Royalty Pharma massively upsizes; G-III Apparel, OrthoLite outline investor-friendly changes

By Paul A. Harris

Portland, Ore., Oct. 4 – The bank loan market was flat to up ¼ point on Tuesday, according to a trader who added that it is an “all-bid, no-offers” story in the bank loan market.

“Everybody is buying what they can,” said the trader who added that despite what the dealers seem to be saying, paper is hard to get.

“Demand is coming from everywhere, and it’s forcing a wave of refinancings,” the source added.

As investors continue to anticipate a Fed move before the end of the year, cash continues to flow into the asset class, the trader said.

The daily flows of the dedicated bank loan retail funds were plus $5 million on Monday, the source added.

In the primary market, Royalty Pharma Investments Finance Trust upsized its six-year term loan B-5 to $3.4 billion from $705 million and tightened talk.

However, G-III Apparel Group Ltd. and OrthoLite made concessions to investors.

Royalty Pharma upsizes

Royalty Pharma Investments Finance Trust upsized its six-year term loan B-5 (Baa2/BBB-) to $3.4 billion from $705 million.

The upsize was telegraphed, as the deal appears to be playing to huge demand, the trader said.

Pricing tightened to Libor plus 250 basis points from earlier talk of 250 bps to 275 bps. As before, the deal, which comes with no Libor floor, is set to come at an original issue discount of 99.5.

Bank of America Merrill Lynch, Goldman Sachs Bank USA and J.P. Morgan Securities LLC are the lead arrangers on the deal.

The term loan has 101 soft call protection for six months and total leverage and fixed-charge coverage tests.

Proceeds will be used to refinance existing debt, including a term loan B-3 due in 2018. With the upsize, Royalty Pharma will refinance its term loan B-4, sources said.

Royalty Pharma is a New York-based acquirer of royalty interests in marketed and late-stage biopharmaceutical products.

First Data repricing

Details surfaced Tuesday on a First Data Corp. effort to reprice $4,368,000,000 and €154 million of first-lien term loans due March 24, 2021 (Ba3/BB), according to a market source.

Both tranches are talked at 300 bps to 325 bps over Libor and Euribor, respectively. Both are set to price at par, with no Libor floor, and with 101 soft call protection for six months.

Commitments are due at 5 p.m. ET Thursday.

Credit Suisse Securities (USA) LLC is the lead arranger.

First Data is an Atlanta-based provider of payment processing solutions.

Misys withdraws discount

Misys plc removed its offer of a discount on $1 billion equivalent of seven-year term loans B, according to a market source.

Both tranches, now sized at $400 million and €537 million, are set to price at par, with spreads of 325 bps to Libor and Euribor, respectively.

Pricing comes at the rich end of the 99.75 to par price talk. Earlier guidance was 99.5.

Earlier spread talk was 325 bps to 350 bps on the dollar-denominated loan and 350 bps to 375 bps on the euro-denominated tranche.

As reported, the dollar deal was upsized earlier to $400 million from $300 million, while the euro tranche was downsized to $600 million equivalent from $700 million equivalent.

Neither tranche has a Libor floor.

Both tranches include a ticking fee of half the spread from Nov. 7 to Dec. 6 and the full spread thereafter.

The company’s credit facility (BB) also includes a $200 million-equivalent five-year revolver and a $300 million-equivalent five-year term loan A.

Deutsche Bank Securities Inc. and Credit Suisse Securities (USA) LLC are the joint coordinators on the deal and bookrunners with Bank of America Merrill Lynch, Barclays, Goldman Sachs Bank USA, J.P. Morgan Securities LLC and Morgan Stanley Senior Funding Inc.

Proceeds will be used to refinance the company’s existing loans.

Misys is a London-based provider of financial services software.

G-III hikes talk

G-III Apparel Group hiked spread talk and price talk amid other investor-friendly changes to its $350 million six-year term loan B (B1/BB+), according to a market source.

Spread talk increased to Libor plus 525 bps from earlier talk of 450 bps to 475 bps.

Price talk deepened the original issue discount to 98 from 99.

The 101 soft call protection was increased to one year from six months.

The incremental allowance decreased to $125 million plus an unlimited amount up to 2.25 times first-lien net leverage. Previously, the allowance had been set at $175 million plus an unlimited amount up to 3.25 times first-lien net leverage.

The allowance is subject to 50 bps MFN for the life of the loan, increased from 12 months.

Mandatory prepayments on the term loan are from 100% of debt issuances, excluding permitted debt, 100% of net asset sales proceeds and net insurance proceeds in excess of an annual amount to be agreed, subject to a reinvestment period, and a 75% excess cash flow sweep at 3 times leverage, stepping down to 50% at 2.75 times and 25% at 2.25 times.

The company’s $1 billion senior secured credit facility also includes a $650 million five-year ABL revolver.

Barclays and J.P. Morgan Securities LLC are the joint lead arrangers on the term loan, and Barclays, JPMorgan and Bank of America Merrill Lynch are the joint lead arrangers on the revolver.

Proceeds will be used to help fund the acquisition of Donna Karan International Inc. and replace an existing $450 million ABL revolver.

Under the agreement, Donna Karan is being bought from LVMH Moet Hennessy Louis Vuitton for $650 million, subject to customary adjustments at closing.

Other funds for the transaction will come from $75 million of newly issued G-III common stock to LVMH and a $75 million 6.5-year seller note.

Closing is expected late this year or early next year, subject to certain conditions.

G-III Apparel is a New York-based designer, manufacturer and marketer of branded apparel and accessories.

Serta Simmons bank meeting

Serta Simmons plans to launch a $2,625,000,000 credit facility at a bank meeting set to get underway at 10:30 a.m. ET on Thursday in New York, according to a market source.

The deal, via arranger UBS Investment Bank, includes a $225 million ABL, a $1.9 billion first-lien term loan and a $500 million second-lien term loan.

The Atlanta-based mattress manufacturer plans to use the proceeds to refinance debt and fund a dividend to Advent International.

Augusta meeting Thursday

Arranger Antares Capital scheduled a Thursday lender meeting for Augusta Sportswear Group’s $435 million credit facility, according to a market source.

The deal features a $40 million revolver and a $395 million covenant-light term loan.

The Augusta, Ga.-based manufacturer and supplier of team uniforms, spiritwear and dancewear plans to use the proceeds to refinance debt.

K&N sets talk

K&N Engineering, Inc. set price talk for its $385 million credit facility, according to a market source.

A $235 million seven-year first-lien term loan is talked at Libor plus 450 bps to 475 bps, with a 1% Libor floor, at 99. The first-lien tranche comes with 101 soft call for six months and a 1% annual amortization rate.

A $110 million eight-year second-lien term loan is talked at Libor plus 850 bps to 875 bps, with a 1% Libor floor at 98. The second-lien loan becomes callable after one year at 102 and after two years at 101.

Commitments are due Oct. 14.

Goldman Sachs & Co. is the left bookrunner. UBS Investment Bank and KeyBanc Capital Markets are the joint bookrunners.

There is also a pro rata tranche in the form of a $40 million revolver.

The borrower is a Riverside, Calif.-based designer and manufacturer of high performance automotive and powersports aftermarket products.

OrthoLite outlines changes

OrthoLite made investor-friendly changes to its $200 million term loan B on Tuesday, according to a market source.

The spread to Libor was set at 500 bps, the wide end of the 475 bps to 500 bps spread talk.

The 1% Libor floor and an original issue discount of 99 remain unchanged.

The 101 soft call protection is increased to 12 months from six months.

Along with the spread and call changes, the borrower also brought an excess cash flow sweep which starts at 75%, steps down to 50% at 3.25 times total net leverage, to 25% at 2.5 times total net leverage and to 0% at 2 times total net leverage.

The company’s $212 million senior secured credit facility (B2) also includes a $12 million revolver.

Goldman Sachs Bank USA and Antares Capital are the leads on the deal.

Commitments were due on Tuesday afternoon.

Proceeds will be used to refinance existing debt and to fund a dividend.

OrthoLite is an Amherst, Mass.-based supplier and manufacturer of open-cell foam insoles to branded footwear companies.

TransDigm add-on

TransDigm Group Inc. launched on Tuesday a $650 million incremental first-lien term loan F with an original issue discount of 99 to 99.5, according to a market source.

The incremental loan (Ba2/B) will be fungible with the company’s existing term loan F.

Like the existing term loan, the add-on loan will mature in June 2023 and bear interest at Libor plus 300 basis points, subject to a 0.75% Libor floor.

The incremental term loan will have 101 soft call protection through June 2017.

Credit Suisse is the lead bank on the deal.

Commitments are due at 5 p.m. ET on Oct. 11, the source said.

The company is seeking the new term loan in connection with considering whether to pay a special dividend, according to an 8-K filed Tuesday with the Securities and Exchange Commission.

The company is considering paying a cash dividend of $1.1 billion to $1.5 billion using the proposed new term loan and cash on hand, according to a press release. The specific timing and aggregate amount of the dividend, if any, has not been determined, the company said.

TransDigm is a Cleveland-based designer, producer and supplier of highly engineered aircraft components for use on commercial and military aircraft.

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