TransDigm hit on short-seller report; Cengage, McGraw-Hill loans tumble; inflows continue

By Paul A. Harris

Portland, Ore., Jan. 20 – The Friday bank loan market focused on TransDigm Group Inc., which received cold treatment from short seller Citron Research, the same outfit that sent shudders through holders of Valeant Pharmaceuticals International Inc.'s securities in late 2015, a loan trader said.

The Citron report suggested that the aircraft components company's bottom line could be adversely impacted should President Trump follow through with promises to drive harder bargains with military aircraft producers, a pricing pinch that could be passed along to subcontractors such as TransDigm.

Citron suggested that TransDigm's business model is to aerospace what Valeant's is to pharmaceuticals.

TransDigm's term loan F paper, a tranche that still has call protection, traded to 99 bid on Friday afternoon, down from par ¾ bid before the report, a bank loan trader said.

TransDigm cancels deadline

TransDigm is also in the primary market where deal timing changes surfaced in the wake of the report.

On Friday afternoon arrangers announced that deadlines for the company's term loan G refinancing deal and a term loan E repricing were backed up until a to-be-determined date and time.

Previously, commitments had been due late Friday for the refinancing, and the deadline for the repricing had actually been moved ahead to Monday from Tuesday, prior to the late afternoon announcement canceling those deadlines.

Those earlier timings surfaced when the company announced that it cut the discount on its upsized $2,029,000,000 seven-year covenant-light first-lien term loan (Ba2/B) to 99.75.

The deal, which is upsized from $1,225,000,000, had been talked earlier at 99 to 99.50.

Spread talk remained unchanged at Libor plus 275 basis points with no Libor floor.

Credit Suisse, Citigroup, Morgan Stanley, UBS, Barclays, Goldman Sachs, HSBC and RBC are the leads on the deal.

Also on Friday TransDigm launched the repricing of its $1,514,000,000 term loan E (Ba2/B).

The repricing cuts the Libor spread to 275 bps from 300 bps, and removes the 0.75% Libor floor.

The issue price will be par.

Credit Suisse is also leading the repricing.

Zeroes and ones

Elsewhere in the secondary market the struggles of school textbook publishers to adapt to the digital age has taken a toll on the loan paper of Cengage Learning, Inc. and McGraw-Hill Education, a loan trader said.

Concerns over the textbook and test publishers followed in the wake of publisher Pearson plc's announcement, earlier in the week that it has cut its profit forecast and its dividend and projected that profits for this year could come as much as 19% below estimates, the source added.

Cengage loan paper is down 4 points since the Pearson announcement, the trader said, adding that the loan was 94¼ bid, 95 offered now, versus 98¼ bid three days ago.

McGraw-Hill loan paper is down 3 1/8 points, at 97¼ bid, 97¾ offered, whereas it was above par three days ago. However investors have been stepping into the name at those lower levels, the trader said.

Inflows continue

The technical force that has set in motion the current wave of repricings and is causing the market to bend persuasively in directions that favor borrowers – i.e. strong cash inflows – is continuing, the trader said.

Dedicated bank loan funds saw $205 million of inflows on Thursday, the most recent session for which data was available at press time.

Of that amount, $70 million flowed into bank loan ETFs.

However ETF inflows have tapered off somewhat over the past couple of weeks, the trader said.

The news on Thursday's daily flows follows the weekly report from Lipper US Fund Flows that the dedicated loan funds saw $548 million of inflows in the week to Wednesday's close; $57 million of that amount flowed into ETFS, the source said.

Avolon prices $5.5 billion

Avolon set pricing on a $500 million 3.5-year term loan B-1 and a $5 billion five-year term loan B-2, according to a market source.

The B-1 tranche priced at Libor plus 225 basis points with no Libor floor and an original issue discount of 99.75, on top of talk.

The B-2 tranche priced at Libor plus 275 bps with a 0.75% Libor floor and a discount of 99.5, also on top of talk.

Both term loans have 101 soft call protection for six months.

Also, the ticking fee on the debt was outlined as half the drawn spread starting on day 31, with funding into escrow if the acquisition has not closed by March 20, the source said.

Earlier in the week the deal was in the market as a single $5.5 billion five-year first-lien term loan B.

When the deal was structured as one five-year term loan, talk was Libor plus 325 bps with a 0.75% Libor floor, an original issue discount of 99 and 101 soft call protection for six months.

Financial covenants are maximum loan-to-value ratio, maximum average age of aircraft and collateral concentration ratios.

Morgan Stanley Senior Funding Inc., UBS Investment Bank, Barclays, J.P. Morgan Securities LLC, BNP Paribas Securities Corp., Credit Agricole CIB and SunTrust Robinson Humphrey Inc. are the joint lead arrangers and bookrunners on the deal.

Proceeds will be used to partially finance the acquisition of CIT Group Inc.’s commercial aerospace leasing business for $10 billion.

Other funds for the transaction will come from senior notes.

The transaction is expected to close this quarter, subject to customary conditions and regulatory approvals.

Avolon is an Ireland-based provider of aircraft leasing and lease management services.

Energy Transfer to reprice

Energy Transfer Equity plans to participate in a lender call at 2 p.m. ET on Monday to roll out a $2.2 billion seven-year first-lien term loan (Ba2/BB), according to a market source.

Credit Suisse is leading the deal, which is talked at Libor plus 250 to 275 basis points atop a 0% Libor floor at 99.5, with 101 soft call protection for six months.

Commitments are due on at 5 p.m. ET on Friday.

The Dallas-based midstream oil and gas company plans to use the proceeds to refinance existing term loans.

MEG Energy tightens talk

MEG Energy Corp. tightened spread talk on its $1,235,000,000 senior secured covenant-light term loan B due Dec. 31, 2023 (Ba3/BB+/BB) to Libor plus 350 basis points from 375 bps, according to a market source.

The proposed original issue discount was cut by 75 cents, to 99.75 from 99.

The 1% Libor floor was left in place, as was the 101 six month soft call protection.

Recommitments were due on Friday.

Barclays, BMO Capital Markets and RBC Capital Markets are the bookrunners on the deal.

Proceeds will be used to refinance an existing term loan B due 2020.

The company said in a recent news release that it also expects to extend the maturity on its revolving credit facility by two years to Nov. 5, 2021 and reduce the commitment amount to $1.4 billion.

And, the company expects to amend its credit agreement to allow for the issuance of second-lien debt, to permit the sale of its interest in the Access Pipeline without lender consent, provided 70% of the net proceeds are used to repay first-lien term debt, and to allow for the sale of an additional $550 million of certain encumbered assets, in addition to the $200 million already permitted, without lender consent, provided that 70% of the net proceeds from any such sale are used to repay first-lien term debt.

MEG is a Calgary, Alta.-based oil sands company.

PolyOne tight to talk

PolyOne Corp. finalized the repricing of its $644 million covenant-light senior secured term loan B due Nov. 12, 2022 (Ba1/BB+) at a 225 basis points spread to Libor with a 0.75% Libor floor at par, according to a market source.

The spread prints at the tight end of the Libor plus 225 to 250 bps spread talk. The reoffer price and Libor floor come on top of talk.

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

Citigroup Global Markets Inc. is the lead bank on the deal.

Cashless roll commitments are due at 5 p.m. ET on Jan. 18, and new money commitments are due at 5 p.m. ET on Jan. 19, the source added.

The term loan will be repriced from Libor plus 275 bps.

Closing is expected during the week of Jan. 23.

PolyOne is an Avon Lake, Ohio-based provider of specialized polymer materials, services and solutions.

Gray Television to extend

Gray Television, Inc. announced in a Friday press release that it is proposing to refinance and extend the maturity date of its revolving credit facility, as well as the term loan under its existing senior credit facility.

The proposal would extend the revolver to February 2022 from the current July 2020 maturity and increase the commitments to $100 million from $60 million.

The proposal would also extend the maturity of the existing $556.4 million term loan to February 2024 from June 2021.

Wells Fargo Bank N.A. is the administrative agent under the senior credit facility.

Atlanta-based Gray Television owns and/or operates 100 television stations across 54 television markets.

Blue Nile upsize

Blue Nile Inc. upsized its six-year first-lien term loan to $185 million from $180 million, according to a market source.

Books closed and the deal was set to allocate on Friday.

The loan features a Libor plus 650 basis points spread atop a 1% Libor floor and was priced at 97, on top of spread and price talk.

The term loan has hard call protection of 102 in year one and 101 in year two and a total net leverage covenant, the source said.

Amortization on the term loan is 5% per annum.

The deal features a total net leverage financial covenant.

Some of the terms in the agreement were tweaked in favor of the borrower.

The general incremental basket was reduced to $15 million from $25 million.

The multiplier for setting unlimited pari-passu amounts was reduced to 3.25 times the consolidated senior secured net leverage ratio from 3.75 times.

A 12-months most favored nation sunset was stricken from the agreement.

The multiplier for the available restricted payments starter basket of $10 million was reduced to 3.5 times consolidated total net leverage from 4.5 times.

Goldman Sachs Bank USA is the bookrunner on the deal.

Proceeds will be used to help fund the buyout of the company by an investor group comprised of funds managed by Bain Capital Private Equity and Bow Street LLC for $40.75 in cash per share. The transaction is valued at about $500 million.

Other funds for the transaction will come from equity.

Closing is expected this quarter, subject to stockholder and regulatory approvals and other customary conditions. There are no financing conditions associated with the buyout.

Blue Nile is a Seattle-based online jeweler.

SolarWinds call on Monday

SolarWinds, Inc. plans to participate in a conference call with lenders starting at noon ET on Monday.

The Austin, Texas-based developer of enterprise information technology infrastructure management software is planning to reprice $1,692,000,000 of first lien term loan debt.

Goldman Sachs in the left bookrunner. Credit Suisse, Macquarie and Nomura are the joint bookrunners.

ProQuest conference call

Proquest LLC set a conference call with lenders scheduled for 1 p.m. ET on Monday, according to a market source.

The Ann Arbor, Mich.-based global information-content and technology company is in the market to reprice its $713 million senior secured term loan B.

Goldman Sachs is the arranger.

Zekelman sets call

Zekelman Industries set a lender call to start at 11 a.m. ET on Monday for a term loan repricing, according to a market source.

Goldman Sachs is the arranger.

The company is a Chicago-based manufacturer of industrial steel pipe and tubular products.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.