Multi-Color deal to remain in market one more day as parties parry over unsecured bond covenants

By Paul A. Harris

Portland, Ore., June 17 – Multi-Color Corp. launched a revised $1.39 billion offering of high-yield notes on Monday morning, with the expectation that the deal would price later in the day, sources said.

However, heading into the Monday close the deal, which had originally been set to price late in the June 10 week, was expected to remain in the market one more day, according to a bond trader, who added that in spite of document changes announced at the time of the launch early Monday, substantial issues remain regarding the downsized tranche of senior unsecured notes.

Although the dealer limited circulation of the specific document changes announced earlier Monday, the points of contention are heard to be covenants bearing upon the restricted payments basket, and the specific language in the definition of “earnings before interest payments, tax deductions and amortizations” (EBITDA), as it applies to the Multi-Color deal, the trader said.

Structural and price revisions heard earlier on Monday saw $50 million of proceeds shifted to the secured notes from the unsecured notes and a widening of price talk on the unsecured notes.

The deal, as revised, features an upsized $700 million tranche of seven-year senior secured notes (B2/B). The tranche size increased from $650 million. Price talk remains unchanged in the 7% area; initial talk was in the low 7% area.

Talk on a downsized $690 million tranche of eight-year unsecured notes (Caa2/B-) widened to 10¼% to 10½% versus earlier talk of 10% to 10¼%; initial talk was in the low 9% area. The unsecured tranche is decreased from $740 million.

Books were scheduled to close at 12:30 p.m. ET on Monday.

However, subsequent to those announcements negotiations on bond covenants were heard to be ongoing, and the unsecured tranche, at least, appeared poised to remain in the market until Tuesday, the trader said.

The deal remained in the market over the past weekend as the unsecured tranche engendered pushback from investors objecting to the 10% to 10¼% price talk, as well as a covenant package that was perceived to afford too little protection for lenders, market sources say.

The secured tranche, on the other hand, has been oversubscribed since early in the roadshow, a trader said, adding that were it not for the upsizing of the secured tranche, talk might have wound as tight as the 6¾% area.

BofA Securities Inc. is the left bookrunner for the Rule 144A for life offering. Deutsche Bank Securities Inc., Barclays, BMO Securities, Credit Suisse Securities (USA) LLC, Houlihan Lokey and Morgan Stanley & Co. LLC are the joint bookrunners.

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

Proceeds will be used to help fund the buyout of the company by Platinum Equity LLC and fund the merger of Multi-Color with W/S Packaging Group, a portfolio company of Platinum Equity. The transaction is valued at $2.5 billion.

The initial issuing entity is LABL Escrow Issuer, LLC, which is to be merged with and into W/S Packaging Holdings, Inc.

Multi-Color is a Cincinnati-based label maker. W/S Packaging is a Green Bay, Wis.-based provider of labels and packaging solutions.

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