LFI Daily Insights 6/27/19: Arrangers price nine loans amid quarter-end rush; Allied Universal doubles secured bonds to $1B to reduce TL
Allied Universal’s coordinated loan and bond refinancing stood out as underwriters worked hard to clear the decks of a large slate of transactions ahead of the holiday and quarter-end. While successive upsizings during today’s session doubled the size of the first-lien notes to $1 billion amid the continuing hot market for secured paper, fatigue for lower-rated deals remained evident in loans and bonds alike.
The upsize reduced the funded component of B3/B-/B Allied Universal’s term loan strip to $2.02 billion as the loan priced at the wide end of guidance, L+425 at 99, to yield 6.94% to maturity. By contrast, the seven-year secured bonds priced at 6.625%, the tight end of talk in the 6.75% area. The Caa2/CCC/CCC+ eight-year $1.05 billion unsecured tranche cleared in line with guidance, albeit at a discount, with a 9.75% coupon and 98.641 offer price generating a 10% yield. Furthermore, loan and bond documentation was revised to include stronger investor protections.
Allied was one of nine loan deals allocating today, for $5.06 billion of gross volume but a mere $369 million on a net basis given all the refinancing activity; indeed Allied is reducing its prior loan exposure by roughly $1 billion. Other loan deals allocating included CHG Healthcare, Corel, Curium Pharma, ERM, Hexion, St. Joseph Energy Center, Upland Software and Vast Broadband.
Among those loans remaining in market, Circa Resort & Casino today sliced $100 million from a planned $550 million term loan backing construction of a gaming property in downtown Las Vegas and will plug the hole with equity. While the margin and OID are unchanged at L+800 at 98, the issuer is the fourth in recent weeks to bolster its LIBOR floor amid rate cut fears, moving to 1.5% from 0%. Today’s move also bolstered ratings; S&P earlier branded the issuer and loan with CCC+ ratings. Now ratings are B3/B-.
Of course, not every B3 credit is created equal. B3/B Anchor Packaging’s $390 million term loan strip (L+400-425, 99-99.5 OID) is oversubscribed well ahead of a July 11 deadline, as accounts prize the defense packaging sector.
Over in high-yield, Sirius Computer Solutions further steepened pricing for its $300 million issue of Caa1/CCC+ rated eight-year LBO bonds as a robust new issue market did not always extend to lower-rated credits. The deal launched to market at 11% today, north of 10.5%–10.75% price talk and whispers in the 10% context that circulated last week. Proceeds will support Clayton Dubilier & Rice’s acquisition of the business from Kelso & Co.
Two of yesterday’s new issues attracted a strong reception in the secondary market.Hannon Armstrong’s 5.25% notes due 2024 were quoted bracketing 102 today with late-afternoon trades in the ballpark of 101.875, north of yesterday’s par issue price. Fellow debut issuer Fairstone Financial’s 7.875% senior notes due 2024 rose to a 102 context this afternoon after trading on either side of 101.5 on the break yesterday afternoon, well above that day’s issue price of 99.484.
As the second quarter nears its close, there is no word on timing for the $225 million of B3/B- five-year senior notes proposed last week by Alpha Auto Group via issuer entity AAG FH LP, which would support a recapitalization. The automotive retailer seeks capital for a multi-pronged refinancing and recap as management takes over the business.
The OneMain/Springleaf add-on 6.125% notes due 2024 lost some of their post-break gains today, trading mostly around 107.25 this afternoon versus a 107 issue price, after trading around 107.5 on the break yesterday.
In terms of situational movers, the Frontier Communications TLB due 2024 (L+375) slid three-quarters of a point to bracket 98 on news late yesterday that Moody’s downgraded the issuer by one notch, to Caa1, with a negative outlook. “The downgrade of the CFR reflects the company's difficult and protracted path to improving weak fundamentals in advance of sizable debt maturities beginning in 2022,” Moody’s wrote in the June 26 report, adding that there is a “more pronounced” potential for a distressed exchange over the next year or so. Some of Frontier’s bond issues remained in lower territory after the rating action, though others held steady. The 9% notes due 2031 changed hands at 57 today, one point lower than yesterday morning’s level, while the 8.75% notes due 2022 last changed hands at 63.75, versus trades as high as 65.5 the day before the downgrade.
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