LCD News Today: Feb. 8, 2022

Primary leveraged loan market

Terms were being finalized today on deals for Virtusa and Pediatric Associates, while a handful of new transactions launched, including a quick-turnaround holdco pay-in-kind toggle term loan for TKC Holdings.

Among the new launches, HelpSystems LLC returned to market with a $555 million fungible incremental first-lien term loan through lead arrangers Jefferies and Golub Capital. Price talk for the covenant-lite term loan due November 2026 is a spread of 400 basis points over the secured overnight financing rate, plus a credit spread adjustment, or CSA, of 10 bps, with a 0.75% floor and an original issue discount in the range of 99.5-99.75. The add-on will bring the pro forma tranche size to about $2.105 billion. Proceeds from the deal will be used to fund three acquisitions currently under exclusivity. Additional financing includes a privately placed incremental second-lien term loan due November 2027 of $170 million that will bring the total size of that tranche to $670 million.

Olaplex Holdings Inc. (B+/B1) launched a $675 million first-lien term loan through lead arranger Goldman Sachs that will be used to refinance the issuer's existing capital structure. The seven-year term loan is offered at Sofr+375-400, with a 0.50% floor and an OID of 99.5. There will be a 25-bps margin step-down at 0.5x inside closing first-lien net leverage. The company's existing facility includes a term loan due January 2026 that had approximately $762 million outstanding as of Sept. 30, 2021. Pricing on that loan is L+650, with a 1% Libor floor and a step-down to L+625 tied to first-lien net leverage. MidCap Financial is administrative agent.

Lead arranger Citizens Bank launched a $260 million covenant-lite first-lien term loan and a $40 million delayed-draw term loan for Magnate Worldwide LLC. Price talk for the seven-year TLB is L+500-525, with a 0.75% Libor floor and an original issue discount of 99. Proceeds from the deal will be used for the acquisition of B/B2 rated Magnate by Littlejohn & Co. Additional financing includes a $50 million asset-based loan facility with $10 million drawn and a privately placed $95 million second-lien term loan, according to S&P Global Ratings.

In another refinancing, Albaugh LLC unveiled a $750 million, seven-year term loan B to pay down its existing facility and to fund an acquisition. The new loan is talked at Sofr+375-400, with a 1% floor and an issue price of 99. HSBC is left lead. Albaugh's existing covenant-lite TLB due December 2024 is priced at L+350, with a 1% Libor floor. The acquisition is a $198 million deal for Rotam Global AgroSciences that was announced in December.

Pediatric Associates LLC (B/B2) upsized its first-lien term loan facility from $600 million to $760 million, split between a $660 million funded tranche and a $100 million delayed-draw term loan, and pricing was finalized tight to talk by the Credit Suisse-led arranger group. Pricing of the seven-year covenant-lite term loan is L+325, from L+350 at launch, with a 0.5% Libor floor and an original issue discount of 99.5. Proceeds will be used to support a recapitalization and a partial equity sale of the business, with TPG Capital acquiring a stake in the pediatric practice management firm.

Primary leveraged loan stories/links

LBO/M&A
HelpSystems launches $555M 1st-lien term loan for M&A; lender call Feb. 9
Magnate Worldwide sets talk for $260M term loan for LBO; commitments due Feb. 23
Cast & Crew sets price talk on $225M add-on term loan; commits due Feb. 15
ITP Aero moves forward deadline for €575M-equivalent dollar term loan to Feb. 9

Refinancing/Recap
Olaplex sets price talk on $675M term loan for refinancing; commits due Feb. 22
Latham Pool launches $350M term loan; commitments due Feb. 17
Albaugh launches $750M term loan for refinancing, M&A
TKC Holdings launches $305M PIK-toggle term loan; commitments due today
Virtusa upsizes term loan to $670M, preps allocations
Safe Fleet sets Feb. 9 lender call to launch $595M term loan

Price flex
Pediatric Associates finalizes pricing on upsized $760M term loan facility

Secondary leveraged loan market

The secondary loan market retained a softer tone in today's session after returning just 0.01% yesterday.

S&P Global Ratings upgraded Boyd Gaming Corp. to BB- today, from B+, and raised its outlook to positive from stable as the company achieved better-than-expected operating performance in 2021 and reduced leverage. The rating agency noted that the company reduced leverage by approximately $800 million in 2021, further improving leverage metrics. The company recently reported its fourth-quarter earnings results, with adjusted EBITDA of $321 million on revenue of $879.8 million, compared to the consensus estimates compiled by S&P Capital IQ of $301.1 million and $838.4 million, respectively. The issuer currently has a first-lien term loan due September 2023 (L+250, 0% Libor floor) that was also upgraded to BB+ from BB and is currently quoted in a 100/100.25 context.

The rating agency also upgraded Academy Sports and Outdoors Inc. to BB-, from B+, and placed a stable outlook on the issuer as the company also lowered leverage amid better-than-expected results. The company benefited from a strong market position along with increased customer traffic and demand for sporting goods and outdoor equipment, resulting in strong sales and EBITDA generation, according to the rating agency. The issuer currently has a $300 million term loan B due November 2027 (L+375, 0.75% Libor floor) that is quoted at 100/100.5.

In earnings, the Plantronics Inc. covenant-lite first-lien term loan due July 2025 (L+250, 0% Libor floor) slipped an eighth of a point to 98.375/98.875 after the company reported its fiscal third-quarter earnings results, which came in below expectations. The company reported adjusted EBITDA of $47.3 million on revenue of $409.6 million, compared to the consensus estimates compiled by S&P Capital IQ of $50.3 million and $418.6 million, respectively. The company noted in its earnings press release that supply chain constraints increased the company's backlog, while demand remains robust and companies prepare for a return to the office. The company expects fiscal 2022 full-year revenue between $1.675 billion and $1.7 billion and adjusted EBITDA between $220 million and $230 million, revised from $1.675 billion-$1.72 billion and $220 million-$240 million, respectively.

Secondary leveraged loan stories/links
Ontic wraps $80M add-on term loan tight to talk; terms
Conterra completes $55M add-on term loan B; terms

Primary high-yield market

Year-to-date volume is on track to total $30.4 billion at Tuesday's close, with the session slated for an additional $600 million in U.S. high-yield issuance. The single-day sum raises February's completed issuance to $6.4 billion. The average high-yield spread to U.S. Treasurys rose 5 basis points in Monday's session, finalizing at T+347, according to the S&P U.S. Issued High Yield Corporate Bond Index. The average yield to worst widened 4 bps, to 5.34%.

The slate of offerings eyed for pricing by the close includes Virtusa Corp.'s add-on 7.125% senior unsecured notes due 2028 backing a dividend payment. After initially pitching the tack-on at $130 million, the deal was trimmed to $50 million, making the borrower the latest to display a preference for floating-rate securities. Pricing for the senior notes was firmed at the wide end of 98.51-99 guidance. Proceeds, along with the seven-year incremental term loan now totaling $670 million and cash on hand, will be used for a dividend payment and to repay existing debt. The initial $350 million bond deal was inked in December 2020 to fund a buyout of the company by Baring Private Equity Asia. Unsecured debt ratings are CCC+/Caa2.

Last week, bond deals for Prince International Corp., McAfee Corp. and Scientific Games Corp.'s lottery business were also downsized in favor of a concurrent loan transaction.

Elsewhere, News Corp. placed a $500 million tranche of 5.125% senior notes due 2032 (BB+/Ba1) at the tight end of talk. The deal was shopped to fund the acquisition of the Base Chemicals and Oil Price Information Service, or OPIS, businesses from S&P Global and IHS Markit, and for general corporate purposes. The new issue is rated BB+/Ba1, reflecting a one-notch upgrade to the company's unsecured debt today at Moody's. Moody's also revised the outlook to positive from stable, citing improvement in operating results, improving free cash flows and a steady track record of conservative leverage and strong liquidity.

Tacora Resources Inc. completed a $50 million add-on to its 8.25% senior secured notes due 2026 to fund capital expenditure purposes and to add cash to the balance sheet. The tack-on priced at talk set at 99.01% of par. The original $175 million tranche of senior secured notes was placed in May 2021. Issue ratings are B/B2.

Primary high-yield stories/links
High-yield forward calendar
Virtusa firms pricing for downsized add-on bond offering, upsizes term loan
Tacora Resources prices add-on to 8.25% senior notes due 2026 at 99.01; terms
Studio City sets price talk for $300M of secured notes

M&A/LBO
News Corp. prices 10-year bonds for M&A at par to yield 5.125%; terms

Secondary high-yield market

The high-yield secondary market held steady today, resisting the ongoing volatility in the European market. Traders reported balanced flows after buyers emerged around yesterday's close. The 106.31 close for the CDX HY 37 was the contract's highest since Feb. 4.

Bonds backing Incora dominated trading volume and price swings following reports that the aerospace logistics company has engaged advisers to help it restructure some $100 million in bond interest payments due in May. The 8.5% secured notes, issued by Wesco Aircraft Holdings Inc. before it merged with Pattonair to form Incora, shed 4 points to a new low of 83.75. Having traded in the low- to mid-90s since September 2021, the bonds have plummeted from a Jan. 18 close at 93, bouncing yesterday on a bout of short covering before resuming their downward trajectory. The Wesco 9% secured notes fared better, holding recent gains to trade three points above a Feb. 4 low of 82.5.

A raft of earnings generated very little trading action on the day, including Tenet Healthcare Corp.'s fourth consecutive quarterly earnings beat. Tenet bonds edged 0.25-0.50 points higher across the stack while its shares gained 5.75%, leading executive chairman Ron Rittenmeyer to bemoan the company's low valuation on this morning's earnings call. The most actively traded THC 6.125% senior unsecured notes due 2028 were changing hands around 101.625 after testing 106 at the end of December.

While a couple of new-money deals moved off the shadow calendar, near-term issuance has been driven by tack-ons. A $200 million boost to Crescent Energy Co.'s 7.25% senior notes due 2026 was the only pricing in Monday's session. The bonds gave up an early quarter-point gain to trade flat to where the add-on priced, at 101, with trading turning mixed heading into the close.

Secondary high-yield stories/links
Incora hires PJT, Alvarez, Milbank for restructuring as payments loom – WSJ

High-grade market

The high-grade primary market — which stalled out over three straight sessions — ground into low gear today with a four-deal docket shopped against a more stable market tone. The CDX IG 37 today ended tighter for the first time in five sessions, standing at 62.75 bps at the equity bell, down from 64 bps yesterday (a high since the fourth quarter of 2020), but still about 13 bps wider in the year to date.

Today's $2.175 billion issuance total, when excluding a $1.75 billion offering for state-owned Comisión Federal de Electricidad (LCD totals exclude SAS and hybrid deals), brings the rolling five-day sum to just $8.725 billion, and the 10-day rolling sum to approximately $23 billion. For reference, the amounts for the comparable calendar periods last year were $20.1 billion for the five-day sum, and just shy of $75 billion for the 10-day total.

Despite another push higher for underlying Treasury yields, today's pricings all featured refinancing themes, including offerings for BCE Inc..'s Bell Canada subsidiary ($750 million), Kia Corp. ($700 million of green bonds), Morgan Stanley Direct Lending Fund, or MSDLF, ($425 million) and El Paso Natural Gas Co. LLC ($300 million). Bell Canada priced new 3.65% 30-year bonds to partially fund the refinancing of a larger C$1 billion offering of notes due 2023, as rating agencies today noted expectations for ongoing deleveraging at the company over the next couple of years. MSDLF, a business development company, upsized its deal from $300 million after it netted first-time senior unsecured ratings last week to reflect the company's strategy to diversify its funding sources and refinance existing senior debt.

Distressed story links
Crew Energy upgraded by S&P Global Ratings to B- on improved credit metrics
Delayed Chapter 11 exit improved recoveries during pandemic – S&P Global Ratings
Incora hires PJT, Alvarez, Milbank for restructuring as payments loom – WSJ
Fridson: Misvaluation-spotting methodology for high-yield market validated

CLO story links
Global CLO Roundup: US settles into Sofr pricing; deals emerge in Europe