International Financing Review September 8 2018 77LOANS LEVERAGED LOANS
99.5. The term loan will have six months of
soft call protection at 101.
The loan will amortise at 2.5% annually.
UCT paid US$342m in cash for Quantum
Global, which provides cleaning and
treatment services to the semiconductor
industry. The combined company is
expected to generate US$167m of annual
adjusted Ebitda.
BROOKFIELD INFRASTRUCTURE held a bank
meeting on Friday to launch a US$1bn term
loan.
Proceeds will be used to support the
acquisition of Enbridge’s Canadian natural
gas gathering and processing business.
Citigroup is leading the financing.
Brookfield is paying Enbridge C$4.3bn
(US$3.3bn) to buy the business, which
includes 19 natural gas processing plants
and liquids handling facilities and is spread
across Montney, Peace River Arch, Horn
River and Liard basins in British Columbia
and Alberta.
Brookfield Infrastructure, part of
Brookfield Asset Management, is an
infrastructure investor, owning assets in the
utilities, transport, energy and
communications infrastructure sectors.
Pool equipment manufacturer HAYWARD
INDUSTRIES increased an incremental term loan
to US$150m from US$125m to back the
acquisition of Paramount Pool and Spa Systems.
Pricing on the loan finalised at 350bp over
Libor with a 0% floor, in line with guidance.
The company tightened the discount to
99.75 from 99.5 at launch.
The loan, due in August 2024, has soft call
protection of 101 for six months.
The financing will also be used to pay
down a portion of a second-lien term loan.
Bank of America Merrill Lynch, Morgan Stanley,
Jefferies and Nomura are arranging the debt.
The expected corporate and first-lien
ratings are B3/B.HILLMAN UP FOR BIG TIMEFastener company HILLMAN GROUP circulated
guidance on a US$365m incremental Term
Loan B that will finance the acquisition of
personal protection and work gear products
maker Big Time Products.
Jefferies leads the transaction.
The new debt will be priced at the same
level as the existing term loan at 350bp over
Libor, and will carry the same maturity date
of May 2025.
The discount is expected to be 99. The
Libor floor will be 0%.
The deal includes six months of soft call
protection at 101.
Hillman in May extended the maturity of
its then US$530m term loan, which
included a US$165m add-on delayed draw
term loan.The existing term loan dates back to June
2014 when it was lined up at a size of
US$550m to back its buyout by private
equity sponsor CCMP Capital Advisors. The
loan at that time priced at 350bp over Libor
with a 25bp stepdown.
Childhood education provider KINDERCARE
is looking to add on US$205m to its
US$972m first-lien term loan to pay for its
acquisition of Rainbow Child Care Center.
At the same time, the company is looking
to extend the maturity of the loan to
February 2025 from August 2022.
Credit Suisse is leading.
The company expects to keep pricing on
the loan at 375bp over Libor with a 1% floor.
The extension will be issued at par while the
new money will be issued at a discount of 99.5.The transaction will reset soft call
protection of 101 for six months on the
entire tranche.
The issuer is rated B3/B-, while the debt is
rated B2/B-.
Waste collection company VALET LIVING is
seeking a US$275m facility to refinance its
existing debt.
The deal comprises a five-year
US$30m revolver and a seven-year
US$245m term loan. Antares Capital leads
with Citizens Bank.
The term loan is covenant-lite.
Valet Living lined up a US$200m
term loan and a US$30m revolver in
September 2015 when the company was
acquired by Ares Management and Harvest
Partners.Container Store cuts borrowing
costs in rare retail comeback
n US Default rate for US retail loans stands at 10%, according to Fitch
Formerly distressed US storage products
retailer THE CONTAINER STORE has returned to the
leveraged loan market to reprice and extend a
term loan, in a rare turnaround story as the retail
sector remains under pressure.
The ecommerce retailer is asking lenders to
drop pricing on its US$292.5m term loan to
500bp over Libor with a 1% floor and extend the
maturity by two years to 2023. The loan now
pays 700bn over Libor and is trading above par
in the secondary market.
Only two and a half years ago, Container
Store’s term loan was trading at distressed levels
at 63 cents on the dollar in February 2016.
As traditional retailers battle online competition
and buyers’ preferences shift towards ecommerce,
The Container Store managed to recover its
earnings largely by cost savings, said Raya
Sokolyanska, a senior analyst at Moody’s.
The company’s performance in the next 12
to 24 months should benefit from an increased
focus on custom design and initiatives to grow
proprietary products, optimise pricing and
reallocate marketing spend to digital channels,
Sokolyanska said.
Moody’s said the proposed transaction was
credit positive because it would improve interest
coverage and liquidity.RECOVERY ROAD
The Container Store turnaround comes on the heels
of other recent recovery stories of smaller companies
in the retail sector, according to Eric Rosenthal,
senior director of leveraged finance at Fitch.
Luxury apparel and accessories brand VINCE
in August successfully refinanced existingterm debt and lined up a US$27.5m term loan.
Outdoor gear and apparel seller EDDIE BAUER is
now exploring a merger with another retailer,
PACIFIC SUNWEAR OF CALIFORNIA. The company
emerged from bankruptcy in 2009 when it
was acquired by Golden Gate, but had been
struggling to keep up with fashion changes.
“There has been some improvement,” said
Rosenthal. “Vince and Eddie Bauer, both
small retailers, used to be on our ‘Top Loans of
Concern’ list but we moved them off with their
recent news. The Container Store is another
example of a company trending in the right
direction.”
This year has seen only two retail loan defaults- Nine West and Charlotte Russe - totalling
US$851m, well below the US$3.8bn at this time
last year, according to Fitch.
The ratings agency expects retail default
volume to pick up again, as FULLBEAUTY BRANDS
and DAVID’S BRIDAL look likely to stumble in the
near term. Fullbeauty Brands’ US$820m Term
Loan B is quoted at only 30 cents on the dollar
in the secondary market, while David’s Bridal’s
US$520m Term Loan B is quoted at 99.5-90.
The default rate for US retail loans now stands
at 10%, according to Fitch, and the risks for
bricks-and-mortar chains are making investors
think twice about lending.
“We are extremely cautious on the sector,”
a portfolio manager said. “We are very much
paying attention to the secular changes that are
occurring in the retail space, whether it be from
the Amazon-type online competition or whether
it’s just from consumer behaviour changes.”
Yun Li
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