Dealers push expected $5.4 billion Tenneco buyout financing into post-Labor Day period

By Paul A. Harris

Portland, Ore., July 21 – With dealers lately booking substantial losses as they syndicate their committed debt financings at steep discounts, a syndicate of banks pushed an expected $5.4 billion of debt offerings backing the leveraged buyout of Tenneco Inc. by Apollo Global Management Inc. into the post-Labor Day period, according to market sources.

That syndicate includes Citigroup Global Markets Inc. and BofA Securities Inc.

The launch of the Tenneco debt offerings, including $3 billion of bonds and $2.4 billion leveraged loans, began being telegraphed to the market as imminent business shortly after activity resumed in the wake of the July 4 Independence Day holiday weekend, sources say.

The decision to postpone comes as risk-aversion prods dealers to offer the debt at discounts that will entice investors into the market, relinquishing fees and booking losses on the financing commitments.

A sampling of deals that came since mid-June offers vivid examples of such discounts:

• On June 15, Iris Holdings Inc. priced $400 million of 10% senior notes due 2028 backing the LBO of Intertape Polymer Group Inc. by Clearlake Capital, at 82;

• On June 16, Entegris Escrow Corp. (Entegris Inc.) priced $895 million of 5.95% senior notes due 2030 to support the acquisition of CMC Materials, at 90.832;

• On June 29, FTAI Escrow Holdings, LLC (Fortress Transportation and Infrastructure Investors LLC) priced $450 million of 10½% senior secured notes due 2027 supporting the spinoff of FTAI Infrastructure, at 94.585; and

• On Wednesday, Camelot Return Merger Sub Inc. priced $710 million of 8¾% notes due 2028, part of the financing for the buyout of Cornerstone Building Brands, Inc. by Clayton, Dubilier & Rice, at 90.296.

As an indication of losses incurred, it is a fair assumption that when dealers struck those financing commitments, they anticipated placing the bonds at or near par, sources say.

As reported, the Tenneco bond deal (via special purpose vehicle Pegasus Merger Co.) sets out $2 billion of secured notes and $1 billion of unsecured notes.

On an investor call that took place late in the July 4 week, pricing indications had the secured paper being pitched in the 10% context, with the unsecureds coming 250 basis points to 300 bps behind the secureds, according to a portfolio manager who was on the call.

The deal, with an enterprise value of $7.1 billion, is expected to close in the second half of this year.

Debt backing the Tenneco financing is believed to be part of a broader migration of planned summer debt offers related to committed financings into the post-Labor Day period, a sellside source said.

The 2022 Labor Day holiday falls on Monday, Sept. 5.

© 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.