Diamond Resorts upsizes two-part notes offer to $1.1 billion

By Paul A. Harris

Portland, Ore., Aug. 16 – Diamond Resorts International, Inc. upsized its two-part offering of high-yield notes to $1.1 billion from $1 billion, a syndicate sources said on Tuesday.

The deal includes an upsized $500 million amount of seven-year senior secured notes (B1/B+). The secured notes tranche is increased from $400 million. Price talk remains unchanged at 7¾% area.

Talk on the $600 million tranche of eight-year senior unsecured notes (Caa1/CCC+) remains in the 10¾% area, also unchanged.

Books were scheduled to close at 5 p.m. ET on Tuesday, with allocations to follow on Wednesday. Earlier timing had books closing at noon ET on Tuesday.

The deal was upsized to $1.1 billion from $1 billion after having previously been upsized from $600 million, with the addition of the $400 million senior secured notes tranche last week.

Tuesday’s additional $100 million upsize represents a further decrease in the amount of the concurrent term loan to $700 million from $800 million. That decrease follows the previous downsize to $800 million from $1.2 billion which came when proceeds were shifted to the secured notes tranche from the loan last week.

Along with Thursday’s upsize of the bond deal came covenant changes, including changes to the secured leverage-, EBITDA definition- and unlimited ratio restricted payments covenants, the source said.

In addition debt baskets were tightened, language dealing with transactions with affiliates was tightened, and the asset sale threshold was reduced.

RBC Capital Markets is the left bookrunner. Barclays and Jefferies LLC are the joint bookrunners. Natixis and Apollo are the co-managers.

The notes in both tranches come with three years of call protection.

Proceeds will be used to fund the leveraged buyout of the company by Apollo Global Management LLC and to refinance certain existing Diamond Resorts International debt.

The unsecured notes offering ran an Aug. 1 to Aug. 4 roadshow and was subsequently delayed when the company elected to restate earnings.

Prior to the merger, the issuing entity will be Dakota Merger Sub, Inc. Following the merger, the issuer will be Diamond Resorts International, which is a Las Vegas-based hospitality and vacation ownership company.

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