LCD News Today: Feb. 9, 2022

Primary leveraged loan market

Investors were reviewing revised terms of deals that are set to wrap this week, while several new transactions were pitched.

Hunter Douglas NV upsized the dollar portion of its cross-border term loan financing today to $3.5 billion, from $3.1 billion, at the expense of the adjoining euro loan, which was downsized by €350 million, to €1 billion. Price talk for the dollar term loan firmed at the tight end of talk at Sofr+350, with a 0.5% floor and an original issue discount of 99.5. There is no credit spread adjustment. Final pricing on the euro tranche is E+400, from E+375-400 at launch, with a 0% floor and an OID of 99.5. In addition, there is now one pricing step-down of 25 basis points at 0.75x inside closing first-lien net leverage on both tranches, revised from an initial pitch of two leverage-based step-downs and an additional step-down upon an IPO. The term loans will have a seven-year maturity and will come with six months of 101 soft call protection. J.P. Morgan and Morgan Stanley are leading the deal for the B+/B1 rated company, which is being acquired by 3G Capital.

Books were closing at the end of the day today on the $2.266 billion first-lien term loan for Amentum Government Services Holdings LLC. The loan was upsized from an initial target of $1.293 billion and will refinance an existing facility in addition to funding the company's $1.9 billion acquisition of PAE. Price talk for the seven-year covenant-lite term loan is tightened to Sofr+400, from Sofr+425 at launch, with a 0.5% floor and no credit spread adjustment, and with an OID of 99.5. There are two leverage-based pricing step-downs of 25 bps. As part of the deal, B/B2 rated Amentum will repay its roughly $973 million term loan B-2 due January 2027 that is priced at L+475, with a 0.75% Libor floor. Additional financing for the $1.9 billion acquisition includes a privately placed $550 million second-lien term loan.

A Deutsche Bank-led arranger group revised terms of the $455 million first-lien and $130 million second-lien covenant-lite term loans for Dodge Construction Network (B-/B3). The seven-year first-lien term loan is offered at Sofr+475, plus a credit spread adjustment, or CSA, with a 0.50% floor and an OID of 98.5. Initial talk was Sofr+CSA+450-475 with an OID of 99. The 101 soft call protection was extended to 12 months, from six months. Pricing for the eight-year second-lien term loan is Sofr+CSA+825, with a 0.50% floor and an OID of 98.5. The CSA for both tranches was amended from a flat 10 bps to 10 bps for the one-month rate, 15 bps for the three-month rate and 25 bps for the six-month rate. Deutsche Bank is left lead on the first-lien tranche and UBS and Deutsche Bank are joint bookrunners on the second-lien.

Notably, this is not the first instance where the CSA was altered on a deal during syndication. In January, Quest Software added CSAs (10/15/25 bps) to its first-lien and second-lien term loans, whereas prior to that the loans had been marketed with no CSA.

Among today's launches was a $595 million first-lien term loan due 2029 for Safe Fleet that will be used to refinance existing debt. The Goldman Sachs-led deal launched at a spread of 375-400 bps over Sofr, plus a credit spread adjustment, with a 0.5% floor and an OID of 99.5. The refinancing emerges after Safe Fleet and Madison Industries mutually agreed to terminate the proposed sale of the company to Madison, Moody's noted. Separate financing for that deal had been syndicated last month. The issuer's existing debt includes a covenant-lite first-lien term loan due February 2025 (L+300, 1% floor) dating to its 2018 buyout by Oak Hill Capital Partners and a small incremental term loan that followed that same year came at essentially identical terms but with pricing of L+375, with a 1% floor. The buyout financing also included a second-lien term loan due February 2026 (L+675, 1% floor).

Primary leveraged loan stories/links

LBO/M&A

Hunter Douglas circulates revised terms of upsized $3.5B term loan
Press Ganey preps $400M add-on term loan for acquisition; lender call Feb. 10

Refinancing/Recap/Other

Safe Fleet launches $595M term loan for refinancing; commitments due Feb. 17
Les Schwab in market with $301M add-on term loan; commitments due Feb. 15
WHP Global firms pricing on $450M term loan; allocations expected today
Team Health eyes maturity extension for $2.62B term loan
CTC Holdings launches $300M term loan; commitments due Feb. 16
Laureate Education sets Feb. 10 lender call to launch $500M term loan

Price Flex

Amentum upsizes term loan to $2.27B to refinance existing tranche
Dodge Construction Network revises terms for 1st-, 2nd-lien term loans

Secondary leveraged loan market

Investors have received allocations of the $670 million, seven-year incremental first-lien term loan for Virtusa Corp. that priced at a spread of 375 basis points over the secured overnight financing rate plus a credit spread adjustment, with a 0.75% floor and an original issue discount of 99 via a BofA Securities-led arranger group. The term loan was initially quoted at a 99.25/99.625 level. Proceeds from the deal will be used to fund a $748 million dividend and to repay a revolver draw.

PlayAGS Inc. also completed a $575 million term loan B due 2029 that cleared in line with talk at a spread of 400 basis over Sofr plus a credit spread adjustment, with a 0.75% floor and an original issue discount of 99 via a Jefferies-led arranger group. The term loan broke for trading at 99.25/99.75. Proceeds will be used to repay the full $521.2 million currently outstanding on its TLB due February 2024 and the $93.6 million outstanding on its incremental TLB of the same maturity. Financing also includes a $40 million revolver due 2027 that is expected to be undrawn at close.

In company news today, term loans backing Syniverse Technologies LLC plunged following the announcement that its merger with special purpose acquisition company M3-Brigade Acquisition II Corp. (MBAC) has been mutually terminated after the rate of redemption by MBAC shareholders would have exceeded the threshold for closing. The issuer had recently completed a $1 billion seven-year term loan B due 2029 (Sofr+425, 0.50% floor) that was set to refinance the company's existing debt in connection with the merger that is now expected to be unwound. The issuer's existing first-lien term loan due March 2023 (L+500, 1% Libor floor) slipped over 2 points, to 97.5/98.5 today following the announcement, while the second-lien term loan due March 2024 (L+900, 1% floor) dropped from a 99.5/100.25 level to a 93 bid context.

Elsewhere, it was announced today that loan issuer US Ecology Inc. signed a definitive agreement to be acquired by Republic Services for $48 per share in cash, representing a total value of approximately $2.2 billion including net debt. The issuer currently has a first-lien term loan due November 2026 (L+250, 0% Libor floor) that is quoted at a 99.75/100.25 level. The deal is expected to close by the end of the second quarter.

Secondary leveraged loan stories/links

Virtusa completes $670M incremental term loan for dividend recap; terms
PlayAGS wraps $575M term loan for refinancing at talk; terms
Syniverse term loans plummet following termination of merger with SPAC
AHF Products completes $215M term loan for buyout at talk; terms
TKC Holdings completes upsized $320M pay-in-kind-toggle term loan; terms
Solera Holdings completes $300M incremental term loan for M&A; terms
Pediatric Associates completes $760M term loan facility tight to talk; terms

Primary high-yield market

Wednesday’s session proved light for new-issue volume, with a single tranche clearing. Supply this week has been slim, against the backdrop of an active earnings season and risk-off tone.

The average high-yield spread to U.S. Treasurys tightened 6 basis points on Feb. 8 to T+341, now 2 bps wider week over week, closing levels for the S&P U.S. Issued High Yield Corporate Bond Index show. The average yield to worst was 20 bps wider on the week at 5.32%, reflecting a single basis point decline during Tuesday’s session.

Studio City Co. Ltd — the lone borrower to clear a deal in today’s session — priced $350 million of 7% senior secured notes tight to guidance in the 7.25% area. The five-year paper backs the casino and entertainment resort operator’s development of a new property with proceeds also earmarked for general corporate purposes and liquidity enhancement. Studio City initially pitched the tranche as a $300 million offering. Assigned issue ratings are B+/Ba3, with negative outlooks at S&P Global Ratings and Moody's.

The new print pushes February’s completed volume to $6.7 billion, while month-to-date volume at $30.8 billion is tracking 52% below the 2021 comparable period.

Primary high-yield stories/links

High-yield forward calendar
Studio City prints upsized secured bonds at par to yield 7%; terms

Secondary high-yield market

The secondary high-yield market took on a firmer tone today, rising 0.25-0.5 points across the board on solid two-way flows as U.S. stocks extended yesterday's broad-based rally. After a flat start, the CDX HY 37 moved up to indications bracketing 106.60, ending the session at the top end of that range to close higher for the second day in a row.

Teva Pharmaceutical Industries Ltd. bonds advanced up to 1.75 points as the company's stock surged 9% on the highs after the drugmaker reported mixed earnings in the wake of a Feb. 4 cash-and-product deal to settle opioid-related charges in Texas. The company delivered a top-line beat but missed with its 2022 earnings forecast, revenue and sales. The longest-dated TEVA 4.1% senior notes due 2046 posted the biggest gains, changing hands at 82.25 after sporting an 80 handle since Feb. 4.

Bonds backing NCR Corp. jumped after the company augured a potential spinoff, merger or sale of the company as it embarks on a strategic review of its businesses. The borrower's most active 5.125% senior notes due April 2029 were up 2.5 points on the highs, at 101. That's after hitting a new low of 97.875 on Monday, versus recent highs around 104. The NCR 5.25% senior notes due 2030 were up at 100.375, after bottoming out at 99.25 in yesterday's session

A tightly priced Tuesday print of 5.125% 10-year unsecured bonds (BB+/Ba1) from News Corp. drew a crowd, although at $500 million, the deal hardly sated pent-up demand for fresh paper. The bonds were up 1.75 points on the highs, at 102, and headed into the close half a point lower. Also trading apace was Embecta Corp.'s recent offering of 5% eight-year senior secured notes (B+/Ba3), which were trading flat just north of par after topping out at 101.

Secondary high-yield stories/links

NCR bonds jump as management mulls strategic options
News Corp. bonds trade up as high-yield secondary stabilizes

High-grade market

Seven issuers tested market demand today as global equity prices rebounded and Treasury rates stabilized, driving issuance volume for the session to a 15-session high at $10.55 billion when excluding SAS and hybrid deals from the count. Cumulative issuance for the last 15 sessions, inclusive of Jan. 20, stands at $38.6 billion, which compares with roughly $131 billion priced over the first 12 active sessions of 2022.

The new offerings reflected more assertive financial policy at some of today's nonfinancial issuers. Leading today's slate, Union Pacific Corp. placed $3.5 billion of notes across long-dated issues due 2032, 2042, 2053, and 2072, as the company eyes share buybacks, among other general corporate purposes. The company on Feb. 3 announced a buyback plan targeting 100 million of its shares through March 31, 2025.

Starbucks Corp. also cited share buybacks among its possible uses of proceeds from today's $1.5 billion placement across two-year (non-call one) floating-rate notes and 3% 10-year notes, though the majority of the proceeds are earmarked to address the $1 billion of the company's notes slated to mature through June 2022. Notably, Starbucks repurchased more than $3.6 billion of its shares for the 12 months to Jan. 2, 2022, up from $710 million over the comparable LTM period a year earlier. It completed nearly all of those repurchases over the three months to Jan. 2, reflecting its second-highest quarterly buyback amount on record, trailing only the roughly $5.2 billion it bought back for the three months to Dec. 30, 2018, according to S&P Global Market Intelligence.

Aptiv PLC, meanwhile, launched $2.5 billion of notes in three parts, funding a part of the cash consideration for its pending $4.3 billion acquisition of software concern Wind River Systems.

Other deals today included pricings for Nationwide Building Society ($1.05 billion), ANZ New Zealand (Int'l) Ltd. (London Branch) ($1 billion), Boardwalk Pipelines LP ($500 million) and Harley-Davidson Financial Services Inc. ($500 million).

Distressed story links

Men's Wearhouse affirmed at CCC+ by S&P Global Ratings as recovery continues
Team Health eyes maturity extension for $2.62B term loan
Lannett downgraded by S&P Global Ratings to CCC+ on weakening credit metrics
24 Hour Fitness downgraded by Moody's to Caa3 on weak operating performance
Ensign Drilling affirmed at Caa1 by Moody's on better industry conditions

CLO story links

Guardian Life acquires minority stake in HPS Investment Partners
Citigroup prices $466.75M reset of 522 Funding CLO 2019-5
BofA Securities prices $506M Symphony CLO XXXI
Monroe prices 1st all-Sofr middle-market CLO
Credit Suisse prices KKR's $509M 2022 CLO market debut