Rackspace softens with downgrade; AOC changes surface; Indicor, Zest, First Brands set talk

By Sara Rosenberg

New York, Jan. 26 – Rackspace Technology Global Inc.’s term loan headed lower in the secondary market on Thursday as the company’s ratings were downgraded by Moody’s Investors Service.

Meanwhile, in the primary market, AOC LLC (LSF11 A5 HoldCo LLC) increased the size of its incremental term loan and modified original issue discount talk in the morning, and then tightened the issue price in the afternoon.

Furthermore, Indicor (Roper Industrial Products Investment Co. LLC), Zest Dental Solutions (Zest Acquisition Corp.) and First Brands Group LLC disclosed price talk on their loan transactions with launch.

Rackspace slides

Rackspace’s term loan dipped to 63½ bid, 65½ offered on Thursday from 64½ bid, 66½ offered on Wednesday following downgrades by Moody’s Investors Service, according to a market source.

The company’s corporate family rating was cut to Caa1 from B2, its senior secured debt rating was trimmed to B3 from B1 and its senior unsecured notes were downgraded to Caa3 from Caa1. Also, the rating outlook was changed to negative from stable.

Moody’s said the downgrades and change in outlook reflect, in part, Rackspace’s governance weaknesses, including aggressive financial strategy and risk management practices as evidenced by rising debt leverage in concert with weakening profitability tied to its former public cloud growth strategy.

Moody’s went on to say that it believes the possibility of distressed debt exchanges are a risk, especially given Rackspace’s significant private equity ownership and current debt trading levels.

Rackspace is a San Antonio, Tex.-based end-to-end multicloud technology services company.

AOC tweaked

Moving to the primary market, AOC raised its non-fungible incremental term loan due Oct. 15, 2028 to $400 million from $350 million, changed the original issue discount talk to a range of 96.5 to 97 from a range of 96 to 96.5 in the morning, and then revised the discount to 97.25 later in the day, a market source remarked.

As before, the term loan is priced at SOFR+10 basis points CSA plus 425 bps with a 0.5% floor and has 101 soft call protection for six months.

Commitments were due at 5 p.m. ET on Thursday, accelerated from an original deadline of noon ET on Friday, the source added.

Allocations are expected on Friday.

BofA Securities Inc. is the left lead on the deal that will be used with cash on hand to fund a shareholder distribution and pay related fees and expenses.

AOC is a Schiphol, Netherlands-based producer of specialty resins.

Indicor guidance

Indicor held its bank meeting at 10:30 a.m. ET on Thursday and, a few hours before the event kicked off, price talk on its $1,230,484,042 first-lien term loan due Nov. 22, 2029 and €300 million first-lien term loan due Nov. 22, 2029 was announced, according to market sources.

Talk on the U.S. term loan is SOFR plus 500 bps with a 0.5% floor and an original issue discount of 94, and talk on the euro term loan is Euribor plus 500 bps to 525 bps with a 0% floor and a discount of 93, sources said. Both term loans have 101 soft call protection for one year from the closing date.

Commitments for the U.S. first-lien term loan are due at 5 p.m. ET on Feb. 3, commitments for the euro term loan are due at noon ET on Feb. 3, and allocations are expected on Feb. 6.

The company’s credit facilities also include a $300 million revolver due Nov. 22, 2027 and a $475 million privately placed second-lien term loan due Nov. 22, 2030.

Indicor lead banks

UBS Investment Bank, BNP Paribas Securities Corp., RBC Capital Markets, BMO Capital Markets, Mizuho, Natixis, TD Securities and Santander are the arrangers on Indicor’s credit facilities, with UBS the left lead on the U.S. loan and BNP the left lead on the euro loan.

The debt was used to help fund Clayton, Dubilier & Rice LLC’s roughly $2.6 billion acquisition of a majority stake in the industrial products businesses of Roper Technologies Inc., rebranded as Indicor. The transaction closed on Nov. 22, 2022 and Roper retained a 49% minority interest in the company.

Indicor is a provider of products and services within three primary product categories: material preparation and testing, sensors and controls, and flow control.

Zest proposed terms

Zest Dental came out with talk of SOFR plus 575 bps to 600 bps with two 25 bps step downs at 0.5x and 1x inside closing first-lien net leverage, a 0% floor, an original issue discount of 95 and 101 soft call protection for six months on its $320 million five-year senior secured covenant-lite first-lien term loan (B3/B) in connection with its morning lender call, a market source remarked.

Commitments are due at noon ET on Feb. 2, the source added.

Citigroup Global Markets Inc., SVB, UBS Investment Bank, RBC Capital Markets and Jefferies LLC are leading the deal that will be used with cash from the balance sheet to refinance the company’s existing $252 million first-lien term loan and $115 million second-lien term loan.

Closing is expected in early February.

Zest is a Carlsbad, Calif.-based developer, manufacturer and supplier of solutions to treat both natural teeth and implant supported restorations.

First Brands talk

First Brands launched in the morning a fungible $250 million incremental senior secured first-lien term loan due March 30, 2027 talked with an original issue discount of 96, according to a market source.

Like the existing $425 million incremental term loan that was completed in December 2022, this incremental term loa is priced at SOFR+CSA plus 500 bps with a 1% floor and has 101 soft call protection through June 15, 2023. CSA is 11.448 bps one-month rate, 26.161 bps three-month rate and 42.826 bps six-month rate.

Commitments are due at noon ET on Feb. 2, the source added.

Jefferies LLC is leading the deal that will be used to fund acquisitions.

First Brands is an automotive aftermarket platform offering comprehensive solutions for consumable maintenance and mission-critical repair parts.

Fund flows

In other news, actively managed loan fund flows on Wednesday were negative $41 million and loan ETFs were negative $21 million, market sources said.

The tracking estimate for Thursday night’s weekly Lipper numbers for loans are outflows totaling $260 million, sources added.

Loan indices mixed

IHS Markit’s iBoxx loan indices were mixed on Wednesday, with the Leveraged Loan indexes (MiLLi) closing out the day up 0.07% and the Liquid Leveraged Loan indices (LLLi) closing out the day unchanged.

Month to date, the MiLLi is up 2.29% and the LLLi is up 2.45%.

Average secondary market bids in the U.S. on Wednesday were 92.51, up 0.03% from the previous day and up 0.69% year to date.

According to the IHS Markit data, some of the top advancers on Wednesday were LogMeIn’s August 2020 covenant-lite term loan B at 44.92, up from 41.92, Mitel Networks’ November 2018 covenant-lite fourth out no roll up term loan at 24.55, up from 23.65, and Shutterfly’s July 2021 covenant-lite term loan at 47.71, up from 46.

Some top decliners on Wednesday were Wahoo Fitness’ August 2021 term loan B at 55, down from 57.50, Yak Mat’s June 2018 covenant-lite term loan B at 39.70, down from 40.54, and Avaya’s February 2021 covenant-lite term loan B2 at 30.13, down from 30.63.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.