LCD News Today: Jan. 27, 2022

Primary leveraged loan market

Books closed this morning on the $5.9 billion term loan B for Athenahealth Group Inc. (B-/B3/B) that was upsized by $150 million, in a shift from the concurrently marketed senior unsecured notes, and had pricing finalized tight to talk. Pricing for the seven-year covenant-lite TLB tightened to a spread of 350 basis points basis points over Sofr, with a 0.5% floor and an OID of 99.5. Initial guidance was a spread range of 375 bps-400 bps. There is now just one 25 bps leverage-based step-down at 0.5x inside closing first-lien net leverage (another ratchet at 0.25x inside closing leverage was removed) as well as a 25 bps step-down upon an IPO. In addition to the funded tranche, there is a $1 billion, delayed-draw first-lien term loan that had the commitment period trimmed to 18 months, from 24 months. Ticking fees were revised to no fee for 45 days (revised from 90 days), then 50% of the margin for days 46-90, stepping to 100% of the margin thereafter. The loan is part of the financing package behind the $17 billion acquisition of the company by Bain Capital and Hellman & Friedman. Additional funding includes $2.35 billion of senior unsecured notes, $2.36 billion of preferred equity, and roughly $6.2 billion of common equity.

A Barclays-led bookrunner group revised terms of the $2.5 billion term loan B supporting a refinancing for Bausch Health Cos. Inc. Pricing was revised to a spread of 525 bps over Sofr, plus a credit spread adjustment, with a 0.5% floor and an OID of 99. Initially, the spread was guided in a range of 475 bps-500 bps. The CSA is 10 bps for the one-month rate, 15 bps for the three-month rate, and 25 bps for the six-month rate. Also, the tenor was shortened to five years, from seven years, and amortization was increased to 5% per annum from 1%, and ticking fees were added. Proceeds from the term loan, along with $1 billion of secured notes due 2027, proceeds from the IPO of Bausch & Lomb and a related debt financing, will be used to refinance in full the company's existing TLB and a portion of its outstanding senior unsecured notes. The refinancing will be effective upon the IPO of Bausch & Lomb and its related debt financing.

NortonLifeLock Inc. increased its term loan B to $3.69 billion, from guidance of up to $3.6 billion at launch, and pricing is finalized tight to talk by a BofA Securities-led arranger group. Final pricing for the seven-year covenant-lite TLB is a spread of 200 bps over Sofr, plus a CSA, with a 0.5% floor and an OID of 99.5. Initial guidance was for a spread in the range of 225 bps-250 bps. Proceeds will be used to support the merger of NortonLifeLock with European cybersecurity firm Avast PLC and additional proceeds from the upsizing, in conjunction with an incremental $410 million TLA, will be used for general corporate purposes.

Primary leveraged loan stories/links

LBO/M&A

Ufinet International launches $1.135B term loan; commitments due Feb. 10
Pediatric Associates sets price talk on $600M term loan; commitments due Feb. 10
Rinchem launches $300M term loan for buyout; commitments due Feb. 9
Foley Products launches $370M term loan; commitments due Feb. 10
ITP Aero sets Jan. 28 lender call to launch €575M-equivalent US dollar term loan

Refinancing/Recap

American Trailer World launches $250M add-on term loan; commitments due Feb. 3
PlayAGS to launch $575M term loan for refinancing; lender call Jan. 28
Metronet Systems sets Jan. 28 lender call to launch $95M add-on term loan

Price Flex

Bausch Health revises terms of $2.5B term loan; commitments due today

Secondary leveraged loan market

The loan market retained a softer tone today as arrangers allocated several new-issue deals to the secondary.

Investor today received allocations of Crocs Inc.'s $2 billion term loan B due 2029 that priced at the wide end of talk at a spread of 350 basis points over the secured overnight financing rate plus a credit spread adjustment, with a 0.5% floor and an original issue discount of 99.5 via a Citi-led arranger group. The term loan broke for trading at 99.75/100. Proceeds from the deal will be used to finance the acquisition of casual footwear company HEYDUDE in a cash-and-stock deal valued at $2.5 billion.

Alight Solutions LLC also completed its $1.956 billion term loan B due August 2028 that priced at Sofr+300, with a 0.5% floor and an OID of 99.875 via lead arranger BofA Securities. There was an accompanying amendment to the issuer's $523 million TLB due August 2028 that will transition the facility to Sofr from Libor and the two tranches will be fungible, creating a combined tranche totaling approximately $2.479 billion. The term loan was initially quoted at a 100.125/100.5 level. Proceeds from the new term loan will be used to refinance the issuer's existing term loan B due November 2026.

Elsewhere, Embecta Corp. placed its $1.15 billion first-lien term loan due 2029 tight to talk at a spread of 300 bps over Sofr, with a 0.5% floor and an OID of 99.5 via a Morgan Stanley-led arranger group. Proceeds from the term loan will be used to support the spinoff of Embecta Corp. from Becton Dickinson and Co. Financing also includes $500 million of eight-year (non-call five-year) senior secured notes and a $500 million revolving credit facility.

Finally, the average bid of LCD's flow-name loan composite fell 29 bps amid this week's market volatility in today's reading to 99.54% of par after five consecutive weeks of gains. Apart from a new loan entering the composite, all the names in the composite moved lower. Medline Industries Inc.'s term loan B due October 2028 (325, 0.5% Libor floor) replaced Bausch Health Cos. Inc.'s TLB due June 2025 (L+300, 0% floor) this week.

Secondary leveraged loan stories/links

Crocs prints $2B term loan for acquisition at wide end of talk; terms
Alight Solutions completes $1.956B term loan refinancing, amendment; terms
Embecta wraps $1.15B term loan for spin-off tight to talk; terms
Leverage loan flow-name bids snap 5-week winning streak with 29 basis point drop
AssuredPartners completes $850M incremental term loan; terms

Primary high-yield market

An additional $4.5 billion of issuance was on track to clear in the U.S. high-yield market by Thursday's close, with the market seemingly shrugging off observed volatility in the week's earlier sessions. Today's prints would place month-to-date volume at $24 billion, with two business days remaining in January.

Bausch Health Cos. Inc. moved off the shadow calendar with an expected refinancing-driven issuance. The company was eyeing $1 billion of five-year secured bonds, alongside a $2.5 billion term loan, to repay the company's existing term loan B in full, repay its 6.125% notes due 2025 and support a partial redemption of its 9% senior notes due 2025. The double-B graded notes were talked in the 6.25% area. The refinancing will be effective only upon the IPO of Bausch & Lomb and its related debt financing.

Athenahealth Group Inc., after downsizing for its bond deal on Wednesday by $150 million, cleared the tranche in today's session. The $2.35 billion of notes priced at the midpoint of talk in the 6.5% area. With the $150 million shifted to a concurrent floating-rate transaction, proceeds of the bonds, the now-$5.9 billion term loan B and a $1 billion delayed-draw TLB, will be used to support a buyout of the company by Bain Capital and Hellman & Friedman. Additional financing includes $2.36 billion of preferred equity and about $6.2 billion of new common equity.

Pitches for Cerdia Finanz GmbH and Embecta Corp. were also finalized in Thursday's business.

Primary high-yield stories/links

High-yield forward calendar

Refinancing

Bausch Health floats price talk for $1B of 5-year secured notes
Cerdia Finanz prints secured notes at 97 to yield 11.297%; terms

M&A/LBO

Embecta places senior secured notes at par to yield 5% for spinoff; terms
Athenahealth circulates guidance for $2.35B of senior notes backing buyout

Secondary high-yield market

High-yield bonds today ended a busy session 1-2 points lower as ETF funds offloaded paper after a third straight week of outflows. The $189 million of ETF redemptions for the week to Jan. 26 came in addition to $2.62 billion that exited mutual funds and on the heels of two weeks of $2 billion+ outflows in high-yield. The selling action drove the CDX HY 37 to a series low of 106.40, canceling out the short-covering traders noted ahead of yesterday's Fed press conference and a bout of dip buying this afternoon.

Quality names came under pressure as a fallen-angel ETF sought to reduce its exposure as ETF premiums bounced around flat to NAV, sources said. The Kraft Heinz Co. bonds shed around a point across the stack with the 3.75% bonds due 2030 hitting a new low at 102.5, for a yield of about 3.383%.

Healthcare bonds were particularly active on the day, with Bausch Health Cos. Inc.'s senior unsecured stack moving to new lows as the company prepared to place $1 billion of new secured notes to refinance existing debt. The 4.875% notes due 2028 tumbled 1.75 points on the day, and almost 4 points on the week to a new all-time low around 94.5, while the 5% notes due 2029 were down 4.5 points, at an all-time low of 81.625.

HCA Healthcare Inc. bonds traded mixed after the for-profit hospital chain blamed the Omicron coronavirus variant for top- and bottom-line misses in a fourth-quarter earnings report that revealed the slowest growth since Q3 2020. Despite management unveiling an $8 billion share repurchase program and an increased quarterly dividend, the company's shares plunged 8% on the report. Meanwhile, the most actively traded HCA bonds were up 0.25-0.5 points on the day and around a point on the week, while the 3.50% senior notes due 2030 dipped below par for the first time since July 2020 and ending the session around 99.75/100.

The three new offerings that emerged from the new-issue pipeline in the wake of the Fed press conference were a mixed bag. Jacobs Entertainment Inc.'s 6.75% seven-year senior unsecured notes, rated B/B2 after upgrades from both S&P Global Ratings and Moody's, broke to a 101.5 context and traded more than a point higher before sellers stepped in to take them back to trades around 101.25. Meanwhile, Eco Material Technologies Inc.'s M&A-driven tranche of 7.875% five-year senior secured green notes (B/B2/B+), which was upsized and priced tight to talk, remained within half a point of its 101.25 break price. Underperforming were Ero Copper Corp.'s 6.5% eight-year senior unsecured notes (B/B1/B), which fell below par from initial trades at 100.75 as copper prices retreated on post-Fed dollar strength. Those ended the session around the 99.5 mark.

High-grade market

Treacherous conditions persisted today despite a firm open for the credit markets, as risk-sentiment proxies widened alongside another intraday major reversal for equities, this time sharply to the downside. The CDX IG 37 started the day roughly a basis point tighter from yesterday's 12-month high at 60.5 bps, but the contract gapped wider to stand at 62.5 bps as the equity bell sounded, marking another new high since the days leading up to the November 2020 presidential elections.

Issuance for the week stands at just $2.6 billion, ex-SAS and hybrids, which compares with midpoint syndicate projections coming into the week for more than $20 billion of new supply. The volume stems from just two offerings, one on Monday ($750 million of 10-year callable subordinated sustainability notes for Hanwha Life Insurance Co. Ltd.) and one today. The Procter & Gamble Co. today placed $1.85 billion of senior notes, backing the refinancing of existing debt, and a shareholder distribution plan characterized by rating agencies as "aggressive" across dividends and buybacks.

The historically low-cost borrower today printed coupon rates of 1.90% for new five-year notes, priced at T+27, and 2.30% for new 10-year notes, at T+50, providing a stark example of the surge in absolute borrowing costs over the last year. P&G in April 2021 placed a $2 billion offering across 1% five-year notes due April 2026 at T+20, and 1.95% notes due April 2031 at T+42.

In October 2020, it printed a $2.25 billion, two-part offering across 0.55% five-year notes due Oct. 29, 2025, at T+25, and 1.20% 10-year notes due Oct. 29, 2030, at T+47. The reoffer yields for those issues still rank among the five lowest ever recorded for senior unsecured notes with those respective maturity tenors, according to LCD.

Distressed market stories/links

GEO Group downgraded by S&P Global Ratings to CCC on debt exchange risk

CLO market stories/links

Barclays prices $510M CIFC Funding 2022-1
Natixis prices $241M refinancing of MCF CLO IX
Monroe markets first MM CLO with Sofr-linked capital stack