US LevFin Wrap — Kraton and Cook & Boardman pull deals as primary headache continues

Bill Weisbrod
+Rachel Butt

3 November 2023•4 min read

More loans languished or were pulled from syndication this week, such as a withdrawn BofA-led deal to finance Platinum Equity’s buyout of door maker Cook & Boardman, and a postponed Goldman Sachs-led add-on for rubber company Kraton.

With deals harder to consummate, some borrowers had to get more creative pull off debt raises, like medical software business Greenway Health (rated Caa1/CCC) which is getting an equity injection from sponsor Vista Equity Partners in conjunction with a new loan that is set to retire debt coming due in February 2024.

Xerox’s bankers at Jefferies called an audible to pivot from a bond deal (which we detailed last month) to a loan due to expectations of stronger overall demand in that market, as it seeks to raise funds to repay a bridge loan that was used to buy shares back from Carl Icahn.

Meanwhile, drugmaker Amneal ruffled some feathers by threatening to strip collateral from lenders who didn’t participate in its amend and extend deal. That was despite the company performing relatively well, as it flashed improving Q3 earnings last week. Amneal came back yesterday with a downsized offering, wider pricing and an extra point of OID.

The deal is also complicated by the fact that many of Amneal’s existing CLO lenders have exited their reinvestment periods and thus are limited in the new investments they can make. Watch for that trend to continue.

“A large portion of the CLO market is out of reinvestment period so they can’t put dollars to work,” a portfolio manager said.

Global Aircraft Leasing meanwhile has so far balked at investors’ demands for better terms on its refinancing bond. But something has to give eventually, as the company’s existing notes come due September 2024.

Some borrowers were able to navigate the market successfully, however.

Quick-service chicken chain Raising Cane’s priced its first-ever bond issuance tight of initial price talk with buysiders willing to bite on a growth story. Check out Credit QuickTake and Legal QuickTake for more details on that deal.

And hotel chain Hilton upsized its refinancing loan package to $3.1bn as investors were drawn to the company’s near-investment grade rating.

Another first-time syndicated debt issuer, tax advisory Ryan, is working to get lenders comfortable with its performance-based fee model which is less predictable than industry standard hourly billing.

Results coming in

Third quarter earnings are underway and one of the worst performers so far among high yield reporters was Spirit Airlines.

Quotes on the company’s 8% secured bonds due 2025 have slumped to 69, after being indicated close to par as recently as 11 October. The low-cost carrier got hit by a double whammy of low demand and discounted fares, while a planned merger with JetBlue is under regulatory scrutiny. Check out our Q3 earnings review for more info.

We also checked in on the latest results of logistics firm Forward Air as the status of that company’s controversial acquisition of customer Omni Logistics was top of mind for investors. The Q3 earnings review is here.

Among private filers, Veritas-backed educational software supplier Anthology’s FY 2023 results showed revenue and EBITDA decreases thanks to merger integration issues, tough competition and customer churn.

Meanwhile, Apollo-owned hospital operator LifePoint posted year-over-year earnings growth in Q3 but the company’s debt has not been immune from a bearish secondary market since it last issued.

Stressed

On the whole, October saw seven defaults in the US leveraged finance market, according to JP Morgan, the most in the past three years. The month also featured $7bn in debt affected by defaults, a six-month high.

This week, we reported that certain lenders to ferry operator Hornblower have engaged professionals to advise on next steps, as the company approaches an April 2025 term loan maturity. The loan is quoted around 37.5 cents on the dollar.

Market volatility and rising yields are welcome news for some investors. In a 9Questions, Polen Capital portfolio manager Ben Santonelli told us he saw “considerable reward potential” in recent high yield trading levels.

Lastly, this week we introduced the beta launch of 9fin AI which gives you the ability to ask questions and receive high-quality answers about companies within the debt capital markets universe.