US LevFin Wrap — HomeServe eyes younger demographic, MedImpact widens, Norwegian cruises through

Sasha Padbidri
+William Hoffman
+ 1 more

12 October 2023•3 min read

The macro environment is looking pretty bumpy. The Israel-Palestine conflict is dominating headlines, this week’s inflation print topped expectations and the possibility remains for a US government shutdown on 17 November.

But despite the uncertainty, the leveraged loan market had another busy week.

In fact, we took a look at why the syndicated market has been welcoming to single B-rated borrowers, against the backdrop of overall investor skittishness and the availability of private credit financing.

In this week’s deals, HomeServe North America raised a $1.05bn TLB to refinance a portion of bridge debt and fund a sponsor dividend. The company, which was spun off from its UK entity by Brookfield Asset Management, is looking to attract Millennial and Gen-Z customers with its ‘home-repairs-as-a-service’ model.

Moving to healthcare, Gentiva (fka Kindred at Home Hospice) is raising a $500m loan to fund its acquisition of hospice peer Heartland from ProMedica. The loan is being shopped with a smaller OID compared with the company’s last visit to the market over a year ago, as lenders benefit from additional clarity on labor costs and reimbursement rates.

Bankers on one struggling deal in that sector, MedImpact, have cut the offering size and widened pricing. We wrote earlier this month about how the regulatory and competitive dynamics in the pharmacy benefit manager space might make the deal a tough sell for some lenders.

The high yield market saw some action from some familiar faces — Norwegian Cruise Line tapped the market to push out a 2025 maturity and oil and gas company Civitas raised debt to fund the acquisition of Permian assets.

In the case of Civitas, we noted that the company was able to price its notes in what appears to be the early stages an escalating conflict in the Middle East, which has the potential to disrupt the energy sector.

“Deals that are pretty easy and relatively attractive are the ones that go right into the bond market, because you can get a 7% or 8% coupon,” said Andrew Feltus, co-director of high yield at Amundi Asset Management. “Why pay more if you don’t have to?”

Notably, some trickier bond deals did hit the market this week.

Aircraft leasing company Avolon is offering $1.95bn of senior PIK toggle notes, just four months after completing an A&E loan transaction. The company has a complicated ownership structure, and is ultimately controlled by Bohai, a Chinese equipment and transport lessor. Check out our Credit QuickTake and Legal QuickTake on that deal.

And Newfold Digital, a Clearlake and Siris-backed web hosting business, was able to accelerate, tighten pricing and upsize its dividend recap SSN offering to $515m. Our Credit QuickTake is here, and our story on the deal is here.

If you’ve got a moment to spare before enjoying the beautiful Fall weather, check out this week’s 9Questions with Phil Raciti of Bardin Hill Investment Partners, where he talks about leveraging (pun intended!) AI in credit investing.