Fortrea frees up; Catalent up with earnings; EG Group, Heritage Grocers talk surfaces

By Sara Rosenberg

New York, June 12 – Fortrea lowered the spread on its term loan B, added a leverage-based pricing step-down and finalized the original issue discount at the tight end of guidance, and then the debt freed to trade on Monday.

Also, in the secondary market, Catalent Inc.’s term loan headed higher after the company released third quarter earnings results.

Meanwhile, back in the primary market, EG Group and Heritage Grocers Group released price talk on their term loans in connection with their lender calls, and Ineos Enterprises Holdings Ltd. joined this week’s new issue calendar.

Fortrea revised

Fortrea trimmed pricing on its $570 million seven-year term loan B to SOFR plus 375 basis points from talk in the range of SOFR plus 400 bps to 425 bps, added a 25 bps step-down at 3.2x first-lien net leverage and set the original issue discount at 98.5, the tight end of the 98 to 98.5 talk, according to a market source.

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

In addition to the term loan B, the company’s $1.52 billion of credit facilities (Ba3/BB/BB+) include a $450 million revolver and a $500 million term loan A.

Goldman Sachs Bank USA, Barclays, BofA Securities Inc., Citigroup Global Markets Inc., JPMorgan Chase Bank, MUFG, PNC Bank and Wells Fargo Securities LLC are leading the deal.

Fortrea breaks

Recommitments for Fortrea’s term loan B were due at noon ET on Monday, and the debt started trading in the afternoon, with levels quoted at 99 bid, 99¼ offered, the source added.

The credit facilities will be used with $570 million of senior secured notes to fund the spinoff of the company from Labcorp, under which Fortrea will make an expected $1.605 billion cash distribution to Labcorp.

Closing is expected in late June, subject to certain customary conditions.

Fortrea is a Durham, N.C.-based contract research organization providing comprehensive phase I through IV biopharmaceutical product and medical devices services.

Catalent strengthens

Catalent’s term loan moved up to 96½ bid, 97½ offered on Monday from 96 bid, 97 offered on Friday as the company released third quarter results that were not as bad as some were expecting, a market source said.

For the third quarter, the company reported net revenue of $1.04 billion, compared to $1.27 billion in the third quarter a year ago, and net loss of $227 million, or $1.26 per diluted share, versus net earnings of $141 million, or $0.78 per diluted share, in the comparable 2022 period.

EBITDA from operations was a loss of $125 million, a decrease of $433 million from the $308 million reported in the third quarter in the prior year. Adjusted EBITDA was $105 million, compared to $339 million in the 2022 third quarter.

Earlier this year, the company disclosed that it was facing productivity issues and higher-than-expected costs at three of its facilities, and potential non-cash adjustments related to its operations in Bloomington, Ind.

Catalent is a Somerset, N.J.-based provider of development sciences and manufacturing platforms for medicines.

EG Group guidance

EG Group held its lender call on Monday morning and announced talk on its $2.791 billion first-lien term loan B due February 2028 at SOFR plus 525 bps to 550 bps with a 0.5% floor and an original issue discount of 96 to 97, a market source remarked.

Furthermore, the company launched its €2.117 billion first-lien term loan B due February 2028 at talk of Euribor plus 525 bps to 550 bps with a 0% floor and a discount of 96 to 97, its £600 million first-lien term loan B due February 2028 at talk of Sonia plus 625 bps to 650 bps with a 0% floor and a discount of 96, and its A$378 million first-lien term loan B due February 2028 at talk of BBSY plus 525 bps to 550 bps with a 0% floor and a discount of 96 to 97, the source added.

Commitments are due on June 21.

EG Group lead banks

Barclays is the sole physical bookrunner, a joint global coordinator and the administrative agent on EG Group’s term loans. Other joint global coordinators are JPMorgan Chase Bank, Deutsche Bank Securities Inc. and Rabobank. BofA Securities Inc., Barclays, Deutsche Bank, Goldman Sachs, HSBC Securities, ING, JPMorgan, Lloyds, Morgan Stanley Senior Funding Inc., Rabobank, SMBC and UBS Investment Bank are joint bookrunners.

The new debt will be used to amend and extend existing U.S. dollar, euro, sterling and Australian dollar first-lien term loans due February 2025 and an existing U.S. first-lien term loan due March 2026.

EG Group is a Blackburn, U.K.-based convenience retail and fuel station company.

Heritage Grocers talk

Heritage Grocers launched on its afternoon call its fungible $460 million add-on term loan B (B2/B) due Aug. 1, 2029 with original issue discount talk of 97, a market source said.

Like the existing $432 million term loan B, the add-on term loan is priced at SOFR+10 bps CSA plus 675 bps with a 0.75% floor and has 101 hard call protection until August.

Commitments are due at 5 p.m. ET on June 22, the source added.

RBC Capital Markets, Wells Fargo Securities LLC, Rabobank, Natixis, BMO Capital Markets, Deutsche Bank Securities Inc., Jefferies LLC and Nomura are leading the deal that will be used to help fund the acquisition of El Rancho Supermercado, an Addison, Tex.-based Hispanic-focused specialty grocer.

Heritage Grocers is an Ontario, Calif.-based Hispanic-focused specialty grocer that was formed through the merger of Tony’s Fresh Market and Cardenas Market.

Ineos on deck

Ineos Enterprises set a lender call for 11 a.m. ET on Tuesday and small group meetings on Tuesday, Thursday and Friday to launch a €650 million equivalent U.S and euro seven-year senior secured term loan B (Ba3/BB/BB+), according to a market source.

The U.S. and euro term loan split is subject to minimum benchmark sizes on both tranches.

Talk on the term loans is SOFR/Euribor plus 400 bps to 425 bps with a 0% floor and an original issue discount of 98 to 98.5, the source said. The U.S. loan has 10 bps CSA.

Commitments are due at noon ET on June 22, the source added.

Barclays is the global coordinator on the U.S. loan, and Barclays, MUFG and NatWest are the joint global coordinators and physical bookrunners on the euro loan. ABN Amro, Banco Santander, Fifth Third and JPMorgan are mandated lead arrangers. Barclays is the administrative agent.

The debt will be used to refinance the company’s initial U.S. term loan B, to pay transaction fees and expenses, and for working capital and general corporate purposes, including acquisitions and the debt repayment.

Ineos Enterprises is a specialty and commodity chemical producer based in the United Kingdom.

Fund flows

In other news, actively managed loan fund flows on Friday were negative $39 million and loan ETFs were positive $105 million, market sources remarked.

Actively managed high-yield fund flows on Friday were positive $43 million and high-yield ETFs were negative $195 million, sources added.

Loan indices rise

IHS Markit’s iBoxx loan indices were stronger on Friday, with the Leveraged Loan indexes (MiLLi) closing out the day up 0.11% and the Liquid Leveraged Loan indices (LLLi) closing out the day up 0.17%.

Month to date, the MiLLi is up 0.89% and year to date it is up 4.83%, and the LLLi is up 1.1% month to date and up 4.98% year to date.

Average secondary market bids in the U.S. on Friday were 91.24, up 0.04% from the previous day and down 0.7% year to date.

According to the IHS Markit data, some of the top advancers on Friday were McAfee/Magenta’s July 2021 covenant-lite term loan B at 75.89, up from 70.73, City Brewing’s April 2021 covenant-lite term loan at 49.5, up from 47.43, and National CineMedia’s June 2018 term loan B at 31, up from 30.1.

Some top decliners on Friday were Diebold’s December 2022 super priority covenant-lite term loan at par, down from 118.65, EyeCare Partners’ December 2020 covenant-lite term loan B at 68.17, down from 72.86, and Win Waste/Waste Innovations’ March 2021 covenant-lite term loan B at 81.33, down from 86.41.

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