.4 billion, and year-to-date completed issuance to $97.6 billion, up 42% year to year. Average yields, now above 4%, remain attractive for borrowers. Per the S&P U.S. Issued High Yield Corporate Bond Index, outstanding issues logged a 4.11% yield to worst at the close on March 2, reflecting a decline of 3 basis points.

Among today's larger refi-driven prints on track to clear, Compass Diversified Holdings LLC set price talk for an offering of eight-year senior unsecured notes at 5.25%-5.50%. The deal supports the company's efforts to repay debt under existing credit facilities and to redeem its 8% senior notes due 2026. Assigned issue ratings are B+/B1, with a 4 recovery rating at S&P Global Ratings.

Tenneco Inc. was also lined up to price $800 million, eight-year secured notes with a 5%-5.25% yield. The new print was being shopped to refinance the company's existing secured bonds due 2024. Assigned issue ratings are B/Ba3/BB. Fitch today revised the outlook to stable, from negative, based on expectations that the most negative effects of the coronavirus pandemic on the company's credit profile have passed and its credit profile will strengthen over the next several years as global auto production recovers.

Elsewhere, Vericast Corp. floated price talk for a trimmed two-part deal pitched to partially refinance the existing capital structure. The $1.1 billion (downsized from $1.3 billion) of five-year first-lien secured notes are guided in the 9.5% area, and $675 million (downsized from $700 million) of six-year second-lien notes, in the 12.5% area. Final terms are expected tomorrow, March 4.

Primary high-yield stories/links

High-yield forward calendar

Comstock Resources prices add-on 6.75% bonds due 2029 at 103; terms

Tenneco floats price talk for $800M bond offering

Owens & Minor guides $500M bond offering debt repayment

Compass Diversified circulates price guidance for $750M bond offering

Twilio shops $1B, 2-part bond offering

Vericast floats price talk for downsized, 2-part bond offering

Secondary high-yield market

A firm start gave way to softness in high yield as a jump in rates after a two-session lull rattled the market and brought duration sellers back into play. Bonds ended the day a quarter of a point lower with traders reporting a heavy feel to the market heading into the close.

Michaels Stores Inc. bonds surged this morning as the company confirmed it has accepted a $3.3 billion buyout offer from private equity firm Apollo Global Management. Having traded actively but flat in the wake of a Tuesday New York Times report that sent Michaels shares soaring, the borrower's $375 million September offering of 4.75% secured notes due October 2027 at one point were up 4 points at a pandemic-era high of 108.75. The more actively traded $500 million of 8% senior notes due July 2027 ended the day 1.5 points higher at 109.125 after probing 110 on the highs.

Bonds backing Diamond Sports Holdings LLC surged today after DISH Network Corporation and DraftKings Inc. announced a partnership that will bring the latter's sportsbook and fantasy sports apps to Dish customers. The news bodes well for Diamond Sports parent Sinclair Broadcast Group Inc., which is working with Bally's Corp. on an app for its regional sports networks as part of an effort to engage younger viewers. Having dipped below 50 at the open, the DSPORT 6.625% senior notes due 2027 ended the day at 53, still well shy of their late January highs around 68. The equally active 5.375% secured notes due 2026 were a quarter of a point higher on the day at 70 from October 2020 lows around the 60 mark and a Jan. 18 pandemic-era peak just below 89.

Flows were better when it came to Tuesday's trio of par-priced primary offerings, all of which were trading at volume in solid two-way action. Macy's Retail Holdings' $500 million offering of 5.875% eight-year senior unsecured notes closed at 101.875, from 102.125 on the highs and 101.5 on the break. Clearway Energy Operating LLC's $925 million offering of 3.75% 10-year senior unsecured green bonds were changing hands at a weighted average of 100.875 from high trades at 101.25, while Murphy Oil Corp.'s $550 million placement of 6.375% senior notes due July 2028 ended the session just south of par after topping out early at 100.5.

Secondary high-yield stories/links

Michaels agrees to acquisition by Apollo in $5B take-private deal

Latest high-yield offerings trade mixed after rising on the break

High-grade market

Torrential issuance continued and volume surged past the high end of syndicate forecasts for the week after just three sessions, as the stabilization in rates this week kicked the door wide open for issuance from all corners of the high-grade marketplace. A dozen issuers today combined to launch $9.75 billion of new supply, lifting IG corporate issuance for the week near $55 billion, even when excluding SAS and hybrid deals from the count. For reference, syndicate projections for the week, per a syndicate survey from Mischler Financial's Ron Quigley, were near $42 billion at the midpoint and topped out at $50 billion.

The 1.93% yield average for the S&P U.S. Investment Grade Corporate Bond Index at the Tuesday close was down from 1.99% last Thursday, a nearly 8-month high. But investors continued to mark bonds firm against the ebbs and flows of rates over the last month, with the T+89 spread for the index on Tuesday holding within a range from T+86-90 since Feb. 8, with the low end of that range reflecting the tightest spread levels in three years.

Deals today for Vontier Corp. ($1.6 billion), Marriott International Inc. ($1.1 billion), Hubbell Inc. ($300 million), Corporate Office Properties LP ($600 million), Omega Healthcare Investors Inc. ($700 million), Agilent Technologies Inc. ($850 million), Atlantic City Electric Co. ($350 million) and HCL Technologies Ltd. ($500 million) all backed refinancing efforts, with an emphasis on terming out 2021-2023 bond maturities at lower coupon rates.

With the bond vigilantes pacified for the time being, today's 12-deal docket lifted the number of deal announcements this week to 37, across 68 tranches. The deal count, tranche count and dollar volume Monday-Wednesday reflect the highest totals for those metrics over any three-day period since Sept. 8-10, 2020, when issuers brought 41 deals across 71 tranches, totaling $63.7 billion.

High-grade market stories/links

Aflac adds to sustainability issuance with new 2026 notes

Barclays places 2-part offering of senior, subordinated notes

HCL Technologies prints debut 2026 deal for refi purposes

Citadel Finance places $600M of notes in bond market debut

Agilent Technologies prices $850M of notes to extend maturities

Omega Healthcare to fund existing debt with new 2033 notes

Corporate Office Properties places $600M to term out debt

Hubbell prices $300M of 2031 notes to take out 2022 issue

Equitable Financial places 2028 FA-backed notes

Vontier launches 1st post-spinoff offering in 3 parts

Marriott returns with refi-driven 2031 notes