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In Latest Dividend Deal for Leveraged Loan Market, Cengage Eyes $1.59B Credit Backing Recap

A Morgan Stanley–led arranger group this morning detailed the structure of a proposed dividend recapitalization financing for Cengage Learning.

The privately held higher education publisher is seeking to put in place a $1.59 billion B term loan, which launches via a bank meeting at 2 p.m. EDT, as well as $740 million of senior unsecured debt, proceeds of which would be used to refinance the approximately $2 billion of existing secured debt and fund a shareholder dividend, sources said. Additional details on the term loan will emerge at this afternoon’s bank meeting.

Morgan Stanley, Credit Suisse,  BMO Capital Markets, Citigroup,, Goldman Sachs, Wells Fargo, Deutsche Bank, and KKR Capital Markets are arranging the loan.

B/B2 Cengage currently has in place a covenant-lite term loan due 2020 that is priced at L+600, with a 1% LIBOR floor, and had been quoted at 100/100.5 prior to Friday’s announcement of a lender meeting, sources said.

The originally $1.75 billion institutional loan was placed in early 2014 to back the company’s exit from Chapter 11, which handed its pre-petition first-lien lenders 100% of the equity in the reorganized company. The loan was upsized by $300 million in December 2014, proceeds of which were used to fund a shareholder dividend. — Kerry Kantin

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