November 29, 2017 / 6:11 PM / a year ago

LPC: US trucking company Western Express pulls refinancing loan

NEW YORK, Nov 29 (Reuters) - US truck carrier Western Express Inc has withdrawn a proposed US$250m leveraged loan refinancing from syndication after investors demanded higher pricing, sources said on Wednesday.

Western Express is one of several US firms to withdraw opportunistic deals in recent weeks as increased volatility in the high-yield bond market has made it tougher for lower-rated companies to cut their borrowing costs.

Midstream energy company EagleClaw shelved a repricing loan last week and orthopedic company DJO canceled a proposed amendment and extension of an existing loan two weeks ago.

BMO Capital Markets launched Western Express’ refinancing on November 9 with price talk in the range of 575bp-600bp over Libor with a 1% Libor floor and a 99 Original Issue Discount (OID).

Proceeds were earmarked to refinance the company’s existing term loan and repay borrowings under its revolving credit facility.

The deal also included a five-year US$60m asset-based revolving credit facility. The six-year term loan was structured with a 5.0 times total net leverage covenant and accelerated amortization of 3% per year. Lenders were offered 12 months of soft call protection at 101.

Higher initial price talk and the deal’s structure reflect some of the challenges facing Western Express, sources said.

Similarly rated leveraged loans have cleared with an average yield to three-year call of 5.32% since the beginning of November and at least 56% of institutional loans currently in market do not contain maintenance covenants, according to Thomson Reuters LPC data. The yield to three-year call on Western Express would have been 7.21% at the midpoint of guidance.

BMO and the company declined to comment.

Potential lenders highlighted the asset-based revolving credit facility as one shortcoming, as term loan holders would have had a second claim on the assets supporting the revolving credit and first claim on the company’s remaining assets, which are scant as Western Express leases the majority of its trucks.

“You’re really a second-lien loan,” an investor said.

The company’s competitive standing in the labor market also concerns some investors.

“They have a shortage of truckers,” another investor said. “They are a low payer and there’s heavy turnover.”

The deal would have brought Western Express’ debt-to-Ebitda, or earnings, before interest, taxes, depreciation and amortization to 3.8 times, based on US$85.8m of last 12-months’ Ebitda and US$322.4m of total debt, including the new US$250m term loan and US$72.4m in capital leases, the sources said.

The loan was assigned B2/B+ corporate and facility ratings by Moody’s Investors Service and Standard & Poor’s, respectively. (Reporting by Andrew Berlin; Editing By Tessa Walsh and Jon Methven)

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