Fairbanks Morse Defense first-lien term loan frees to trade above OID

By Sara Rosenberg

New York, Sept. 2 – Fairbanks Morse Defense (Arcline FM Holding LLC) saw its incremental first-lien term loan make its way into the secondary market on Thursday morning, with levels quoted above its original issue discount.

The company’s fungible $215 million incremental first-lien term loan (B2/B) due June 23, 2028 broke for trading at par bid, par ˝ offered, according to a trader.

Pricing on the incremental first-lien term loan is Libor plus 475 basis points with a 0.75% Libor floor and it was sold at an original issue discount of 99.5.

The company is also getting a fungible $47.5 million privately placed incremental second-lien term loan (Caa2/CCC+) due June 23, 2029 priced at Libor plus 825 bps with a 0.75% Libor floor.

During syndication, the incremental first-lien term loan was upsized from $202.5 million and the discount firmed at the tight end of the 99 to 99.5 talk, and the incremental second-lien term loan was upsized from $42.5 million.

Fairbanks lead banks

Jefferies LLC, BMO Capital Markets and UBS Investment Bank are leading Fairbanks Morse Defense’s term loans.

Proceeds will be used with additional cash equity to fund an acquisition. The equity contribution was reduced as a result of the recent upsizing of the term loans.

Along with this transaction, the company is amending its existing credit agreement to modify the leverage-based incurrence tests for debt and liens to be set off 5.25x first-lien net leverage/6.75x senior secured net leverage.

Lenders were offered a 12.5 bps consent fee for the amendment.

Fairbanks Morse Defense is a Beloit, Wis.-based provider of propulsion systems, ancillary power, motors and controllers for the U.S. Navy and U.S. Coast Guard, and provider of associated parts and maintenance services.

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