GoDaddy adds spread step-down, frees to trade; Madison IAQ dips with downgrade

By Sara Rosenberg

New York, Oct. 21 – GoDaddy Inc. added a pricing step-down to its term loan B and then the debt made its way into the secondary market on Friday, with levels quoted above its original issue discount.

Also, Madison IAQ LLC’s term loan headed lower in trading following a ratings downgrade by Moody’s Investors Service, while GenesisCare’s (Genesis Care Pty Ltd.) term loan was unchanged on the day after its downgrade by S&P Global Ratings.

GoDaddy tweaked, breaks

GoDaddy added a 25 basis points pricing step-down at 1.45x net first-lien leverage to its $1.77 billion seven-year term loan B-5 (Ba1/BB) on Friday morning, a market source said.

Pricing on the term loan remained at SOFR plus 325 bps with a 0% floor and an original issue discount of 98.

As before, the term loan has 101 soft call protection for six months, amortization of 1% per annum and no CSA.

Earlier in syndication, the discount on the term loan was tightened from 97.5.

Late in the day, the term loan freed to trade, with levels quoted at 98¼ bid, 99¼ offered, a trader added.

RBC Capital Markets, BNP Paribas Securities Corp., HSBC Securities (USA) Inc., Morgan Stanley Senior Funding Inc., Wells Fargo Securities LLC, JPMorgan Chase Bank, Barclays, Deutsche Bank Securities Inc. and Goldman Sachs Bank USA are leading the deal that will be used to refinance an existing $1.77 billion term loan B due 2024 priced at Libor plus 175 bps with a 0% Libor floor.

The company is also getting a $1 billion revolver due in 2027 to replace its existing $600 million revolver.

GoDaddy is Tempe, Ariz.-based provider of web hosting and domain names.

Madison IAQ retreats

Madison IAQ’s term loan fell to 91 bid, 92 offered from 93 bid, 94 offered after the debt was downgraded to B2 from B1 and the corporate family rating was dropped to B3 from B2 by Moody’s, according to a trader.

The ratings downgrade reflects the company’s failure to reduce its very high financial leverage relative to Moody’s expectations following the acquisitions of Nortek Air and Big Ass Fans LLC in 2021, the ratings release said.

Moody’s explained that the company has not delivered the free cash flow expected at the time of the acquisitions, and that cost inflation, softness in residential and certain commercial market demand and higher than expected working capital investment probably contributed to the shortfall.

Moody’s expects Madison IAQ’s earnings to contract in 2023 as demand is expected to decline within the residential and commercial markets. This is anticipated to result in modest amounts of free cash flow generation and little debt retirement above the scheduled amortization on the first-lien term loan, keeping debt/EBITDA above 7.5x.

Madison IAQ is a Chicago-based provider of indoor air quality solutions.

GenesisCare steady

GenesisCare’s term loan was quoted at 35 bid, 45 offered after being downgraded on Friday, unchanged from Thursday’s levels, but the debt is down from 38 bid, 48 offered on Oct. 17, a trader remarked.

“Sellers. No buyers. Don’t think the downgrade had much (affect). Weaker this week. Weaker over the past several months,” the trader added.

S&P cut GenesisCare’s corporate rating and senior secured term loans rating to CCC from CCC+.

The rating agency said that GenesisCare’s earnings and cash flow have been weaker than expected, mainly due to a sluggish recovery in patient treatment volumes and slower recovery in its U.S. business.

In S&P’s view, high debt levels and rising borrowing costs will continue to pressure liquidity and the sustainability of GenesisCare’s capital structure.

S&P continued to say that there is an increased likelihood of GenesisCare doing a below-par debt exchange as the term loan B has traded sharply lower in the secondary market in recent months. S&P would view such a transaction as a default if lenders do not receive the full amount originally promised.

According to S&P, GenesisCare’s leverage was 18.1x as of March 31. S&P’s base case indicates that EBITDA interest coverage will be around 1x in fiscal 2023 and exceed 1x in fiscal 2024, and free operating cash flow will remain negative in fiscals 2023 and 2024.

GenesisCare is an Australia-based cancer and cardiac care company.

Secondary flat

Generally speaking, the secondary market was unchanged to possibly a touch lower on Friday, a trader said.

“Felt like it wanted to be down in the morning. Then equities wanted to rip. We’re probably flattish to maybe slightly down,” the trader added.

On Friday, S&P 500 closed up 86.97 points, or 2.37%, Dow Jones Industrial Average closed up 748.97 points, or 2.47%, and Nasdaq closed up 244.87 points, or 2.31%.

Fund flows

In other news, actively managed loan fund flows on Thursday were negative $67 million and loan ETFs were negative $2 million, according to market sources.

Loan funds reported weekly outflows totaling $885 million, including positive $55 million ETFs.

The past nine weeks’ outflows for loans totals $10.5 billion equating to 12% of weekly AUM. However, the past weeks’ withdrawals were the lightest over this time period, sources said.

Net inflows for loan funds since the beginning of 2021 are down to $43.5 billion, whereas dedicated loan fund AUM is down to $110 billion from as much as $142 billion in May.

Outflows for loan funds year to date are $3 billion, sources added.

Loan indices dip

IHS Markit’s iBoxx loan indices softened on Thursday, with the Leveraged Loan indexes (MiLLi) closing out the day down 0.01% and the Liquid Leveraged Loan indices (LLLi) closing out the day down 0.05%.

Month to date, the MiLLi is up 0.77% and year to date its down 2.89%. The LLLi is up 1.22% month to date and down 3.64% year to date.

Average secondary market bids in the U.S. on Thursday were 92.46, up 0.04% from the previous day and down 4.53% year to date.

According to the IHS Markit data, some of the top advancers on Thursday were LANDesk Software’s December 2021 covenant-lite term loan B at 75.28, up from 72, LaserShip’s May 2021 covenant-lite term loan at 81.88, up from 80, and Isagenix’s June 2018 term loan at 41.55, up from 40.63.

Some top decliners on Thursday were Air Methods’ April 2017 covenant-lite term loan B at 65.94, down from 71.75, AMC Entertainment’s April 2019 covenant-lite term loan B at 68.81, down from 73.17, and Diebold’s May 2017 U.S. term loan B at 79, down from 81.96.

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