Kindred loan trades higher; new Fortescue deal pressures existing paper; Indivior sweetens talk

By Paul A. Harris

Portland, Ore., March 6 – Friday's bank loan market was quiet, and all aboard seemed to be buyers, a trader said.

“We were hearing that CLOs had been taking prints above par on Thursday – taking profits or making way for a calendar,” the trader added.

Among new issues, Kindred Healthcare, Inc.'s $200 million term loan, which priced on Thursday at 99.5, was seen trading at par bid, par ½ offered on Friday.

Fortescue Metals Group's $7.39 billion bank loan debt, which launched at a Friday bank meeting, was putting pressure on the existing term loan paper, the trader added.

And, Indivior plc widened the spreads and hiked the discount on $635 million and €100 million of five-year term loans B on Friday, according to a market source.

Kindred prices upsized deal

Kindred Healthcare priced an upsized incremental $200 million term loan at 99.5.

The deal was trading at par bid, par ½ offered on Friday afternoon, according to a trader.

It was upsized from $150 million, and came rich to price talk of 98.75 to 99.

The Libor plus 325 basis points loan has a 1% Libor floor.

The new loan paper will be fungible with the outstanding $995 million of term loans under Kindred’s existing senior secured term loan facility, according to the release.

Proceeds will be used to pay down the company’s $900 million senior secured asset-based revolving credit facility.

The financing is expected to close on March 10.

J.P. Morgan Securities LLC was lead arranger and bookrunner. JPMorgan Chase Bank, NA was the administrative agent.

Fortescue pressured

Australia's Fortescue held a bank meeting Friday morning to roll out about $7.39 billion of bank loan debt, according to a market source.

The deal, which is being led by Credit Suisse Securities (USA) LLC, is comprised of a new $2.5 billion seven-year senior secured term loan and a $4,888,000,000 tack-on that will extend its existing term loan due June 30, 2019 to a seven-year maturity.

In the midst of this activity, Fortescue's existing loans were trading off, according to a trader who said that the negative price moves may reflect apprehensions on the part of investors that the new deal won't get done.

Fortescue's existing loan was 93 bid, 93¾ offered on Friday, the trader said, adding that elsewhere it was seen trading in the 92s.

The existing loan was as high as 95½ bid on Thursday, the source added.

Prior to the announcement of the new deal, the existing loan was in the high 80s “and it rose with the tide,” the source added.

Some accounts that are in the existing paper and are being invited to roll into the new seven-year deal may have maturity constraints, despite the fact that the new paper is not expected to be out there too long in any case, the trader said.

Both tranches are talked with 425 to 450 basis points Libor spreads with 1% Libor floors.

The new term loan is talked at 99. Investors will roll into the extension at par, and receive a 25 bps fee.

“Essentially it's 5¼% at 99,” said the trader. “Some people are wondering if that price captures the risk and wondering whether it's realistic to bring another $2.5 billion.”

Commitments for the tack-on are due on March 13. Commitments for the new loan are due on March 18.

Proceeds will be used to extend the term loan maturity and refinance senior unsecured notes.

Indivior sweetens talk

Indivior’s term loans saw spreads on both tranches increase to Libor/Euribor plus 600 basis points from 575 bps.

The discount talk deepened to 94 from earlier talk of 97 to 98.

The maturity was decreased to 4.75 years from five years.

The 101 soft call protection increased to one year from six months.

In addition there were covenant changes.

Commitments are due on March 10.

The company’s senior secured credit facility (B3/B) also includes a $50 million five-year revolver that is talked at Libor plus 525 bps with no Libor floor and an original issue discount of 99½, the source continued.

Morgan Stanley Senior Funding Inc. and Deutsche Bank Securities Inc. are the lead banks on the deal.

Proceeds will be used to fund a dividend and for general corporate purposes.

Indivior is a Richmond, Va.-based specialty pharmaceutical company focused on addiction and related mental health disorders.

Community Health Systems

Community Health Systems Inc. priced its upsized $1.7 billion Libor plus 325 basis points term loan F due December 2018 (Ba2/BB) at 99.25, whereupon it traded to a par bid, par ¼ offered market, according to a market source.

The deal was upsized from $1.66 billion.

The reoffer price came on top of price talk that trimmed 25 bps off of earlier talk that was set at 99.

The deal, which comes without a Libor floor, features 101 soft call protection for six months.

Credit Suisse Securities (USA) LLC was the lead bank on the deal.

Proceeds will be used to refinance/extend the existing $1.66 billion term loan E that is due in January 2017 and is priced at Libor plus 325 bps with no Libor floor.

Community Health is a Nashville, Tenn.-based hospital company.

C&J Energy revises structure

C&J Energy Services, Inc. announced in a Friday press release that it has revised the debt structure to finance its proposed combination with the completion and production services business of Nabors Industries Ltd.

Under the revised arrangement, C&J has elected to finance the transaction with term loans and borrowings under its new revolving credit facility, which allows the company to maintain future liquidity at the same interest rates that were expected to apply to the revolving credit facility when the transaction was announced in 2014.

Specifically, the revised debt structure is expected to include the same $600 million revolver (with an estimated $92 million drawn at the closing of the proposed transaction) that was previously announced, along with an increased term loan B comprised of a $510 million five-year term loan B-1 and a $550 million seven-year term loan B-2, thereby eliminating the need for a high-yield offering.

The company expects that the all-in yield for the new term loans at the closing date should not exceed 8¼% yield to maturity and the interest rate margins under the revolving credit facility will remain the same as originally announced.

The covenant package and aggregate interest expense under the revised debt structure remains substantially consistent with the original term loan covenant package and aggregate interest expense.

The transaction is expected to close by the end of March 2015, subject to approval by C&J stockholders and other customary closing conditions.

"We are pleased with this all-loan financing structure, which reflects a very favorable revision to the committed financing structure in light of current market conditions,” said Josh Comstock, founder, chairman and chief executive officer of C&J.

“This enhanced debt structure is expected to provide our combined company with significant financial flexibility as we manage through a challenging time for our industry.

"The covenant package will allow us to use our cash flow to optimize our liquidity position and aggressively manage our debt, while maintaining a strong balance sheet. Additionally, we believe this will strongly position us to take advantage of future market improvements and strategic industry opportunities as we continue to focus on executing our long-term growth strategy and maximizing value for all of our shareholders," he added.

As reported, the $510 million five-year senior secured term loan B-1 has a drawn margin of Libor plus 550 bps, and the $550 million term loan B-2 has drawn margin of Libor plus 625 bps.

Both tranches have 1% Libor floors and 1% annual amortizations.

Commitments are due on March 13.

Citigroup is the lead left arranger. BofA Merrill Lynch is the administrative agent, as well as an arranger. Wells Fargo Securities LLC and JPMorgan are arrangers.

Capital One, Comerica, Amegy, Regions, BNS and DNB are co-managers.

The B-1 tranche is secured by all of the capital stock and inter-company notes of each credit party (limited to 100% of the non-voting capital stock and 65% of the voting capital stock of certain excluded subsidiaries).

The B-2 tranche is secured by all of the tangible and intangible properties and assets of each credit party.

The B-1 tranche is callable at 104 in year one, and par thereafter. The B-2 tranche is callable at 105 and 103 in years one and two, respectively, and par thereafter.

C&J Energy is a Houston-based provider of hydraulic fracturing, coiled tubing, cased-hole wireline, pumpdown and other oilfield services.

Lattice prices, allocates

Lattice Semiconductor Corp. priced its $350 million Libor plus 425 basis points six-year senior secured covenant-light term loan at 99, a market source said on Friday.

The deal has allocated.

The loan came on top of spread and discount talk.

It comes with 101 soft call protection for six months, the source said.

Jefferies Finance LLC and HSBC Securities USA Inc. are the joint lead arrangers and bookrunners on the deal.

Proceeds will be used to help fund the acquisition of Silicon Image Inc. in an all-cash tender offer of $7.30 per share, representing an equity value of about $600 million.

Other funds for the transaction will come from about $250 million of cash on the balance sheet.

Closing is expected by the end of March, subject to customary conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and the tender of a majority of Silicon Image’s common stock.

Pro forma net leverage will be about 1.4 times.

Lattice Semiconductor is a Portland, Ore.-based provider of programmable connectivity services. Silicon Image is a Sunnyvale, Calif.-based provider of wired and wireless connectivity services.

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