Kepro increases pricing on first- and second-lien term loans

By Sara Rosenberg

New York, May 9 – Kepro (Keystone Acquisition Corp.) lifted pricing on its $205 million seven-year first-lien term loan (B1/B) to Libor plus 525 basis points from talk of Libor plus 400 bps to 425 bps and on its $100 million eight-year second-lien term loan (Caa2/CCC+) to Libor plus 925 bps from talk of Libor plus 800 bps to 825 bps, according to a market source.

Also, the original issue discount on the first-lien term loan was changed to 98 from 99 and the discount on the second-lien term loan was revised to 98 from 98.5, the source said.

The 101 soft call protection on the first-lien term loan was extended to one year from six months.

Furthermore, on the first-lien term loan, the unlimited first-lien incremental debt was reduced to up to 3.5 times first-lien net leverage and unlimited junior lien incremental debt was reduced to up to 5.5 times total secured net leverage, the unsecured debt capacity was reduced to 5.5 times from 6.0 times and the 2.0 times interest coverage ratio test was removed, the unlimited investment capacity was lowered to 4.25 times total net leverage from 4.75 times, and the unlimited restricted payments and subordinated debt prepayments was reduced to 4.0 times total net leverage from 4.25 times, the source continued.

Leverage-based baskets on the second-lien term loan were set to equal first-lien baskets.

In addition, the excess cash flow sweep on the first-lien term loan was increased to 75% in excess of $5 million with step-downs to 50%, 25% and 0% at first-lien net leverage of 3.25 times, 2.75 times and 2.25 times, respectively, and on the second-lien term loan was increased to 75% in excess of $5 million with step-downs to 50%, 25% and 0% at total secured net leverage of 5.25 times, 4.75 times and 4.25 times, respectively.

Other changes to both term loans included reducing the incremental freebie basket to $40 million with no grower, removing the MFN sunset, adding a 0.25 times step-down after eight fiscal quarters to the maximum total net leverage ratio covenant, and removing the leveraged-based step-downs for repayments from asset sale proceeds.

Both term loans still have a 1% Libor floor, and the second-lien term loan still has hard call protection of 102 in year one and 101 in year two.

The company’s $330 million in credit facilities also provide for a $25 million revolver (B1/B).

RBC Capital Markets LLC and Capital One are the joint bookrunners and joint lead arrangers on the deal.

Recommitments were scheduled to be due at 1 p.m. ET on Tuesday, the source added.

Allocations are targeted for Wednesday.

Proceeds will be used to help fund the buyout of the company.

Kepro is a Harrisburg, Pa.-based quality improvement and care management organization.

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