LevFin Insight: Digicel, Frontier TLBs gain as issuers tap 1L bond market; ADT next on deck
Earlier today on LFI: As issuers continue to flock to the secured bond market for attractive terms—and in certain instances to skirt MFN protection—the issuance of pari passu bonds continues to impact trading of the pari passu loans.
As reported, TransDigm’s complex of loans was active and higher as the company in late Januarytapped the first-lien bond market to fund its purchase of Esterline Technologies. In recent days, institutional loans backing Digicel and Frontier Communications have advanced with both issuers inking secured bond deals to address upcoming TLA maturities.
In Caa1/NR/CCC- Digicel’s case, the secured bond deal ultimately priced with a yield inside of where the loan had been quoted prior to the news of the bond execution. Digicel’s TLB due May 2024 (L+325) has run up to a 90.25–91.25 market, versus a quote at 87.5–89.5 on March 4, a day prior to the launch of the bond deal. At the 87.5 bid price, the loan offered a yield to maturity of about 9.24%, though that has tightened to 8.48% at the current bid price.
The upsized $600 million of five-year notes launched with talk in the 9% area and priced an eighth inside of guidance, at 8.75% at par. The paper is quoted at 100.5–101 today, yielding about 8.56% at the bid price.
B3/CCC+/B Frontier’s TLB due June 2024 (L+375) has trended higher week, gaining about two points to a 97.25–98 market, narrowing the yield on the loan to about 7.19% at the bid price, from 7.73%. As reported, the wireline concern drove by the high-yield market yesterday for a $1.65 billion eight-year issue of first-lien notes to repay outstandings under a TLA and revolver borrowings. The deal cleared at the middle of talk and is trading today around 101.125, trade data show, yielding about 7.76%.
The 50 bps MFN protection on Digicel’s loan lapsed in November per its 18-month MFN sunset provision. Lenders to Frontier Communications, however, in May 2017 negotiated the removal of a 12-month MFN sunset provision when the deal was being syndicated, citing concerns about upcoming debt maturities. Notably, the language applies to first-lien notes maturing prior to June 2025 at the swapped equivalent rate. The new notes will mature in 2027.
B1/B+ ADT is the next issuer lined up to tap the first-lien bond market for a refinancing effort, eyeing $1.5 billion of first-lien notes to repay $500 million of term debt in connection with an amendment effort and help repay its price 9.25% second-lien notes due 2023.
The issuer’s term loan due 2022 (L+275) trades much closer to par than both Digicel and Frontier, marked at 99.75–100 after gaining roughly a half-point yesterday after the company detailed the proposed amendment terms, which entails a 50 bps fee in addition to the $500 million, or approximately 12.7% paydown. Lenders to the 2015-vintage term loan benefit from 50 bps of MFN protection. — Kerry Kantin
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