Confluent Health firms $200 million term loan at Libor plus 500 bps

By Sara Rosenberg

New York, June 20 – Confluent Health LLC set pricing on its $200 million seven-year covenant-lite first-lien term loan (B3/B-) at Libor plus 500 basis points, the high end of the Libor plus 475 bps to 500 bps talk, according to a market source.

Also, the 101 soft call protection on the term loan was extended to one year from six months, the source said.

In addition, MFN was changed to 50 bps for life on all pari term loans incurred as incremental term loans from 75 bps with a six-month sunset and all MFN carve outs were removed.

Incremental was revised to be subject to a first-lien net leverage ratio of 4.5x from 5.5x or “no worse”, secured net leverage ratio of 6.0x from 6.5x or “no worse,” and total net leverage ratio of 6.5x from 6.5x or “no worse” or 2.0x interest coverage ratio for unsecured debt or “no worse,” and the inside maturity basket was removed.

Asset sales were modified to remove step-downs, make the sweep not limited to sales of assets constituting collateral and the reinvestment period was shortened to 12 months from 18 months.

Indebtedness was revised to include a first-lien net leverage ratio of 4.5x, instead of 5.5x or “no worse,” a secured net leverage ratio of 6.0x, instead of 6.5x or “no worse,” and a total net leverage ratio of 6.5x, instead of 6.5x or “no worse” or 2.0x interest coverage ratio for unsecured debt or “no worse.”

Unlimited restricted payments were changed to not to exceed 3.75x total net leverage from 4.25x total net leverage.

Restricted debt payments basket was changed to the greater of $10 million and 25% EBITDA from the greater of $20 million and 50% EBITDA, and unlimited restricted debt payments were adjusted to not to exceed 4.0x total net leverage from 4.5x total net leverage.

Available amount is now the greater of $10 million and 25% EBITDA plus excess cash flow builder, revised from the greater of $20 million and 50% EBTIDA plus builder, and the use of available amount for restricted payments and restricted debt payments is now also subject to total net leverage not to exceed 4.5x, the source continued.

Under investments, unlimited investments were changed to not to exceed 4.0x total net leverage from 5.0x total net leverage, investments in restricted subsidiaries and permitted acquisitions were revised to $10 million non-loan party sublimit shared between permitted acquisition and investments in restricted subsidiary baskets from no cap on permitted acquisitions of non-loan parties and no non-loan party sublimit on investments in restricted subsidiaries, investments in unrestricted subsidiaries were changed to 50% EBITDA from 100% EBITDA, and the provision for investments by non-loan parties with cash or assets received by such non-loan party pursuant to a permitted investment in it was removed.

The company is now required to hold quarterly management discussion and analysis calls.

The term loan still has a 0% Libor floor and an original issue discount of 99.

Deutsche Bank Securities Inc., Macquarie Capital (USA) Inc. and Bank of Ireland are the bookrunners on the deal.

Recommitments were scheduled to be due at 3 p.m. ET on Thursday, the source added.

Proceeds will be used to help support a significant equity investment in the company by Partners Group on behalf of its clients alongside management. The Edgewater Funds will divest its holding in the company as part of the transaction.

Confluent Health is a Louisville, Ky.-based outpatient physical therapy provider.

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