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US LevFin Wrap — Varsity Brands accelerated, Wilsonart and RR Donnelley make changes in busy week
Emily Fasold
+David Bell
•5 min read
This is our weekly newsletter on all things US leveraged finance, from the latest trends to in-depth coverage, to people moves. Explore all our market wraps here.
It’s opening day for the Olympics in Paris today, and back in the US, the primary market has been in its own race to absorb a fresh wave of LBO financings.
One of the winners was non-destructive testing company Acuren (rated B2/B), which priced a $775m term loan at SOFR+350bps at par earlier this week after tightening price talk and upsizing the facility by $50m.
Sources we spoke to about the deal, which will fund Acuren’s planned $1.85bn acquisition by a SPAC, touted the borrower’s conservative leverage and steady earnings growth as it continues to grab market share through M&A and organic initiatives.
Other hot syndication processes include Varsity Brands’$2.375bn term loan backing its buyout by KKR, which saw the commitment deadline accelerated by two days earlier this week to today at 10am ET.
The order book for deal was around 50% full at launch, according to sources we spoke to, who said buysiders were largely willing to shrug off concerns around the company’s high leverage, heavy EBITDA adjustments and ongoing antitrust litigation. Several lenders said the company’s dominant market share was a credit positive.
After the annual summer slowdown, a leveraged finance banker said the primary market should continue to see more LBO financings thanks to an overall uptick in M&A activity.
“If this market holds up, we’ll see tons of [LBO] activity right after Labor Day,” the source said. “It’s a race to the finish line right now and [debt] investors are ready to buy.”
Via 9fin (chart)
Challenging sector
Of course, LBO financings are not an easy ride.
Some of this week’s trickier deals included a bond and loan package to refinance Wilsonart’s existing debt and fund CD&R’s purchase of ITW’s remaining stake in the company.
The plastic manufacturer priced the $1.06bn term loan portion of the deal at SOFR+425bps with a 98.5 OID yesterday, wide of its (already widened) revised talk of SOFR+375bps with a 99.5 OID. Its $500m in SUNs due 2032also priced at the wide end of talk, with a lofty 11% yield.
The B3/B+-rated borrower also tightened the credit agreement before getting the deal over the finish line.
Wilsonart’s high leverage and headwinds in the building products sector were major concerns for buysiders, according to a CLO manager.
“They did all the right things with the capital structure, but leverage isn’t exactly low and their sector is really getting hit right now, so they needed a wider coupon,” the CLO manager said. “That’s what it takes to get a deal done in that sector right now.”
Printing company RR Donnelley has also made changes to the debt package that will back the acquisition of fellow print specialist Valassis and refinance its second-lien debt.
The company initially launched a $2.3bn, two-tranche bond and loan package last week, but the structure has changed twice since then.
Left lead JP Morgan is now offering a $1bn first lien SSNs due 2029 at price talk of 9.25% area, $650m second lien SSNs due 2029 that are being offered 150bps wide of that, and a $650m private TLB that’s being taken down by Apollo, according to sources. A previously offered $650m public TLB has been pulled.
The banks also offered a juicier OID on the loans and a wider coupon on the second-lien notes. (Click here to check out our more detailed coverage on the deal).
Aside from RR Donnelley, other borrowers to attempt to refinance their second-lien debt stacks this week included Justrite Safety with a $200m dual-tranche term loan deal and Boyd Corp with a $1.8bn term loan due 2029.
Secondary moves
In the secondary, debt issued by cyber security firm CrowdStrike was still trading off this week after the company’s software-update-gone-wrong caused major worldwide IT outageslast week.
While sources we spoke to said they expect the impact for other leveraged credits (like airlines) to be minimal, quotes on CrowdStrike’s SSNs due 2029 dropped to the 89 range earlier this week, down from 91 before the incident occurred.
Elsewhere, Walgreens Boots Alliance is reportedly working with JP Morgan on a potential high yield bond sale to address its near-term debt maturities after the retailer was downgraded to Ba3/BB.
The company’s large debt stack includes five bond tranches maturing by 2026, including $2bn in 3.8% SUNs due November 2024.
High energy
As we detailed in our report yesterday, energy has continued to be a favorite amongst high yield investors, and this week saw a handful of successful syndications from borrowers in the sector.
Notable deals included a $1.5bn senior secured bond financing for Venture Global’s continued liquid natural gas export buildout and a $500m debut bond offering from Kraken Oil & Gas. Both deals priced tight to talk, with respective 7% and 7.625% yields.
On a less positive note, we also did a deep dive into the increasingly difficult operating environment for restaurant chains this week in light of high-profile bankruptcies in the sector from borrowers like Red Lobster and Rubio’s Mexican Grill.
