New issue activity may continue to be light for the month of September

By Sara Rosenberg

New York, Sept. 13 – Some participants in the leveraged loan market are estimating that issuance in September will continue to be rather limited as CLO activity is hindered by pricing.

“Nobody seems to expect a lot of new deals in September, but I think higher-quality deals would be well received. The market is treading water as CLOs are limited by liability pricing and retail flows are not strong. Not seeing a ton of institutional demand either,” a market source remarked.

“And yet nobody expects a high default rate in loans and their coupon will keep going up, so it’s hard to ignore their return potential over the next year,” the source continued.

“Last I heard there was about $5 billion of possible primary beyond the big deals everyone has heard of. I think market tone will drive timing. The stock market being down today will not help. Longer term we need CLO liability prices to tighten (for issuance to increase),” the source added.

Regarding deals that are currently in market, the consensus seems to be that they are currently filled out or filling out.

“Flutter seems like a pretty easy deal, with a big public-market vote of confidence in 2023’s sports-betting growth in the U.S. to support the loan and expected delevering,” a source said.

“I suspect nobody is a fan of Citrix, but it’s been pre-marketed for so long that they would not have set price talk if they did not think it would get done. People are wary of results over the first year, but nobody seems to think it’s a near-term default candidate,” the source continued.

Flutter details

As previously reported, Flutter Entertainment plc launched with a lender call on Sept. 6 a €1 billion equivalent U.S. dollar term loan B (Ba1/BBB-/BBB) due July 2028 talked at SOFR+CSA plus 325 basis points with a 0.5% floor, an original issue discount of 97 and 101 soft call protection for one year.

CSA is 11.448 bps one-month rate, 26.161 bps three-month rate and 42.826 bps six-month rate, the source said.

Barclays is the sole physical bookrunner on the deal. Deutsche Bank is the administrative agent.

Commitments are due at noon ET on Sept. 20.

Proceeds will be used with euro and U.S. term loan A borrowings and other euro-denominated senior secured debt to fund the acquisition of Sisal SpA from CVC Capital Partners Fund VI for €1.913 billion, which was completed on Aug. 4.

Flutter Entertainment is a Dublin-based sports betting and gaming operator. Sisal is an Italian online and retail gaming operator.

Citrix transaction

The Citrix Systems Inc. (Tibco Software Inc.) $4.05 billion 6.5-year term loan B that launched with a call on Sept. 8 is talked at SOFR+10 bps CSA plus 450 bps with a 0.5% floor, an original issue discount of 92 and 101 soft call protection for six months.

Commitments for the U.S. term loan B are due at 5 p.m. ET on Sept. 19.

Market sources previously told Prospect News that the U.S. term loan B is fully subscribed and was pretty much circled before the actual lender call took place.

Along with the U.S. term loan B, the company is getting a $500 million equivalent euro 6.5-year term loan B, a $2.5 billion six-year term loan A and a $1 billion five-year revolver.

On Monday, the term loan A was downsized from $3 billion as the company upsized its 6.5-year first-lien secured notes offering to $4 billion from $3.5 billion. Prior to that, the term loan A was reduced from an initial size of $3.5 billion because the notes were increased from an initial amount of $3 billion.

Citrix being acquired

Citrix will use the term loans and bonds, along with $3.95 billion of seven-year second-lien secured debt, $2.5 billion of preferred equity and $6.511 billion of equity, to fund its buyout by Vista Equity Partners and Evergreen Coast Capital Corp. for $104.00 per share in a transaction valued at $16.5 billion, including the assumption of debt, and merger with Tibco Software Inc., one of Vista’s portfolio companies, repay existing debt at Citrix and Tibco and add cash to the balance sheet.

BofA Securities Inc., Credit Suisse Securities (USA) LLC and Goldman Sachs Bank USA are joint lead arrangers with additional banks on the term loan debt. Barclays, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., KKR Capital Markets LLC, Mizuho Bank, Morgan Stanley Senior Funding Inc. and RBC Capital Markets were all part of the original debt commitment group.

Net first-lien debt is 5.1x and net total debt is 7x.

Closing is expected during the last week of September, subject to customary conditions. All regulatory approvals for the transaction have been received.

Citrix is a Fort Lauderdale, Fla.-based provider of secure, unified digital workspace technology. Tibco is a Palo Alto, Calif.-based infrastructure and business intelligence software company.

Hemisphere buyout closes

In other news, the acquisition of Hemisphere Media Group Inc. by Gato Investments LP, a portfolio investment of Searchlight Capital Partners LP, for $7.00 per share has been completed, according to a news release.

To help fund the transaction, the company came to market in July with a $370 million seven-year covenant-lite term loan B (B2/B) talked at SOFR plus 575 bps to 600 bps with a 0.5% floor, an original issue discount of 90 to 91 and 101 soft call protection for one year. However, syndication of the term loan was not completed so final terms are currently unavailable.

Wells Fargo Securities LLC, Truist Bank, Fifth Third Bank and Deutsche Bank Securities Inc. are the lead arrangers on the loan.

Hemisphere Media is a Coral Gables, Fla.-based pure-play media company targeting the U.S. Hispanic and Latin American markets.

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