Cengage Learning term loan gains with Apollo investment; Clarios comes to market

By Sara Rosenberg

New York, April 17 – In the secondary market on Monday, Cengage Learning Inc.’s term loan experienced a sizeable boost in levels following news of an investment in the company by Apollo Global Management Inc. through the purchase of new convertible preferred stock.

Meanwhile, in the primary market, Clarios approached lenders with a new term loan B, and TMF Group (TMF Sapphire Bidco BV) and Garrett Motion Inc. joined this week’s new issue calendar.

Cengage rises

Cengage’s term loan moved up to 97 bid, 97¾ offered on Monday from 93½ bid, 94 offered on Friday as the company announced that Apollo will purchase $500 million of a new series of convertible preferred stock of Cengage Group, subject to certain adjustments, a trader said.

Apollo is buying the shares at a purchase price of $990 per share after giving effect to a $10 per share original issue discount.

Proceeds from the preferred stock will be used with cash on hand to redeem, repurchase and/or refinance all of Cengage Learning’s outstanding 9.5% senior notes due 2024 and to pay fees and expenses associated with the transactions.

“By replacing debt with equity capital from Apollo Funds, we are meaningfully reducing outstanding debt giving us optionality to invest in our portfolio of growing businesses,” said Michael E. Hansen, Cengage’s chief executive officer, in a news release.

The transaction is expected to close by June 30, subject to customary conditions.

Cengage is a Boston-based edtech company.

Clarios holds call

Moving to the primary market, Clarios held a lender call at 11 a.m. ET on Monday, launching a $1 billion seven-year term loan B at talk of SOFR plus 400 basis points with a 0% floor, an original issue discount of 98 and 101 soft call protection for six months, according to a market source.

Commitments are due at 5 p.m. ET on Thursday, the source added.

JPMorgan Chase Bank is leading the deal that will be used with $500 million of other secured debt to refinance a portion of the company’s existing term loan due 2026.

Clarios is a Milwaukee-based supplier of low voltage automotive batteries.

TMF readies deal

TMF Group set a lender call for 10 a.m. ET on Tuesday to launch a minimum $400 million term loan B due May 2028 and a €950 million term loan B due May 2028, a market source remarked. Small group meetings for the transaction will take place on Wednesday and Thursday.

The term loans (B) have 101 soft call protection for six months.

Commitments are due at 10 a.m. ET on April 27, the source added.

Barclays, Goldman Sachs, HSBC Securities and Nomura are the physical bookrunners on the deal. Deutsche Bank is a passive bookrunner. HSBC is the agent.

The loans will be used to extend the maturity of an existing €950 million term loan B due May 2025, to refinance existing second-lien debt, to repay revolving credit facility borrowings and for acquisition activity.

CVC and ADIA are the sponsors.

TMF Group is an Amsterdam-based provider of legal financial and employee administration services.

Garrett on deck

Garrett Motion scheduled a lender call for 9 a.m. ET on Tuesday to launch its previously announced $700 million seven-year term loan B, which is talked at SOFR plus 400 bps with a 0.5% floor, an original issue discount of 98 and 101 soft call protection for six months, according to a market source.

JPMorgan Chase Bank is leading the deal that will be used to fund the repurchase of about $280 million of series A cumulative convertible preferred stock from Centerbridge Partners LP and about $290 million of series A cumulative convertible preferred stock from Oaktree Capital Management LP, and the conversion of the company’s series A cumulative convertible preferred stock into shares of common stock.

With the new term loan, the company is seeking an amendment to its existing credit agreement to change the definition of restricted payment to allow for the payments contemplated by the transaction agreements, and to transition is existing U.S. loan to SOFR from Libor.

Lenders are being offered a 5 bps amendment fee.

Commitments/consents are due at 5 p.m. ET on April 25, the source added.

Garrett is a Rolle, Switzerland-based provider of passenger vehicle, commercial vehicle, aftermarket replacement and performance enhancement solutions.

Fund flows

In other news, actively managed loan fund flows on Friday were negative $74 million and loan ETFs were $0 million, market sources said.

Outflows for loan funds in 2023 total $11.8 billion, sources added.

Loan indices rise

IHS Markit’s iBoxx loan indices were higher on Friday, with the Leveraged Loan indexes (MiLLi) closing out the day up 0.03% and the Liquid Leveraged Loan indices (LLLi) closing out the day up 0.02%.

Month to date, the MiLLi is up 0.59% and year to date it is up 3.67%, and the LLLi is up 0.71% month to date and up 4.02% year to date.

Average secondary market bids in the U.S. on Friday were 91.53, unchanged from the previous day and down 0.38% year to date.

According to the IHS Markit data, some of the top advancers on Friday were Infogroup’s April 2017 term loan at par, up from 81.58, Millers Ale’s May 2018 term loan at par, up from 97.5, and Doncasters’ March 2020 term loan B2 at 96.11, up from 95.17.

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