LSF8 gives early tender update for DFC’s 10½%/12% PIK, 10½% notes

By Susanna Moon

Chicago, Nov. 8 – LSF8 Bond Holdings, Ltd. said investors had tendered $534,096,865, or 96.07%, of the 10½%/12% senior secured PIK toggle notes due 2020 and $54,815,000, or 99.73%, of the $54,961,000 10½% senior secured notes due 2020 as of the early tender deadline at 5 p.m. ET on Nov. 7.

The notes were issued by DFC Finance Corp. LSF8 is under common control with Lone Star Fund VIII (U.S.), LP and Lone Star Fund VIII (Bermuda) LP, which indirectly own DFC Finance.

The tendered percentage for the PIK notes excludes any notes owned by DFC Finance or any of its affiliates, according to company notice.

The tender offer will continue until midnight ET at the end of the day on Nov. 22.

As a result, holders have tendered more than 66 2/3% of the principal amount of each series so far.

LSF8 is also soliciting from noteholders, on behalf of DFC Finance, consents to proposed amendments to the applicable indenture for each series of notes.

The proposed amendments, if adopted, would:

• Eliminate or amend some of the covenants in each of the indentures, some reporting obligations, some events of default and related provisions;

• Terminate a turnover agreement dated Aug. 19, 2016 between LSF8 and TMI Trust Co. and a contribution commitment letter dated Aug. 19, 2016 among Lone Star Fund VIII (U.S.), TMI Trust and Sterling Mid-Holdings Ltd.;

• Modify the priority of the liens on the collateral securing the notes to make those liens junior to the liens on the collateral securing the company’s ABL credit facility obligations and any other credit facility obligations;

• Modify the release provisions of the indentures to provide for the automatic release of the collateral agent’s lien on any assets constituting collateral upon the release of all liens on those assets securing any credit facility obligations and any other pari passu obligations; and

• Modify the voting provisions of the intercreditor agreement and U.S. collateral agreement to permit senior secured notes held by affiliates of DFC Finance (other than Sterling Mid-Holdings and its subsidiaries) to be voted with respect to any proposed action under those agreements requiring noteholder consent.

The total amount payable for notes tendered by the early tender date is $0.68 per $1.00 principal amount of PIK toggle notes and $650 per $1,000 principal amount of non-PIK notes. The total payment includes an early participation premium of $0.03 and $30, respectively.

Holders who tender their notes after the early tender deadline will receive the tender price, which is the total amount less the early tender premium.

Holders of non-PIK notes also will receive a cash amount equal to the accrued interest up to but excluding the settlement date. Holders of PIK notes will receive cash for the accrued interest up to but excluding the settlement date equal to (a) the amount of interest for the period that DFC Finance has elected to pay in cash plus (b) for interest for that period that DFC Finance has elected to pay in the form of additional PIK notes, the tender consideration per $1.00 principal amount of those additional PIK notes.

Holders may not tender their notes without delivering their consents, and holders may not deliver their consents without tendering their notes.

Tenders may not be withdrawn after the early tender deadline.

As previously announced, the early tender date and expiration date were extended from 5 p.m. ET on Nov. 3 and midnight ET at the end of the day on Nov. 20, respectively.

As of 5 p.m. ET on Nov. 1, about $8.78 million, or 1.06%, of the outstanding PIK notes, and about $140,000, or 0.26%, of the outstanding non-PIK notes, had been tendered for purchase in the offer.

Eaglehill Advisors LLC (212 405-1200) is acting as dealer manager and solicitation agent. Global Bondholder Services Corp. (212 430-3774 for brokers and banks or 866 807-2200 for all others) is acting as the information and tender agent.

DFC is a non-bank provider of alternative financial services based in Malvern, Pa.

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