US LevFin Wrap — Banks roll out Indicor and NielsenIQ, Confluent goes clubbing, Subway debt recipes

William Hoffman

3 February 2023•5 min read

Is it a bird? Is it a plane? Is it a Chinese spy balloon?! No — it’s the return of LBO and M&A financings to the primary leveraged credit markets, which seemed to gain more momentum this week on top of an already solid start to the year.

The banks that funded Roper Technologies’ spin-off of its industrials business — rebranded as Indicor — are out this week to syndicate the debt, and underwriters are also offering out a loan to NielsenIQ, which funds the company’s acquisition of its German competitor GfK.

Both are benefiting from the credit market’s hot start to the year, which has allowed bankers to once again start pushing paper.

Fine print

As we highlighted last week, loan deals are seeing strong demand from CLOs and other cash-rich funds. The $2.6bn financing for Indicor (the Roper Tech carveout) is no different.

The tighter pricing and accelerated deadline on the deal suggests investors overcame concerns about how the 16 businesses that make up Indicor will fare as a standalone entity, as we detailed in our coverage earlier this week.

Still, leads made some lender-friendly concessions in the documentation, inserting J.Crew-blocker language into the credit agreement, at investors’ request (click here for a recap from 9fin’s legal analysts on these provisions).

Buysiders flagged some aggressive disqualified-party language in the draft credit agreement. There were also concerns about the fine print of the inter-creditor agreement, given that sponsor CD&R has taken down the entire $475m second lien piece of Indicor’s capital structure.

Clients can request a copy of our legal team’s analysis of the proposed credit agreement here.

Roll up, roll up

The book build for NielsenIQ started constructively enough, although it does appear that across the primary market this week, many investors were holding back on fully committing until after Wednesday’s FOMC meeting. Commitments are due by 9 February for the NielsenIQ deal.

As we noted this week, the acquisition of GfK should give NielsenIQ scale to cement its status as a go-to source for consumer data, which its clients use to formulate marketing strategies.

Others acquisition financings are already starting to appear, some of them on the down-low: for example, physical therapy roll-up Confluent Health and its underwriters at Macquarie have been quietly clubbing up an add-on loan to fund acquisitions, at a tough time for the sector. If you are not a client you can request a copy of this report here.

Further down the potential pipeline, owners of the sandwich chain Subway are reportedly exploring a sale of the business for some $10bn.

Bankers may be somewhat cautious after the bruising experience of last year’s jumbo LBO financings — but after speaking with industry sources we outlined a couple of different financing options for a potential Subway acquisition.

Speaking of bruising 2022 buyouts, sources tell us that the syndication of the nearly $4bn Citrix second lien debt — expected to hit the market as a bond offering — is expected to hit the market in a few weeks.

“It wouldn’t shock me if there is a bit of premarketing with some anchor orders,” one sellside source said of the second lien portion, which was led by Goldman Sachs. “They probably know who is going to step up and anchor it.”

Dividend spree

We explored last week how the hot loan market was allowing financial sponsors to take out debt-financed dividends.

Natural gas business CQP Holdco offered another example on Friday, when it priced a $275m add-on to its 2028 TLB in a one-day drive by to fund a dividend to its sponsors Blackstone and Brookfield.

“We like the company, even at the holdco level, but it’s an indication of just how tight the market is that they can come in one day with a $275m deal to fund a dividend,” said a CLO manager.

Other loan issuers including Zest Dental and Franchise Group took the chance to refinance debt this week.

Zest managed to price a small five-year $320m TLB, but investors were able to extract some concessions from the BC Partners-backed dental implant company; Franchise Group priced a $300m add-on TLB, with proceeds slated to pay down ABL borrowings.

Franchise Group owns and operates a suite of consumer-facing business including Vitamin Shoppe and Pet Supplies Plus, but investors expressed concern about the fact that many of its stores are not actually franchised, despite the company’s name.

Well Fed

The reaction to the FOMC meeting on Thursday sparked the largest tightening in high yield spreads since November 2020 and the third largest one day gain for HY bond prices since May 2022, according to a report from JP Morgan.

The positive backdrop brought Uniti Group, a REIT, to the market with $2.6bn of SSNs due 2028, with proceeds slated to address $2.25bn of 7.875% SSNs due 2025 and repay $275m of revolver borrowings.

The notes were upsized from an initial target of $1.75bn, allowing the company to fully redeem the 2025s. At the original size, Uniti would have only been able to fund a partial redemption and would have turned to the loan market to finish the refi, according to an investor presentation.

For more on the complicated relationship between Uniti and internet provider Windsteam, read 9fin’s Credit QuickTake of the deal.

Favorite brands (brands, brands, brands…)

Looking ahead, Varsity Brands is shopping a $1.331bn amend and extend TLB via its sponsor Bain Capital to extend the maturity by two years to 2026.

These kinds of A&Es are fast becoming the go-to method for refinancing — which makes sense in today’s market, where borrowers might otherwise end up with a significantly tighter credit agreement.

In other brand news, Inspire Brands is out with a new $1.75bn TLB due 2027 to refinance its outstanding $2.488bn TLB due 2025. The Roark Capital-backed company, which owns popular fast-food chains like Arby’s, Sonic and Jimmy John’s, has been successful at rehabilitating brands.

Market participants we spoke to largely saw this transaction as a bridge to better equity market conditions, which is when Inspire could start thinking about IPOs for some of its brands, such as Dunkin’ Donuts.

While you’re enjoying your weekend inside hiding from the chillingly cold weather in the Midwest and Northeast, consider giving this week’s Cloud 9fin a listen. We discuss our piece about how the Libor transition fight is getting ugly.