Partners Group, Form Technologies’ sponsor, has proposed to contribute a total of $300 million in a preferred equity instrument paying PIK, with proceeds mainly going to pay down $60 million of outstanding RCF borrowings, fully repay $210 million in second lien term debt and boost cash on the balance sheet, according to sources. The recapitalization will also involve a maturity extension of the first lien term loan, currently set to mature in January 2022, by 3.5 years and provide a substantial margin uplift for lenders, they said.
Pro forma leverage including the preferred equity would be about 9x, while net first lien leverage would be approximately 7x, the sources said.
Form’s currently outstanding debt includes $893 million in an L+325 bps first lien term loan set to mature in January 2022, $210 million in second lien debt and a $100 million revolver due July 2021, for which the company had been
negotiating an amend-and-extend as of earlier this week.
The capital infusion and related paydowns and amendments are expected to close by mid-February, the sources said.
Weakness in certain end markets, particularly automotive and oil, has been exacerbated by the Covid-19 pandemic, cutting Form Technologies’ revenue and straining its liquidity. The business improved substantially, however, in the second half of 2020, the sources said.
Form’s first lien term loan was quoted today at 94/96 and the second lien was quoted on Monday at 89.75/91, according to Solve Advisors.
Among CLO lenders, Ares Management owns $77.9 million across 22 funds, Greywolf Capital holds $30.58 million across six funds, Blue Mountain holds $26.1 million across 14 funds, Prudential Fixed Income holds $25.5 million across 18 funds, Eaton Vance holds $5.78 million across nine funds, and Credit Suisse Asset Management holds $4.84 million across two funds, Refinitiv’s LPC Collateral database shows.
The second lien debt is fairly concentrated with two funds holding the majority and the balance spread across many smaller holders, according sources. Credit Suisse Asset Management holds about $5.9 million of the junior debt, according to the LPC Collateral database.
The company is working with Kirkland & Ellis as legal advisor and Guggenheim Securities as financial advisor, and an ad hoc group of first lien lenders organized with Gibson Dunn as legal advisor and FTI Consulting as financial advisor.
Partners Group declined to comment. Form Technologies did not respond to a request for comment.
--Adelene Lee, Millie Dent