Summit Behavioral revises first- and second-lien sizes, pricing

By Sara Rosenberg

New York, Nov. 3 – Summit Behavioral Healthcare LLC upsized its seven-year first-lien term loan to $459 million from $450 million and its eight-year second-lien term loan to $185 million from $180 million, according to a market source.

The company eliminated plans for a $70 million first-lien 24-month availability delayed-draw term loan and a $25 million second-lien 24-month availability delayed-draw term loan.

Also, pricing on the first-lien term loan was increased to Libor plus 475 basis points from talk in the range of Libor plus 400 bps to 425 bps, and the one leverage-based step-down and one initial public offering-based step-down were removed, the source said.

Pricing on the second-lien term loan was lifted to Libor plus 775 bps from talk in the range of Libor plus 700 bps to 725 bps.

In addition, the original issue discount on the first-lien term loan was changed to 97 from 99.5, and the discount on the second-lien term loan was revised to 94 from 99.

The term loans still have a 0.75% Libor floor.

The first-lien term loan has 101 soft call protection for six months, and the second-lien term loan has hard call protection of 102 in year one and 101 in year two.

Regarding documentation, the incremental was changed to the greater of $67.5 million and 75% of pro forma consolidated EBITDA from the greater of $90 million and 100% of consolidated EBITDA, reallocated unused general debt capacity was removed and the inside maturity basket was removed.

MFN protection was modified to 50 bps with no sunset from 100 bps with a six-month sunset, the MFN maturity carve-out and the MFN dollar basket were eliminated, carve-outs now apply to all pari passu term loans instead of being limited to syndicated floating-rate term loans, denominated in U.S. dollars incurred under the incurrence test and not incurred to finance a permitted acquisition or permitted investment, and applicability was changed to apply to incremental equivalent debt, ratio debt and incurred acquisition debt that are secured on a pari passu basis from being limited to incremental facilities.

Mandatory prepayments saw the removal of asset-sale sweep step-downs, the asset sale reinvestment period was changed to 15 months with a six-month extension from 18 months with a six-month extension, and the excess cash flow sweep was revised to 50% with step-downs to 25% and 0% at first-lien net leverage of 4.25x and 3.75x from 50% with step-downs to 25% and 0% at first-lien net leverage of 4.5x and 4x.

Under restricted payments, the cumulative credit was changed to a started of greater of than $27 million/30% of EBITDA from $45 million/50% of EBITDA and the builder was revised to subject to pro forma compliance with an interest coverage ratio of 2x from retained excess cash flow, the unlimited basket was modified to 5.5 total net leverage from 6.25x total net leverage, and the ability to reallocate unused capacity under the general investment basket and the ability to reallocate unused capacity under the general restricted debt payment basket were removed.

Restricted debt payments saw the unlimited basket change to 5.5x total net leverage from 6.25x total net leverage and the removal of the ability to reallocate unused capacity under the general investment basket.

The unlimited investment basket was changed to 6x total net leverage from 7x total net leverage, and investment in and permitted acquisitions of non-guarantors was revised to a cap of greater than $45 million/50% of EBITDA from no cap.

Under indebtedness, the use of restricted payment capacity to incur debt/lien and the ability to reallocate unused capacity under the general restricted payment basket were removed, cap of the greater of $45 million/50% of EBITDA was added to ratio debt and acquisition debt incurred by non-loan parties, and equity contribution debt was revised to 100% from 200%.

Also, second-lien cushion was modified to 20% on dollar baskets/thresholds from 25% on dollar baskets/thresholds and the cushion on ratios was removed, EBITDA definition was revised to include a look-forward of 18 months, unrestricted subsidiaries now includes a limitation on transfers of ownership or exclusive licensing of intellectual property material to the borrower and its restricted subsidiaries, and release of non-wholly owned guarantors now includes limitations on the ability to automatically release the guarantees of a guarantor upon such guarantor becoming a non-wholly owned subsidiary (other than in connection with a bona fide sale or other disposition of equity interests in such guarantor to a bona fide third party non-affiliate).

The company’s now $719 million of credit facilities, down from $800 million, also include a $75 million five-year revolver.

Jefferies LLC, BofA Securities Inc. and Credit Suisse Securities (USA) LLC are the bookrunners on the deal.

Commitments are due at 5 p.m. ET on Thursday, the source added.

Proceeds will be used to help fund the buyout of the company by Patient Square Capital from FFL Partners and Lee Equity Partners.

Summit Behavioral is a Franklin, Tenn.-based behavioral health services provider with a focus on the substance use disorder and acute psychiatric treatment end markets.

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