Auction.com hits secondary; Xplore retreats with downgrade; Copeland unmoved by downsize

By Sara Rosenberg

New York, May 30 – Auction.com’s extended term loan B freed up for trading on Tuesday, with the debt bid in line with its original issue discount.

Also, Xplore Inc. (formerly Xplornet Communications Inc.) saw its first-lien term loan move lower in the secondary market as the company’s ratings were downgraded by S&P Global Ratings.

Also, Copeland’s term loan B levels held steady in trading after the company opted to reduce the size of the tranche as a result of obtaining a term loan A.

Auction.com breaks

Auction.com’s $426.4 million term loan B due June 2028 made its way into the secondary market on Tuesday, with levels quoted at 95 bid, 96 offered, according to a market source.

Pricing on the term loan is SOFR plus 600 basis points and it was sold at an original issue discount of 95. The debt is non-callable for one year, then at 103 in year two and 101½ in year three.

Antares Capital is leading the deal that will be used to extend an existing term loan B from 2024.

Auction.com is an Irvine, Calif.-based provider of asset sale services for the residential real estate markets.

Xplore softens

Xplore’s first-lien term loan fell to 79 bid, 81 offered on Tuesday, down from 80½ bid, 82½ offered on Friday, as S&P trimmed the company’s issuer credit rating and first-lien term loan rating to CCC+ from B-, and second-lien term loan rating to CCC- from CCC, and revised the liquidity assessment to less than adequate from adequate, a market source remarked.

The downgrade was prompted by subscriber losses driving weaker-than-anticipated earnings and cash flow, which led to S&P projecting that Xplore’s debt-to-EBITDA ratio will weaken to more than 8x, and liquidity will be tight over the next 12 months owing to elevated network investments amid weaker operating cash flow.

The negative outlook for the company reflects S&P’s view that ratings could be lowered further if Xplore is unable to improve its growth trajectory in the next 12 months, despite significant capital spending on fiber expansions and access to Jupiter 3 satellite capacity, and the risk that the company’s capital structure could prove unsustainable given the increased debt leverage and eroding liquidity amid difficult market conditions.

S&P does not anticipate a near-term default from a liquidity shortfall given Xplore’s access to about C$60 million cash and cash equivalents as of March 31, and modest debt maturities until 2028. However, as of March 31, the company had drawn more than 92% of its revolving credit facility with only C$12 million available.

Xplore is a Woodstock, N.B.-based broadband service provider in Canada.

Copeland steady

Copeland’s term loan B was quoted at 98¾ bid, 99 offered, unchanged from Friday, as news emerged that the size of the B loan was reduced to $2.275 billion from $2.725 billion and a $450 million term loan A was added to the capital structure, according to a market source.

Upon allocating the term loan B on May 4, it was said that the tranche had the potential to be reduced ahead of closing by a term loan A of up to $450 million.

The term loan B is priced at SOFR plus 300 bps with a 25 bps step-down at 3.25x first-lien net leverage, a 0% floor and an original issue discount of 99, and has 101 soft call protection for six months.

During syndication, the term loan B was downsized from $2.75 billion as the company’s U.S. senior secured notes offering was increased to $2.275 billion from $2.25 billion, and pricing was reduced from SOFR plus 350 bps.

Copeland lead banks

RBC Capital Markets, Barclays, Wells Fargo Securities LLC, SMBC, Goldman Sachs Bank USA, BNP Paribas Securities Corp., HSBC Securities (USA) Inc., JPMorgan Chase Bank, Mizuho, Truist, BofA Securities Inc., MUFG, Bank of Nova Scotia, TD Securities (USA) LLC, CIBC, Regions, Fifth Third and US Bank are leading Copeland’s loans.

The term loans, U.S. notes and €455 million of senior secured notes are being used with equity to fund the acquisition by Blackstone of a majority stake in Emerson Electric Co.’s Climate Technologies business (Copeland) for an aggregate purchase price of $14 billion.

Under the agreement, Emerson will receive upfront, pre-tax cash proceeds of about $9.5 billion and a note of $2.25 billion at close and retain 45% common equity ownership in the new stand-alone joint venture.

Copeland is a manufacturer of mission critical, highly engineered heating, ventilation, air conditioning and refrigeration components.

Fund flows

In other news, actively managed loan fund flows on Friday were negative $99 million and loan ETFs were positive $50 million, market sources said.

Year to date, outflows for loan funds total $16.5 billion, sources added.

Loan indices lower

IHS Markit’s iBoxx loan indices were weaker on Friday, 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 0.02%.

Month to date, the MiLLi is down 0.23% and year to date it is up 3.81%, and the LLLi is down 0.69% month to date and up 3.74% year to date.

Average secondary market bids in the U.S. on Friday were 90.93, down 0.08% from the previous day and down 1.03% year to date.

According to the IHS Markit data, some of the top advancers on Friday were Wheel Pros’ May 2021 covenant-lite term loan at 60.08, up from 58.42, Telesat Canada’s December 2019 covenant-lite term loan at 60.13, up from 58.67, and Cineworld’s September 2019 incremental RSA/backstop with rights covenant-lite term loan at 21.75, up from 21.28.

Some top decliners on Friday were Byju’s November 2021 covenant-lite term loan B at 66.33, down from 78.38, Sound Physicians’ June 2018 term loan at 63.84, down from 67.25, and NEP’s October 2018 U.S. covenant-lite term loan at 87.33, down from 91.4.

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