Leveraged Finance

Coverage of acquisitions, leveraged buyouts, recapitalizations and asset purchases across the Americas, EMEA and APAC from financial and legal analysts and leveraged finance experts.

2021 Leveraged Loan Market Trends; MFNs, PetSmart, Lien Amendments

More recently than ever, the success rates for lenders to push back against terms in their agreements or to push for the inclusion of others have increased. 2021 leveraged loan market trends have taken a turn to benefit lenders, plus some terms that used to be considered aggressive are becoming more and more familiar in these amendments. Our Americas Covenants team analyzes and reviews some of the most prominent 2021 leveraged loan market trends emphasizing the fact that these are exceptions to the rule. 

First, the team discusses the most favored nations (MFN) protection where lenders have been trying to break down the strength of this protection agreement in terms of pricing differences, length and scope. Next, our Americas Covenants team takes a look at the anti-PetSmart guarantor protections where guarantors and liens on assets could be released in an easy manner creating credit agreement provisions that include the block of the release of guarantors. Further in the article, our team discusses provisions to erroneous payments as a result of the Revlon and Citibank mistaken wire transfer, transfers to unrestricted subsidiaries, and a few other provisions that are becoming increasingly more common including earlier maturing debt, debt using restricted payment capacity and more. Read our Americas Covenants team’s full analysis of the 2021 leveraged loan market trends here: https://reorg.com/leveraged-loan-market-trends/

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Mon Apr 12, 2021 4:30 pm Distressed Debt  High Yield Bonds  Leveraged Finance

Rounding up and focusing our deep dive on the most prominent high yield and distressed litigation situations from the week of April 5, 2021, the Americas Core Credit team’s weekly podcast also takes a look at Hertz’s second amended plan of reorganization, Ferellgas’s lawsuit for their unpaid fees, and Intelsat’s Jackson crossover group and their debtors plans.

The Hertz debtors, on April 3rd, filed a second amended plan of reorganization in a company disclosure statement reflecting an “enhanced proposal from Centerbridge Partners, Warburg Pincus, and Dundet Capital Partners” to fund the company’s chapter 11 cases with their $1.6B rates offering, a $565M direct purchase of Hertz reorganized equity by Dundet, Centerbridge and Warburg, and a $385M preferred stock issuance to Centerbridge and Warburg. In a development of the Ferrellgas bankruptcy cases after the company emerged, Moelis Company, which serves as financial advisor, capital markets advisor and investment bankers to Ferrellgas LP and parent Ferrellgas Partners LP, sued the company for more than $20M in unpaid fees in connection with the parent company’s recent chapter 11 filing and Ferrellgas LP’s out of court restructuring. On Intelsat, their ad hoc parent entity convertible noteholder group and the Jackson crossover group objected to the debtor’s proposed 9 month extension of their exclusive periods to file and solicit votes on a chapter 11 plan. Click through to listen to the full podcast on Spotify, iTunes or SoundCloud for our discussion on Hertz, Ferrellgas, Intelsat as well as our deep dive on the prominent high yield and distressed litigation situations from the week of April 5, 2021.

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Reorg on the Record; The European primary market remains favorable

Written by Noor Sehur, Analyst Team Lead, EMEA Core Credit || The European primary market continues to remain favourable for new issuances. Reorg’s primary pipeline shows 36 companies with near-term maturities, 16 possible LBO deals and three deals from bolt-on acquisition financings which could take advantage of the attractive primary market. Recent deals with attractive pricing included Gatwick’s 4.375% 2026 bonds. The bonds were supported by the airport’s exposure to short haul flights, and equity cushion despite continued travel demand uncertainty. Advanz Pharma’s 2028 bonds also offered a premium to comparable bonds. Although most deals have priced tighter than original guidance in recent weeks, we have started to see pushback from investors on tighter margins. Douglas cut the €1.08 billion loan part of its debt package to €600 million while upsizing the SSNs to €1.305 billion from €1 billion and PIK notes to €475 million from €300 million, providing additional buffer to the secured debt investors. Pricing was also increased by 50 bps on the loan and the SSNs amid significant execution risks in the group’s transformation plan, near term cash burn and heavily adjusted EBITDA. In the loan market, margins widened on LGC Group‘s cov-lite term loan B, Idemia’s first lien term loan and Belron’s term loan B. || Sign up for our weekly updates here.

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Tue Apr 6, 2021 5:32 pm Leveraged Finance

Pending merger transactions between Navistar International Corp. (NAV) and Traton SE (TRATF) are beginning to be reviewed by Brazil’s Administrative Council for Economic Defense, or CADE. 35 companies named as market participants began receiving questionnaires on March 30 and with responses requested by April 14, CADE hopes to gain some further information on how the potential merger would impact the vehicle industries that each company plays a role in including light trucks, semi-heavy trucks, heavy trucks, road buses, city buses and more.

Although NAV and TRATF filed paperwork in December 2020, CADE felt it was important to investigate the amended notification form provided by the companies. Each company owns operational subsidiaries in Brazil including MAN Latin America and Scania Latin America, as well as International Industria Automotiva da America do Sul Ltda. The review process through CADE can take 240 calendar days, and this period may be extended up to 90 days. Click through to read our detailed analysis of the merger situation between NAV and TRATF here: https://reorg.com/nav-tratf-merger/

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Reorg Webinar Series: CFLD State of Play, Trading in Distressed Debt Through Creative Enforcement

Discussing China Fortune Land Development (CFLD) and their current state of play, Reorg’s managing editor for Asia, Shasha Dai, and Asia Core Credit senior credit analyst, James Shi, will be conducting a webinar on Wednesday, April 7, 2021 alongside Kobre Kim partner John Han. Our panel of experts will be taking a look at the state of trading in the distressed debt market through creative enforcement, plus the team will be diving deep into China Fortune Land Development’s event timeline from our initial coverage on the company in July 2019 when credit sensitive issues related to CFLD’s working capital were raised through to March 2021 when CFLD’s total overdue debt principal and interest reached RMB 37B. Our discussion will also include a review of the CFLD capital structure and their “two speed restructuring” process where the company plans to reach a debt restructuring agreement onshore first before CFLD addresses the offshore debt crisis. 

Register for the webinar here: https://reorg.zoom.us/webinar/register/8016160136487/WN_IR7TI9PNTxyngNCfbVVkug 

If you’re already a subscriber, you can view our ever-expanding coverage of the China Fortune Land Development situation here: https://app.reorg.com/v3#/dashboard/8185

If you’re not already a subscriber request a trial here: https://reorg.com/trial  

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After a conference call with investors on March 26, Yuzhou Management has assured its group of investors that their cash flow and balance sheets remain strong even though the company predicted a 94% year-over-year decline for their 2020 fiscal year. The company’s offshore notes fell deeply on the morning of the call creating obvious concern for investors, but management reassured investors by explaining that short sellers were dispersing false information. However, Youzhou can not comment further on the status of this information until their annual results are officially released on March 30. 

The Covid-19 pandemic resulted in low selling prices and the delay of development and delivery of property projects in 2020 for Yuhou impacting their cash flow and profit, but the company expects dividend payments to remain on par with 2019. Click through to read our Asia Core Credit team’s analysis of the call including a detailed examination of the company’s corporate bonds and senior notes as well as Yuzhou’s capital structure: ADD LINK

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Actico Sale Process Based on 2021 EBITDA
Tue Mar 30, 2021 3:46 pm Financial Restructuring  Leveraged Finance

Working with Raymond James as their financial advisor and a group of potential buyers, the Actico sale process is underway. With a projected EBITDA of €10M, Actico, who’s name was changed from Bosch Financial Software in 2015, could reach a potential valuation of €180M for the sale. The sale is expected to be supported by debt and with only minimal competition in the financial automation software sector it is attracting sponsors who are expected to carry out the due diligence. Also making this sale attractive to sponsors is the company’s consistent growth. Actico expects another 11% year-over-year growth for 2020, but with the impact of the coronavirus pandemic in the second and fourth quarters of 2020, there was a temporary weakening of business. Click through to read our full analysis of the situation as well as a full year, 2019 financial report for Actico: https://reorg.com/actico-sale-attracts-sponsors/ 

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Featuring a discussion on a force majeure dispute following the Texas winter storm, CBL Property’s amended RSA, Seadrill Partners’ disclosure statement approval and a deep dive into Argentine oil company YPF’s state of play after their liability management exercise, our Americas Core Credit weekly podcast breaks down the most important stories from the week of March 22nd, 2021. 

In terms of the force majeure dispute following Texas winter storm Uri, our team discussed the applicability of these clauses in power hedging agreements and how they could dictate legal strategies taken by Texas electricity generation projects facing high bills from financial institution hedge counterparties. Our team takes a look specifically at Canadian Breaks, a large wind farm in the Texas panhandle, after they filed a petition against J.P. Morgan when the bank presented the wind farm with a $79M bill for power purchased during the storm. 

On CBL Properties, our experts discuss the debtors filing of an amended restructuring support agreement which resolved their disputes with prepetition lenders and agent Wells Fargo paving the way for a potentially consensual restructuring of the mall REIT’s funded debt. Discussing Seadrill Partners, our team broke down the disclosure statement as well as Judge David Jones’ approval of this statement on a conditional basis after counsel announced significant progress on a global settlement with Seadrill Limited.  

Finally, Kyle Owusu, Director of Emerging Markets Credit, took a deep dive into Argentine oil company YPF and their current state of play after their liability management exercise. The company’s new 2029 and 2033 bonds, which were issued as part of the company’s February liability management exercise, are being offered at around 58, 50, and 48 respectively according to advisers. Click through to listen to the full episode on Spotify, Soundcloud or Apple Podcasts.

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Permira Debt Managers to Exit Davies Group
Tue Mar 23, 2021 8:42 pm Leveraged Finance

The U.K.-based Davies Group provides professional services and technology solutions, including claims, underwriting, distribution, regulation, customer experience, human capital, digital transformation and change management for the insurance industry. Reorg’s EMEA Middle Market team reported in mid-March that the Davies Group’s incumbent lender Permira Debt Managers is exiting its position amid BC Partners’ acquisition of the company, sources told Reorg. Blackstone Credit provided a £950 million debt package to support the transaction. Permira Debt Managers did not participate in the acquisition financing but is getting repaid, sources said. Click through to read the most recent update.

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Lycra’s Bondholder Group Looking for More Transparency in Ruyi-Huayang Joint Venture
Tue Mar 23, 2021 5:12 pm High Yield Bonds  Leveraged Finance

After a joint venture between Shandong Ruyi Technology Group and Huayang New Material Technology Group, a group of Lycra bondholders are looking for more clarity due to the suspected use of Lycra’s intellectual property and potential technology transfer for a construction project between Ruyi and Huayang. Lycra suspects that their branding and technology is going to be leveraged for the project without authorization. These complications came after Huayang and Ruyi signed a framework agreement to institute fiber material manufacturing facilities including one for Lycra that could produce 60,000 tonnes of spandex per year by December 2021. 

Additionally, as part of the deal between Ruyi and Huayang, Lycra was aimed to be listed on China’s STAR board if Huayang provided RMB 2.5 billion to Ruyi in exchange for an equity interest in the U.S. spandex company as well as RMB 3 billion worth of intellectual property rights and RMB 7 billion worth of offtake contracts. The bondholder group at Lycra were alerted that Ruyi had received part of the RMB 2.5 billion proceeds giving them reason to believe that intellectual properties had been sold by its Chinese parent. Ruyi also recently told some Lycra bondholders that they are looking to float Lycra on the Hong Kong stock exchange instead of the Shanghai tech board, but bondholders are skeptical that this will ever happen. Read our full analysis of the Lycra bondholder group situation here: https://reorg.com/lycras-ad-hoc-bondholder-group-seeks-clarity-on-ruyi-huayang-joint-venture/

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