ServiceMaster to launch $1.8 billion; Rackspace tightens pricing; loan paper drought continues

By Paul A. Harris

Portland, Ore., Oct. 25 – In an overall quiet leveraged loan market, bank loan paper remained well bid on Tuesday, a trader said.

With 12 straight weeks of retail inflows to dedicated bank loan funds the loan market is starved for new paper, the trader remarked.

“Instead, all we’re getting is these retread deals,” the source added, referring to the recent onslaught of repricing deals and extensions which do not afford investors to put cash to work in genuinely new bank deals.

There was news in the primary market.

ServiceMaster Global Holdings, Inc. plans to launch a $1.8 billion credit facility at a bank meeting on Wednesday.

And Rackspace Hosting Inc. tightened talk on its $2 billion seven-year covenant-light term loan.

ServiceMaster refinancing

ServiceMaster plans to launch a $1.8 billion credit facility at a bank meeting on Wednesday, according to a loan trader.

The refinancing deal features a $1.5 billion term loan due 2023, priced at Libor plus 250 basis points at 99.75, with no Libor floor. The tranche features six months of call protection at 101.

The pro rata tranche is a $300 million revolver due in 2019.

JP Morgan Securities LLC is the lead.

Proceeds from the new credit facility will be used to refinance an approximately $2.4 billion existing term loan B and $300 million revolver.

The refinancing effort will also include $1 billion of unsecured debt set to mature in 2024.

ServiceMaster is a Memphis-based provider of essential residential and commercial services.

Rackspace tightens

Rackspace tightened the spread on its $2 billion seven-year covenant-light term loan B to Libor plus 400 bps from 425 bps and trimmed the discount to half a point.

The loan, now set to price at 99.5 instead of 99, comes with a 1% Libor floor.

Commitments were due on Tuesday.

The term loan B has 101 soft call protection for six months and amortization of 1% per annum, the source said.

Mandatory prepayments are 50% of excess cash flow, stepping down to 25% and 0% at 0.75 times and 1.25 times, respectively, inside closing date net first-lien leverage; 100% of asset sale proceeds in excess of the threshold amount and subject to reinvestment rights and leverage-based step-down to 50% and 0%; and 100% of debt issuance proceeds other than permitted debt.

The incremental allowance is not to exceed the sum of $700 million plus additional debt so long as the company is in pro forma compliance with, if pari debt, closing date net first-lien leverage, and, if junior debt, 0.5 times greater than closing date net secured leverage, subject to 50 bps MFN for pari term loan debt with a 12-month sunset.

The company’s $2,225,000,000 senior secured credit facility (Ba2/BB+/BB+) also includes a $225 million five-year revolver.

Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Barclays, RBC Capital Markets and Credit Suisse Securities (USA) LLC are the leads on the debt,

Proceeds will be used to help fund the buyout of the company by Apollo Global Management LLC for $32.00 per share in cash. The transaction has a total value of $4.4 billion.

Hoffmaster sets talk

Hoffmaster Group Inc. set price talk on $515 million of term loan debt in two tranches on Tuesday, according to a market source.

A $390 million seven-year first-lien covenant-light term loan (B2/B) is talked with a 425 bps to 450 bps spread to Libor atop a 1% Libor floor at 99.

A $125 million eight-year second-lien covenant-light term loan (Caa2/CCC+) is talked with an 850 bps spread to Libor atop a 1% Libor floor at 98 to 98.5.

Commitments are due Nov. 4.

RBC Capital Markets LLC, Jefferies Finance LLC and Macquarie Capital (USA) Inc. are the leads on the debt.

The $565 million credit facility also features a $50 million revolver.

Proceeds will be used to help fund the buyout of the company by Wellspring Capital Management LLC from Metalmark Capital.

Hoffmaster is an Oshkosh, Wis.-based producer of specialty disposable tabletop products.

Cooper-Standard price talk

Cooper-Standard Holdings Inc. set price talk for its $340 million seven-year term loan B (Ba1/BB+) at bank meeting on Tuesday, according to a market source.

The loan is talked with a 275 bps spread to Libor atop a 0.75% Libor floor. The reoffer price is 99.75. Existing lender receive a 25-bps extension fee.

The loan comes with six months of soft call protection at 101.

Commitments are due at 5 p.m. ET on Thursday for existing lenders rolling into the new loan and at noon ET on Friday for new lenders.

Deutsche Bank Securities Inc. is the left bookrunner. Bank of America Merrill Lynch, J.P. Morgan Securities LLC, Goldman Sachs & Co. and Barclays are the joint bookrunners.

The Novi, Mich.-based supplier of systems and components for the automotive industry plans to use the proceeds, together with cash on hand, to repay its non-extended term loans outstanding under the amended and restated term loan facility.

Other financing includes a $210 million ABL revolver and $400 million of senior notes.

ABB Optical loan talk

ABB Optical Group/Con-Cise Optical Group LLC talked a $48 million senior secured incremental first-lien term loan B (B1/B) at a 500 bps spread to Libor atop a 1% Libor floor at 99.50, a market source said.

Commitments are due on Friday.

The deal, which has no financial covenants, comes with 101 soft call protection for six months.

Morgan Stanley Senior Funding, Inc. is the joint lead arranger and joint bookrunner.

The Coral Springs, Fla. optical distributor plans to use the proceeds to repay borrowings under its revolver, which was used to finance an acquisition.

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