Sonrava LME launches with rare fully pro rata, par exchange structure

Max Frumes

4 June 2024•2 min read

Sonrava Health, advised by Ropes & Gray and Greenhill, has launched a liability management deal to raise capital and exchange its existing debt into a senior credit facility via a drop down structure, according to sources.

The twist on this deal is that participants are providing new capital that will be raised via a drop down of assets with sufficient value to overcollateralize both the new priority debt and a separate priority exchange loan offered at par to the entirety of the $490m term loan due August 2028, currently SOFR+450 for the main tranche.

An ad hoc group of lenders advised by Paul Hastings and Lazard led negotiations for lenders and will receive a backstop fee. But other than that, all of the incentives and premiums including for early consents are being offered pro rata to every lender.

Early consents are due this Thursday and participation is expected to be at or near 100%, sources said.

Those exchanging into the priority exchange term loan will get equal step-ups in coupon across the tranches, sources said. The existing credit facility also has a revolver with an inside maturity, and all maturities will stay the same for the exchanging lenders, according to sources. The new loan will include what the market has come to expect of a post-LME covenant package, which is tighter than the existing documents, these sources said.

The exchange will be effectuated with a Dutch auction process, according to sources, though the auction feature is largely mechanical in nature as everyone is expected to offer to exchange at par (versus bidding to exchange at less than that).

As 9fin reported, the New Mountain Capital-backed Sonrava, formerly Western Dental, had been seeking to raise capital.

California-based Sonrava provides dental and oral health care across the country. The company has been grappling with cash flow pressures amid deteriorating performance and higher-than-expected integration costs, while an inflationary environment has dented its earnings.

A representative for New Mountain declined to comment. Representatives for Sonrava did not respond to a request for comment.

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