Warner Music frees to trade; Covetrus, Citrix update loan terms; Farfetch releases talk

By Sara Rosenberg

New York, Sept. 20 – Warner Music Group (WMG Acquisition Corp.) set the spread on its incremental first-lien term loan at the low end of guidance and tightened the original issue discount, and then the debt freed to trade on Tuesday afternoon.

Also, Covetrus Inc. (Corgi BidCo Inc.) finalized the issue price on its first-lien term loan at the wide side of revised guidance, and Citrix Systems Inc. (Tibco Software Inc.) modified the original issue discount on its U.S. and euro term loan Bs.

Furthermore, Farfetch US Holdings Inc. approached investors in the morning with a new term loan B and announced price talk on the transaction, and Generation Bridge II LLC and Ontic (Bleriot US Bidco Inc.) joined this week’s primary calendar with plans for incremental term loans.

Warner revised, frees

Warner Music Group finalized pricing on its non-fungible $150 million incremental first-lien term loan due Jan. 20, 2028 (Ba3/BB+) at SOFR plus 300 basis points, the low end of the SOFR plus 300 bps to 325 bps, and changed the original issue discount to 98 from 97, according to a market source.

As before, the incremental term loan has a 0.5% floor and 101 soft call protection for six months.

Recommitments were due at 12:30 p.m. ET on Tuesday and the incremental term loan broke for trading in the afternoon, with levels quoted at 98¼ bid, 98¾ offered, another source added.

Credit Suisse Securities (USA) LLC is the left lead on the deal that will be used to fund deferred consideration owed in connection with a 2021 acquisition and for general corporate purposes.

Warner Music is a New York-based music entertainment company.

Covetrus sets OID

Covetrus Inc. (Corgi BidCo Inc.) firmed the original issue discount on its $1.525 billion seven-year covenant-lite first-lien term loan (B1/B-) at 94, the wide end of revised talk of 94 to 95 and wide of initial talk in the range of 95 to 96, a market source remarked.

Pricing on the first-lien term loan is SOFR plus 500 bps with a 0.5% floor, and the debt has 101 soft call protection for one year.

Earlier in syndication, pricing on the first-lien term loan was set at the high end of the SOFR plus 475 bps to 500 bps talk and the call protection was extended from six months. There were also a number of changes to documentation, including to MFN, accordion, pari passu debt, business line exception, asset sale, excess cash flow sweep, other ratio debt, general restricted payment basket, unlimited investments, EBITDA cost savings and synergies, minimum consolidated coverage ratio for acquisitions and investments, ratio liens basket, available amount and post-IPO restricted payment basket. And, the restricted payment debt basket and the investments in joint ventures basket were removed, J. Crew and Chewy provisions were added and quarterly lender calls were added.

Covetrus leads

Deutsche Bank Securities Inc., UBS Investment Bank, BMO Capital Markets, Mizuho Securities USA LLC, TD Securities (USA) LLC, Santander Bank and ING Capital LLC are leading Covetrus’ term loan.

The company is also getting a $350 million privately placed second-lien term loan and, based on the commitment letter, is expected to get a $300 million five-year revolver.

The new debt will be used with equity to fund the buyout of the company by Clayton, Dubilier & Rice and TPG Capital for $21.00 per share in cash, representing an enterprise value of about $4 billion.

Closing is expected this year, subject to Covetrus shareholder approval and other customary conditions.

Covetrus is a Portland, Me.-based animal-health technology and services company.

Citrix widens

Citrix Systems changed original issue discount talk on its $4.05 billion 6.5-year term loan B and $500 million equivalent euro 6.5-year term loan B to a range of 91 to 92 from just 92, and then set the discount on the two tranches later in the day at 91 after the 1 p.m. ET recommitment deadline passed, according to a market source.

The U.S. term loan B is still priced at SOFR+10 bps CSA plus 450 bps with a 0.5% floor and pricing on the euro term loan B remained at Euribor plus 450 bps with a 0% floor.

Both term loans still have 101 soft call protection for one year.

Previously in syndication, the call protection was extended from six months, leverage-based pricing step-downs were eliminated, modifications were made to MFN, incremental, reinvestment period for asset sales the excess cash flow sweep, debt incurrence, restricted payments, permitted investments, available amount, EBITDA and permitted liens, Chewy and Serta protections were added, and the inside maturity basket, permitted alternative security debt and asset-sale step-downs were removed.

Citrix pro rata

Along with the term loan Bs, Citrix’s $8.05 billion equivalent credit facilities (B) include a $1 billion five-year revolver and a $2.5 billion six-year term loan A.

The term loan A was downsized recently from a revised amount of $3 billion and an initial size of $3.5 billion as the company’s 6.5-year first-lien secured notes offering was increased to $4 billion from a revised amount of $3.5 billion and an initial size of $3 billion.

The bonds priced on Tuesday at 6.5% with an offering price of 83.561, for a yield to maturity of 10%.

One source explained that the original issue discount on the term loan Bs may have widened because of the relative value between the loans and the bonds, and possibly also as result of the secondary market trading down over the past few days.

Citrix being acquired

Citrix will use the new loans and bonds with $3.95 billion of seven-year second-lien secured debt, $2.5 billion of preferred equity and roughly $6.5 billion of equity to fund its buyout by Vista Equity Partners and Evergreen Coast Capital Corp. for $104.00 in cash per share and merger with Tibco Software Inc., one of Vista’s portfolio companies, to repay existing debt at Citrix and Tibco and to add cash to the balance sheet.

BofA Securities Inc., Credit Suisse Securities (USA) LLC, Goldman Sachs Bank USA, Barclays, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., KKR Capital Markets LLC, Mizuho Bank, Morgan Stanley Senior Funding Inc., RBC Capital Markets, Apollo Global Funding, Jefferies LLC, HSBC Securities (USA) Inc., Macquarie Capital (USA) Inc., Nomura Securities International Inc., Truist Securities Inc., UBS Securities LLC, Wells Fargo Securities LLC, Fifth Third Bank, ING Capital LLC, Intesa Sanpaolo, KeyBanc Capital Markets Inc., MUFG, Natixis, Santander Bank, The Bank of Nova Scotia, Silicon Valley Bank, Societe Generale, Stifel Nicolaus and Co., SPC Capital Markets LLC, TD Securities (USA) LLC and U.S. Bank are leading the credit facilities.

Closing is expected during the last week of September, subject to customary conditions.

Citrix is a Fort Lauderdale, Fla.-based provider of secure, unified digital workspace technology. Tibco is a Palo Alto, Calif.-based infrastructure and business intelligence software company.

Farfetch holds call

Farfetch held a lender call at 10 a.m. ET on Tuesday to launch a $400 million five-year covenant-lite first-lien term loan B (B1) talked at SOFR plus 600 bps to 625 bps with a 0.5% floor and an original issue discount of 95, the company revealed in a 6-K filed with the Securities and Exchange Commission.

The term loan is non-callable for one year, then at 103 in year two and par thereafter.

Commitments are due at noon ET on Sept. 27.

JPMorgan Chase Bank is leading the deal that will be used for general corporate purposes, working capital and funding of transaction fees and expenses.

Farfetch is a London-based online platform for the luxury fashion industry, connecting creators, curators and consumers.

Generation on deck

Generation Bridge set a lender call for 11:30 a.m. ET on Wednesday to launch a fungible $32.5 million incremental senior secured term loan B due February 2029 talked at SOFR+CSA plus 500 bps with a 0.5% floor and an original issue discount of 98.56, a market source said.

CSA is 11 bps one-month rate, 26 bps three-month rate and 43 bps six-month rate, and the incremental term loan has the same call protection as the existing term loan B, which is a 101 soft call until February 2023.

Commitments are due at noon ET on Sept. 27, the source continued.

Credit Suisse Securities (USA) LLC is leading the deal that will be used to fund a distribution to equity holders.

In connection with this transaction, pricing on the company’s existing term loan B will convert to SOFR from Libor. The spread is unchanged at 500 bps with a 0.5% floor.

Lenders are being offered a 50 bps consent fee, the source added.

Generation Bridge is an operator of power generation facilities.

Ontic readies loan

Ontic will hold a lender call at 10 a.m. ET on Wednesday to launch a non-fungible $85 million incremental covenant-lite first-lien term loan due October 2026, according to a market source.

Commitments are due at 5 p.m. ET on Sept. 27, the source added.

Nomura Securities is the left lead on the deal that will be used to repay revolver borrowings, for general corporate purposes, and to pay fees and expenses.

Ontic is a provider of OEM-licensed parts and aftermarket services for mature aerospace and defense platforms.

Fund flows

In more happenings, Monday’s actively managed loan fund flows were negative $203 million and loan ETFs were negative $17 million, sources said.

Outflows for loan funds week-to-date total an estimated $727 million, sources added.

Loan indexes

IHS Markit’s iBoxx loan indices declined on Monday, with the Leveraged Loan indices (MiLLi) closing out the day down 0.13% and the Liquid Leveraged Loan indices (LLLi) closing out the day down 0.13%.

Month to date, the MiLLi is down 0.40% and year to date its down 1.86%. The LLLi is down 0.64% month to date and down 3.04% year to date.

Average secondary market bids in the U.S. on Monday were 93.56, down 3.4% year to date.

According to the IHS Markit data, some of the top advancers on Monday were Hornblower’s November 2020 incremental covenant-lite term loan B at 71.17, up from 68.50, Cineworld’s February 2018 U.S. covenant-lite term loan at 47.63, up from 46.14, and Harland Clarke/Vericast’s August 2021 covenant-lite term loan at 71.50, up from 69.63.

Some top decliners on Monday were Heritage Power’s July 2019 term loan at 36.50, down from 39.24, Pabst Brewing’s May 2021 covenant-lite term loan B at 87, down from 90.21, and National CineMedia’s June 2018 term loan B at 72.38, down from 74.64.

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