PRESS DIGEST- British Business - June 28
June 28 The following are the top stories on the business pages of British newspapers. Reuters has not verified these stories and does not vouch for their accuracy.
NEW YORK, June 8 Middle market lenders are losing higher yielding assets to the institutional loan market as companies such as US Anesthesia Partners, attracted by the lower spreads, opt to tap the broadly syndicated market, leaving private credit managers to reinvest repayment proceeds at lower yields.
Private debt investors have been battling against an increasingly aggressive middle market environment, where portfolio yields have been eroded by several quarters of tightening spreads and covenant-lite volume has soared.
Year-to-date middle market institutional issuance including deals still in process has reached US$18.08bn, already surpassing the US$10.67bn booked in the first half of last year, as larger rated middle market borrowers take advantage of demand from institutional loan buyers, such as Collateralized Loan Obligations (CLO).
Anesthesia services provider US Anesthesia is arranging a US$1.4bn first- and second-lien loan via the broadly syndicated loan market, the proceeds of which will be used to refinance the company’s more costly existing debt and fund a US$162m distribution to the company’s shareholders.
At least eight business development companies have exposure to US Anesthesia’s existing credit facilities, data from Thomson Reuters LPC’s BDC Collateral show.
The new US$950m first-lien term loan is guided in the 325bp-350bp over Libor range, compared to the existing spread of 500bp over Libor. Faced with minimum portfolio yield requirements, some middle market credit managers are unlikely to be able to stay in the deal.
Without a significant supply of new money deals in which to invest as repayments accelerate, investors are forced to decide whether to chase the market down, holding onto assets they like, or to be taken out by the institutional market and hopefully earning favorable prepayment fees.
“You don’t like to lose the asset, but at least you want to get paid on the way out,” said one middle market direct lender.
US Anesthesia’s deal is being arranged by a syndicate of banks led by Goldman Sachs with Barclays, JP Morgan, Morgan Stanley, Antares Capital, BMO and CapitalOne and has been rated - a first for the company. A credit rating significantly widens the base of potential investors. Goldman Sachs declined to comment.
Moody’s assigned a B2 corporate family rating. The first-lien debt carries a B1 rating and the second-lien loan carries a Caa1 rating. S&P rated the company B and assigned a B rating to the first-lien debt and a CCC+ rating to the second-lien debt.
The deal also includes a US$150m revolving credit facility and a US$300m privately-placed second-lien term loan. Ares and Metlife are among the lenders taking down the second-lien loan - both members of the existing syndicate, sources said.
US Anesthesia’s current capital structure includes an US$850m term loan and US$210m second-lien term loan, which grew over time through a series of add-on transactions since investment firm Welsh, Carson, Anderson & Stowe announced the formation of single-specialty physician services organization in 2012. The sponsor owns 44% of the company while the physician partners and management own the rest.
The company now generates approximately US$200m in earnings before taxes, depreciation and amortization, according to sources.
In another example of middle market companies jumping to the institutional loan market, travel document services provider CIBT Global Inc has finalised a US$515m covenant-lite loan backing the company's buyout by Kohlberg & Company.
The transaction, split between a US$330m seven-year term loan, a US$120m eight-year second-lien term loan and a US$65m five-year revolver, saw first-lien pricing drop to 400bp over Libor with a 1% floor from 525bp. Pricing will step down to 375bp over Libor at 5.5 times total net leverage. The loan sold at a 99.75 OID, narrowing from the 99.5 offered at launch.
The second-lien tranche tightened to 775bp over Libor with a 1% floor from guidance of around 800bp. The discount was 99, unchanged from guidance.
An investor in the deal, who said he expected to hold onto the asset despite losing 125bp of spread, said a lot of people would exit that cannot go below 400bp.
Antares Capital was lead agent on both the first- and second-lien facilities, joined by Goldman Sachs and Jefferies as joint lead arrangers. Owl Rock was a joint lead arranger on the second-lien loan.
CIBT was also issued with a first-time B3 corporate family rating by Moody’s in May.
(Additional reporting by Andrew Berlin.) (Reporting by Leela Parker Deo and Jonathan Schwarzberg; Editing By Chris Mangham)
June 28 The following are the top stories in the Financial Times. Reuters has not verified these stories and does not vouch for their accuracy.
LONDON, June 28 Businesses in Europe underestimate the "slow-burn" effects of cyber attacks and need to prepare more fully for a loss of customers, a fall in share price and other potential consequences, Lloyd's of London said in a report on Wednesday.