LCD News Today: Oct. 25, 2021

Primary leveraged loan market

Several new deals launched into the leveraged loan market today, but some had price talk already circulating when they were announced late last week, including AerCap Holdings and TricorBraun. Resonetics LLC was added to the list as timing firmed for its incremental M&A financing and the Echo Global Logistics LBO deal was announced for launch on Tuesday.

Terms were finalized on the term loan B for Clubessential Holdings LLC (B-/B3) and allocations are expected on Tuesday from the Barclays-led arranger group. The 5.5-year term loan was upsized by $50 million, to $350 million, and pricing was finalized at L+400, the tight end of the L+400-425 range at launch, with a 0.50% Libor floor and an issue price of 99. Proceeds will be used to refinance existing debt and recapitalize the membership management software firm following a minority investment by Silver Lake. Additional funds from the upsizing will add cash to the balance sheet. Battery Ventures is the existing majority shareholder in the business.

Resonetics LLC (B-/B3) launched a $130 million incremental first-lien term loan that will be used for tuck-in acquisitions. The add-on is offered at 99.5 and will be fungible with the existing covenant-lite first-lien term loan due April 2028 that is priced at L+400, with a 0.75% floor. The company, backed by GTCR and Regatta Medical, was last in the market in April when it issued the existing $360 million first-lien term loan alongside a privately placed $90 million second-lien term loan due 2029. Credit Suisse is leading the deal.

Echo Global Logistics Inc. is rolling out the $550 million, seven-year covenant-lite first-lien term loan that is part of the debt financing supporting the buyout of the company by The Jordan Co. The deal launches on Tuesday through a Credit Suisse-led arranger group. Additional financing will include a $100 million revolver and a privately placed $160 million second-lien term loan. Chicago-based Echo Global Logistics provides technology-enabled transportation and supply chain management services.

Primary leveraged loan market stories/links
LBO/M&A
Resonetics launches $130M add-on term loan for M&A; lender call today
Echo Global Logistics preps launch of $550M LBO term loan; lender call Oct. 26
GreenWaste accelerates commitment deadline for $400M term loan
Summit Health nets committed financing for M&A
Refinancing/Recap
Clubessential finalizes upsized $350M term loan; recommitments due today

Secondary leveraged loan market

The secondary loan market retained a soft tone in today's session after the S&P/LSTA Leveraged Loan Index returned 0.02% on Friday.

The $1.642 billion, seven-year first-lien term loan backing the acquisition and merger of Multi-Color Corp. and Fort Dearborn Co. was initially quoted at a 98.875/99.375 after pricing wide of talk on Friday afternoon at L+500, with a 0.50% Libor floor and an original issue discount of 98.5 via a BofA Securities-led arranger group. Financing for the cross-border transaction also included a €500 million euro-denominated first-lien term loan (E+500, 0% floor) that also priced at an OID of 98.5 and a two-part bond offering.

Meanwhile, TIBCO Software Inc. has completed its $1.415 billion nonfungible incremental first-lien term loan due June 2026 that also priced wide of talk at L+400, with a 0.50% Libor floor and an OID of 98 via a Nomura-led arranger group. The loan broke at 98.125/98.625 and has since ticked up to a 98.25 bid. Proceeds will be used to finance the acquisition of Blue Prism Group.

Option Care Health Inc. has allocated its $600 million term loan B due 2028 that cleared tight of talk via lead arranger BofA Securities. The loan priced at L+275, with a 0.50% Libor floor and an original issue discount of 99.75 before entering the aftermarket at 100/100.375. Proceeds from the term loan, alongside a new $500 million tranche of 4.375% senior unsecured notes due October 2029, will be used to refinance the issuer's existing TLB due August 2026 (L+375, 0% floor) that totaled about $1.16 billion as of June 30.

Lead arranger BofA Securities also priced and allocated the $610 million Sofr-based term loan B that will finance the acquisition of Clariant's pigments business by The Heubach Group and SK Capital Partners. The seven-year loan priced at a margin of 500 basis points over Sofr plus a credit spread adjustment, or CSA, of 10 bps for a one-month rate, 15 bps for a three-month rate and 25 bps for a six-month rate. The loan freed to a 99.25/100 market after pricing at an OID of 99. The facility has a 0.50% Sofr+CSA floor.

In company news, PAE Inc. announced today that it has signed a definitive agreement to be acquired by an affiliate of Amentum Government Services Holdings LLC in an all-cash transaction valued at approximately $1.9 billion including the assumption of debt. PAE has a first-lien term loan due October 2027 (L+450, 0.75% floor) that totaled $887.8 million as of June 27, 2021. Amentum also has a first-lien term loan due January 2027 (L+475, 0.75% floor).

Secondary leveraged loan stories/links
Multi-Color, Fort Dearborn wrap $2.2B cross-border term loan wide of talk; terms
TIBCO Software completes $1.415B term loan for Blue Prism deal; terms
Option Care wraps $600M term loan tight to talk; terms
Heubach completes $610M Sofr-based term loan for M&A; terms
Anthology completes $1.3B term loan for Blackboard acquisition; terms
Traverse Midstream Partners wraps term loan repricing, add-on; terms
AppLovin wraps $1.5B term loan for M&A; terms
Advantage Solutions completes $1.3B term loan repricing; terms
Ellucian wraps $1.6B term loan repricing at talk; terms
Radiate Holdco completes $720M add-on term loan, $2.68B repricing; terms
Chamberlain Group $2.015B LBO term loan allocates, gains on break; terms
Gateway Casinos & Entertainment wraps $1.25B-equivalent term loan; terms

Primary high-yield market

A calm start for the week's primary market activity placed $150 million on track for pricing in Monday's session. With the month winding down, October has logged some $25.3 billion in issuance, about $15 billion shy of the record set for the month in 2012, LCD data shows. Year-to-date volume at $419.6 billion is 15% ahead of last year's pace.

Today's slim print was expected via Viking Cruises Ltd., structured as an add-on to its existing 7% senior notes due 2029. The $150 million tack-on printed at 99.5 talk, with an upsize of $50 million. Proceeds are earmarked for general corporate purposes. Unsecured debt ratings are CCC/Caa2. The initial $350 million issue was placed in January in a dual-tranche offering.

Roblox Corp. joins the ramp up in first-time high-yield debt issuers. The video game developer is underway with a $1 billion offering of 8.5-year senior notes to support general corporate purposes. Pricing for the tranche is expected to be tomorrow's business. Thus far, Moody's has assigned a Ba2 rating to the bonds. For reference, the 2021 count of tranches priced by first-time borrowers totaled 136 through Sept. 30, 2021, exceeding the prior full-year peak of 127 in 2013, according to LCD.

Also on tap for tomorrow, Gray Television Inc. has proposed $1.125 billion of 10-year senior notes in connection with the acquisition of Meredith Corp.'s local media business for $2.825 billion in cash. Funding for the deal also includes a $1.5 billion incremental term loan D and $265 million of cash on hand.

Primary high yield stories/links
High-yield forward calendar
Viking Cruises places add-on to 7% senior notes due 2029 at 99.5; terms
Roblox Corp. sets call for $1B offering of 8.5-year unsecured notes
M&A/LBO
Gray Television shops $1.125B of notes for Meredith deal
Equiniti, AST sets investor call for $350M offering of 8-year senior notes

Secondary high-yield market

High-yield bonds had a mixed start to the week, with caution creeping in following Friday's hectic session as higher rates fueled inflation concerns. Quality names were up to 1.5 points higher on the day, while a handful of issues declined by the same amount. The broader market remained flat to fractionally lower, with new and trailing issues dominating trading volumes.

The CDX HY 37 was steady, hovering in the 109.07 area after the equity bell, from 109.05 at the close on Friday.

Bonds backing Netflix Inc. were higher across the stack on an upgrade from S&P Global Ratings, which boosted the company to BBB from BB+, with a stable outlook on improving margins and positive cash flow expectations. Netflix bonds have traded at investment-grade prices since early 2020, to the extent that a consensus-beating bounce in third-quarter profit and subscriber numbers left the bonds cold. The company's actively traded 5.875% senior unsecured notes due 2028 today were up 1.25 points, at 122.25, for a yield of about 2.23%, or T+79.

WeWork bonds lagged Friday's equity surge after the company's stock market debut, moving incrementally higher today. The borrower's sole outstanding print of 7.875% notes due 2025 edged up a quarter of a point, to a fresh pandemic-era high of 102.5, versus trades in the mid-60s in January.

Of Friday's three new tranches, LABL Inc.'s 5.875% seven-year secured notes outperformed. Priced at a discount at 99.293 and downsized in favor of a concurrent term loan, the bonds closed on the highs at 101.25. The accompanying 8.25% eight-year unsecured notes (CCC+/Caa2) failed to gain traction above a 100.25 break price and were changing hands at 99.675 for the bulk of the session. Rounding out the slate was a par-priced print of 4.375% eight-year senior notes from Option Care Health Inc. that closed half a point off the highs, at 100.5.

Secondary high-yield stories/news
Friday's high-yield deals trade mixed in tentative secondary market

High-grade market

The week kicked off with subdued activity following last week's unexpectedly large $50 billion burst of issuance. Deals included an upsized $750 million placement of 2.875% 10-year notes for Synchrony Financial, priced at T+125, and a $650 million issue of five-year notes for SVB Financial Group, set at T+65. Today's issuance count excludes two preferred deals marketed by SVB Financial alongside the bond pricing, under LCD criteria that exclude SAS and hybrid deals from high-grade issuance totals.

The proceeds of today's trio of offerings for SVB Financial back general corporate purposes, after the company on Oct. 21 reported earnings well above analyst forecasts, including normalized earnings per share of $6.24, on revenue of more than $1.52 billion, compared with consensus calls for earnings of $5.59 per share, on revenue of $1.33 billion. Management noted on SVB's earnings call that it would look to the preferred and senior bond markets to bolster its Tier 1 capital position, following on a common equity raise in the previous quarter.

As for Synchrony, normalized earnings per share of $1.67 for the quarter beat an S&P Capital IQ consensus projection for a profit of $1.47 per share, even as revenue of $2.49 billion came in just shy of the $2.52 billion consensus view. The company reported a net charge-off rate of 2.18% for the third quarter, down 224 bps year over year.

In the glow of those results, Synchrony last week detailed a material ramp in its shareholder returns after a fallow last nine months of 2020, and slim buyback totals over the first half of this year. It reported about $1.3 billion of share repurchases during the third quarter, or its highest level of buybacks since the final quarter of 2019, according to S&P Global Market Intelligence. It entered the fourth quarter with $1.2 billion of remaining authorization under its current buyback plan.

On the secondary market today, bonds issued across AerCap Holdings NV's $21 billion M&A offering last Thursday continued tighter today, as even the mammoth scale of the offering fell well short of market demand for highly liquid issues. Participants in the offering reported an order book more than 3.5 times the final offering amount, allowing AerCap to lock in funding costs firm to comparable secondary issues. Against that tight pricing, the new $4 billion 3.30% long 10-year issue due Jan. 30, 2032, traded today at a weighted average at T+147, from T+165 at pricing. The $3.75 billion each of 2.45% five-year notes and 3% seven-year notes traded as much as 20-25 bps through issuance, and the new 3.85% bonds due 2041 traded today at a post-break low spread of T+155, or 20 bps through the initial reoffer spread, according to MarketAxess.

Distressed news stories/links
Washington Prime emerges from Chapter 11
Gateway Casinos lifted to Caa1 by Moody's following $1.25B term loan placement

CLO market stories/links
Barclays prices $461M reset of Sound Point CLO XXIV