WEX, Strategic Partners, SeaStar Solutions free up; market bid lower following Brexit vote

By Sara Rosenberg

New York, June 24 – WEX Inc.’s credit facility made its way into the secondary market on Friday, with the term loan B quoted above its original issue discount, and Strategic Partners Acquisition Corp. and SeaStar Solutions broke as well.

Also in the secondary market, loans were in general bid lower as investors reacted to news that the United Kingdom voted to leave the European Union.

WEX hits secondary

WEX’s $1.21 billion seven-year term loan B freed up for trading on Friday, with levels quoted at 99¼ bid, 99 5/8 offered, according to a trader.

Pricing on the term loan B is Libor plus 350 basis points with a step-down to Libor plus 325 bps when consolidated total leverage is less than or equal to 3.5 times and a 0.75% Libor floor. The debt has 101 soft call protection for one year and was sold at an original issue discount of 99.

Recently, pricing on the term loan B was reduced from Libor plus 400 bps, the step-down was changed from Libor plus 375 bps at consolidated total leverage that was still to be determined, the call protection was extended from six months, the 12-month MFN sunset was removed, setting the 50-bps MFN for the life of the deal, and the incremental allowance was changed to the greater of $375 million and 4 times total leverage from the greater of $450 million and 4 times total leverage, the source continued.

Bank of America Merrill Lynch, SunTrust Robinson Humphrey Inc., MUFG and Citizens Bank are leading the deal.

WEX buying EFS

Proceeds from WEX’s term loan B will be used to help fund the acquisition of Electronic Funds Source LLC, a provider of payments solutions, for $1.1 billion in cash and the issuance of 4 million shares of common stock to Warburg Pincus, Electronic Funds Source’s current owner, to repay existing revolver borrowings of $219 million and to repay an existing $452 million term loan A.

The company said in a filing with the Securities and Exchange Commission that, along with the term B, it expects to get as part of its $2,125,000,000 credit facility (Ba3/BB-) a $470 million revolver, under which $200 million will be drawn, and a $445 million term loan A for the acquisition and refinancing.

Total secured debt to adjusted EBITDA is 4.7 times, and total debt to adjusted EBITDA is 4.7 times.

Closing on the acquisition is subject to regulatory approvals and other customary conditions.

WEX is a South Portland, Maine-based provider of corporate payment solutions.

Strategic Partners frees up

Strategic Partners’ credit facility also broke for trading, with the $335 million seven-year first-lien covenant-light term loan seen at 99¼ bid, par offered, a market source said.

Pricing on the term loan is Libor plus 525 bps with a 1% Libor floor, and it was sold at an original issue discount of 99. There is 101 soft call protection for six months.

The other day, the term loan was upsized from $325 million and pricing was cut from Libor plus 550 bps.

The company’s $380 million credit facility also includes a $45 million revolver.

UBS Investment Bank, Goldman Sachs & Co. and Credit Suisse Securities (USA) LLC are leading the deal that will be used to help fund the buyout of the company by New Mountain Capital.

Strategic Partners is a Chatsworth, Calif.-based designer and manufacturer of medical apparel and footwear and school uniforms.

SeaStar tops OID

SeaStar Solutions’ fungible $90 million add-on first-lien term loan (B) due 2021 began trading too, with levels seen at 99½ bid, 100½ offered, a trader remarked.

Pricing on the add-on term loan is Libor plus 425 bps, after flexing recently from Libor plus 450 bps. The loan has a 1% Libor floor and 101 soft call protection for six months, and was issued at a discount of 99.

Originally, the company was going to lift pricing on its existing first-lien term loan to Libor plus 450 bps with a 1% Libor floor from Libor plus 425 bps with a 1% Libor floor in connection with the add-on term loan, but, due to the change in spread on the add-on loan, existing term loan pricing will not be changed.

RBC Capital Markets, Antares Capital and UBS Investment Bank are leading the add-on that will be used to fund a dividend.

SeaStar is a Litchfield, Ill. manufacturer and distributor of marine steering and control systems and engine and drive parts.

Bids fall with Brexit vote

In more news, bids were lower in general in the loan market after news surfaced that the United Kingdom voted to leave the European Union, according to a market source.

“Dealers dropped bids close to a point first thing and offers barely moved. Classic dealer behavior when they don’t want to trade because they are more nervous than their clients,” the source said.

“Anecdotally, there were plenty of buyers hoping for scared sellers and not finding them. Heard the same of the high-yield market,” the source continued.

“Longer term it will be about flows. If the Fed is on hold much longer (economists are split on that) then maybe we will see mutual fund flows out, but that’s only 15% of the market. If something happens to securitized such that the CLO arb does not work then maybe new CLO demand will be hurt but old CLOs will buy loans at a discount. Institutional accounts will wait and watch for a bit, maybe, but loans will remain a high quality way to get decent yield without duration risk.

“I think the longer-term question is whether the weakness in the UK will translate to a Euro recession of any note and if that contagion spreads. The U.S. loan market is highly correlated with U.S. revenues, which is a strength right now. But if the U.S. stock market takes a beating that sentiment will wash over to high-yield and loans.

“Bottom line, nothing much is happening yet and it probably should not happen, but the hysteria of the markets is capable of doing more than the fundamentals support,” the source added.

© 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.