US LevFin Wrap — Hanesbrands gets the right fit, NielsenIQ crosses finish line

Bill Weisbrod
+David Bell

17 February 2023•4 min read

Tuesday’s CPI print, which could portend further tightening from the Fed, cast a pall over the market in the latter part of this week. The high yield market took a breather from new issuance, but the loan market pushed ahead.

Loans are benefiting from expectations of higher rates and a strong bid from CLO managers. Plenty of borrowers are taking advantage of demand for well-known credits with strong ratings; most have been able to tighten pricing and accelerate their deals.

“There’s a bit of FOMO panic-buying, as CLOs have raised capital and you’ve got to deploy it,” said one banker.

Take clothier Hanesbrands, which priced a $900m 7-year refi TLB on Wednesday. The deal was upsized and priced tight to guidance at SOFR+375bps with a 99 OID, after the company issued a $600m 8-year bond at 9% (the lower end of talk) last week.

Buysiders were happy to overlook a spotty 2022 that saw inventory pile up and liquidity decline in favor of the company’s Ba2/BB+ rating, its status as a known debt issuer and its stated deleveraging plans.

Others noted the attractive pricing of the Hanes loan compared to the bonds, especially given its seniority in the capital structure. “It’s not far inside the bonds, but the loan has less leverage,” said a buysider. “I'll take the seniority for free.”

Talent agency Creative Artists Agency also got a friendly reception from the loan market with a $1.55bn five-year TLB, allowing it to push out a debt maturity. Though a possible strike by the Writers Guild of America looms on the horizon, the company touted its broadening clientele which increasingly includes athletes and digital influencers.

Demand remains strong for energy credits, as shown by a $800m 7-year TLB refinancing for UGI Energy Services that priced on Friday. Companies in the sector are riding the wave of high commodity prices, though some buysiders raised concerns over financing energy credits at this point in the cycle.

Meanwhile, in the tech world, ZoomInfo managed to tighten the OID on its $600m TLB amend-and-extend deal to par, from talk of 99.5-99.75.

On the prowl

Sticking with software for a moment, we explored earlier this week how sponsors are hunting for more take-private targets in the sector. Depressed equity valuations might look attractive, but do debt markets have the stomach for these kinds of deals?

Public debt markets are in need of new supply, but private credit might be more appealing (for more on private credit, including insights on private asset-based financing, check out our 9Questions interview with Ivan Zinn of Atalaya Capital Management).

One way private credit firms are financing software LBOs is with annual recurring revenue loans. This has proven to be a more workable option than a committed debt financing from banks (especially for companies that are burning cash) at a time when bankers are still working through the 2022 LBO backlog.

“I’m not seeing material movement on the LBO front,” the banker said. “I think that’s going to be a continued challenge until the backlog gets addressed.”

For a long time, that backlog included NielsenIQ’s financing for its acquisition of German market research counterpart GfK. But this week, a JPMorgan-led bank group wrapped up syndicaton of that deal, after downsizing the dollar tranche to $1.455bn and boosting the OID.

The extra yield helped lenders to look past potential integration risks, which we flagged in our coverage of the deal earlier this month.

‘Tis the season

Earnings are coming through thick and fast with both public and private results making waves in secondary trading activity this week.

Great Lakes Dredge & Dock debt traded off on Wednesday as a slowdown in bidding activity last year caused sharp declines in EBITDA and revenue.

Debt issued by Caryle-backed software company Veritas Technology and publicly traded hospital operator Community Health Systems popped in secondary trading, after both companies reported numbers that were better than expected.

The earnings at privately-owned battery maker Clarios came in broadly in line with expectations. But buysiders were especially upbeat about the company’s deleveraging plans, which we explored in more detail here.

Clarios is benefiting from rising demand for its advanced battery technology, which among other things help power electric vehicles. But other corners of the auto sector in the leveraged finance universe might not look so hot — subprime auto lending, for example.

In this week’s episode of our Cloud 9fin podcast, we dug into the subprime auto lending space to explore how the likes of Exeter Finance and Credit Acceptance Corp might weather a downturn in consumer credit.