Quest Software term loans soften with downgrade news; Upfield discloses price talk

By Sara Rosenberg

New York, June 26 – Quest Software’s first- and second-lien term loans headed lower in the secondary market on Monday in reaction to the company’s issuer credit and term loan debt ratings being downgraded by S&P Global Ratings.

Meanwhile, in the primary market, Upfield released price talk on its amended and extended term loans in connection with its lender call.

Quest Software slides

Quest Software’s term loans fell in trading on Monday after S&P cut the company’s issuer credit and first-lien credit facility rating to CCC+ from B- and second-lien term loan rating to CCC from CCC+, a trader remarked. The outlook is stable.

The first-lien term loan was quoted at 77 bid, 80 offered, down from 81¼ bid, 82¾ offered on Friday, and the second-lien term loan was quoted at 68 bid, 72 offered, down from 71½ bid, 73½ offered, the trader added.

S&P said in the rating release that the company is expected to report a second year of negative free cash flow in 2024 as the impact of higher interest expense overwhelms recent improvements in profitability and sales execution.

The rating agency went on to say that the current interest rate environment has made the company’s capital structure unsustainable and Quest would need to considerably improve its operating performance to generate consistently positive free cash flow.

As a result, S&P downgraded the company’s ratings. However, the stable outlook reflects the expectation that the company will continue to grow subscription-based revenues while maintaining adequate liquidity.

Quest Software is a cybersecurity, data intelligence and IT operations management software provider.

Upfield guidance

Upfield held a lender call on Monday morning, launching an $883 million term loan B due January 2028 at talk of SOFR plus 475 basis points to 500 bps with an original issue discount of 97.5, a €2.375 billion term loan B due January 2028 at talk of Euribor plus 475 bps to 500 bps with a discount of 97.5, and a £656 million term loan B due January 2028 at talk of Sonia plus 575 bps with a discount of 97, according to a market source.

All of the term loans have 101 soft call protection for six months.

Commitments are due at 10 a.m. ET on July 6, the source added.

KKR Capital Markets is the sole physical bookrunner on the deal. BNP Paribas Securities Corp., Citigroup Global Markets Inc., Credit Agricole, Credit Suisse, Deutsche Bank Securities Inc., Goldman Sachs, HSBC Securities, ING, Mizuho, RBC Capital Markets, Societe Generale and UniCredit are joint bookrunners.

The debt will be used to amend and extend an existing $833 million term loan B due July 2025 that is priced at SOFR plus 300 bps, an existing €2.375 billion term loan B due July 2025 that is priced at Euribor plus 350 bps and an existing £656 million term loan B due July 2025 that is priced at Sonia plus 400 bps.

Upfield is an Amsterdam-based plant-based consumer product company.

Fund flows

In other news, actively managed loan fund flows on Friday were negative $31 million and loan ETFs were negative $9 million, market sources said.

Year to date, outflows for loan funds total $18.3 billion, with negative $1.4 billion ETFs, sources added.

Loan indices mixed

IHS Markit’s iBoxx loan indices were mixed on Friday, with the Leveraged Loan indexes (MiLLi) closing out the day up 0.03% and the Liquid Leveraged Loan indices (LLLi) closing out the day down 0.01%.

Month to date, the MiLLi is up 1.64% and year to date it is up 5.61%, and the LLLi is up 1.69% month to date and up 5.6% year to date.

Average secondary market bids in the U.S. on Friday were 91.38, unchanged from the previous day and down 0.54% year to date.

According to the IHS Markit data, some of the top advancers on Friday were U.S. Renal Care’s June 2019 term loan B at 46.71, up from 44.42, Emerald Expo’s May 2017 covenant-lite term loan B at par, up from 97.13, and VeriFone’s August 2018 covenant-lite term loan at 92.17, up from 89.63.

Some top decliners on Friday were CPC Acquisition’s December 2020 covenant-lite term loan at 76.42, down from 78.65, Cumulus Media’s September 2019 covenant-lite term loan B at 75.5, down from 77.43, and Diamond Sports/Sinclair/Regional Sports’ March 2022 first priority term loan at 76.3, down from 77.83.

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