HUB frees to trade; Nomad Foods, Blackstone Mortgage, Angus set talk; Tenneco on deck

By Sara Rosenberg

New York, Oct. 31 – HUB International launched an incremental term loan on Monday morning, finalized the original issue discount at the tight end of guidance in the afternoon and then freed the deal up for trading late in the day.

Also, Nomad Foods, Blackstone Mortgage Trust Inc. and Angus Chemical Co. approached lenders with new term loans, and Tenneco Inc. (Pegasus Merger Co.) joined this week’s primary calendar.

And, in more happenings, Petmate (Astro One Acquisition Corp.) saw quotes on its first-lien term loan weaken in the secondary market on the back of debt and corporate downgrades from Moody’s Investors Service, and Team Health Holdings Inc.’s extended term loan was unchanged to down on the heels of a rating downgrade from S&P Global Ratings.

HUB launches, breaks

HUB International held a lender call at 10 a.m. ET on Monday, launching an $850 million seven-year incremental senior secured covenant-lite term loan B (B2/B) at talk of SOFR plus 400 basis points with a 25 bps step-down upon an initial public offering, a 0.75% floor and an original issue discount of 95 to 96, a market source remarked.

The incremental term loan has 101 soft call protection for six months and 0 bps CSA.

Commitments were due at 3 p.m. ET, after which the discount was set at 96, the tight end of talk.

The incremental term loan then made its way into the secondary market late in the day, with levels quoted at 97 bid, 97½ offered, a trader added.

Morgan Stanley Senior Funding Inc., JPMorgan Chase Bank, Barclays, BofA Securities Inc., Goldman Sachs Bank USA, Macquarie Capital (USA) Inc., Nomura and BMO Capital Markets are leading the deal that will be used to fund current and future acquisitions under letters of intent, refinance revolver borrowings, and pay fees, expenses and original issue discount associated with the transaction.

HUB, a Chicago-based insurance brokerage, expects to close on the loan on Nov. 10.

Nomad holds call

Nomad Foods emerged in the morning with plans to hold a lender call at 10 a.m. ET on Monday to launch an $825 million seven-year senior secured covenant-lite term loan B talked at SOFR plus 425 bps with a 0.5% floor, an original issue discount of 95 to 96 and 101 soft call protection for six months, a market source said.

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

Citigroup Global Markets Inc. and Morgan Stanley Senior Funding Inc. are the joint lead arrangers on the deal. Deutsche Bank Securities Inc., Goldman Sachs Bank USA, JPMorgan Chase Bank and Jefferies LLC are joint passive leads. Credit Suisse is the administrative agent.

The new loan will be used to help refinance an existing $907 million U.S. term loan B due 2024, for general corporate purposes and to pay transaction expenses.

Closing is expected on Nov. 10.

Nomad Foods is a U.K.-based frozen foods company.

Blackstone shops add-on

Blackstone Mortgage Trust surfaced early in the day with plans to hold a lender call at 1 p.m. ET to launch a fungible $250 million add-on term loan B-4 (BB-) due 2029 talked with an original issue discount of 96.5, a market source remarked.

Pricing on the add-on term loan is SOFR plus 350 bps with a 0.5% floor and no CSA.

The add-on term loan and the existing $499 million term loan B-4 are getting 101 soft call protection for six months, the source continued.

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

JPMorgan Chase Bank is leading the deal that will be used for general corporate purposes.

Blackstone Mortgage Trust is a New York-based real estate finance company.

Angus seeks loan

Angus Chemical held a lender call at 3 p.m. ET, launching a non-fungible $125 million incremental term loan (B2/B-) due November 2027 talked at SOFR plus 475 bps with a 25 bps step-down up an initial public offering, a 0.75% floor, an original issue discount of 92 to 93 and 101 soft call protection for six months, a market source said.

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

JPMorgan Chase Bank is leading the deal that will be used for general corporate purposes, to fund an acquisition and to refinance existing debt.

Angus is a Buffalo Grove, Ill.-based specialty and fine chemical company.

Tenneco coming soon

Tenneco scheduled a lender call for 1:30 p.m. ET on Tuesday to launch a $1.4 billion six-year covenant-lite senior secured term loan B, according to a market source.

The company is also getting a revolver and a term loan A, the source said.

Citigroup Global Markets Inc., BofA Securities Inc., Barclays, BNP Paribas Securities Corp., Jefferies LLC, RBC Capital Markets, TD Securities (USA) LLC, Wells Fargo Securities LLC, Deutsche Bank Securities Inc., BMO Capital Markets, Credit Suisse Securities (USA) LLC, Goldman Sachs Bank USA, ING, Mizuho, MUFG, Santander and U.S. Bank are leading the deal.

The credit facilities will be used with senior secured notes, a senior secured bridge facility, a senior unsecured bridge facility, equity and cash from the balance sheet to fund the buyout of Tenneco by Apollo for $20.00 per share, or about $7.1 billion, including debt, to refinance existing debt, and to pay fees and expenses.

Closing is expected in mid-November.

Tenneco is a Lake Forest, Ill.-based designer, manufacturer and marketer of automotive products for original equipment and aftermarket customers.

Primary mood improves

Monday was one of the busiest days on the new issue front in a while, with the four lender calls mentioned above – HUB International, Nomad Foods, Blackstone Mortgage and Angus Chemical – taking place and the addition of Tenneco to this week’s calendar.

One source explained that “a slight improvement in mood and clearing the decks before Thanksgiving on well-liked high-quality credits” is the message he was hearing on the reason behind the new issue activity.

He attributed the improvement in mood to “GDP growth and the stock market’s move”.

Petmate softens

Back to the secondary market, Petmate’s first-lien term loan was quoted lower in the secondary market following ratings downgrades from Moody’s Investors Service, with levels dropping to 77 bid, 80 offered on Monday from 79 bid, 81 offered on Friday, according to a trader.

“This downgrade [is] really not going to affect sentiment much as it was already hanging out in stressed land from a credit perspective,” the trader remarked, adding that the debt rarely trades.

On Friday, the company’s first-lien senior secured term loan and corporate family rating were downgraded to Caa1 from B3, and its second-lien senior secured term loan was cut to Caa3 from Caa2. The outlook is negative.

Moody’s said the downgrade reflects the company’s weakened operating performance and very high financial leverage driven by macroeconomic pressures including weaker consumer demand, commodity inflation, ocean freight, raw materials, and labor costs, resulting in declining profitability and weakening margins.

Without a material improvement in operating performance and meaningful debt reduction, Moody’s expects Petmate’s capital structure to become increasingly unsustainable. Moody’s adjusted debt/EBITDA has increased above 11x as of March 2022, and EBITDA/interest coverage is about 1.5x.

Petmate is an Arlington, Tex.-based manufacturer of pet products.

Team Health downgraded

Team Health’s extended 2027 term loan was quoted by one trader at 82 bid, 84 offered, down from 83 bid, 85 offered on the back of a downgrade by S&P Global Ratings of the company’s issuer credit rating to CCC+ from B- late Friday. However, a second trader had the 2027 term loan unchanged on Monday at 83 bid, 85 offered.

The non-extended 2024 term loan was quoted by both traders at 91 bid, 93 offered, in line with Friday’s levels.

The rating outlook is negative.

S&P said that the downgrade reflects weakened cash flow prospects, in large part due to rising interest rates. The company is expected by S&P to generate minimal free operating cash flow over the next couple of years, which is believed to be unsustainable for its capital structure.

In addition, S&P said that refinancing risks for Team Health have also increased, with about $1.2 billion of debt maturities in February 2024 that have yet to be refinanced and credit market conditions remain challenging.

Team Health is a Knoxville, Tenn.-based physician services organization.

Loan indices rise

In other news, IHS Markit’s iBoxx loan indices were stronger on Friday, with the Leveraged Loan indexes (MiLLi) closing out the day up 0.13% and the Liquid Leveraged Loan indices (LLLi) closing out the day up 0.16%.

Month to date, the MiLLi is up 0.79% and year to date its down 2.87%. The LLLi is up 1.21% month to date and down 3.65% year to date.

Average secondary market bids in the U.S. on Friday were 92.35, down 4.61% year to date.

According to the IHS Markit data, some of the top advancers on Friday were National CineMedia’s June 2018 term loan B at 43, up from 40.50, Envision Healthcare’s October 2018 covenant-lite unvoted term loan at 28.94, up from 27.95, and LogMeIn’s August 2020 covenant-lite term loan B at 64.58, up from 62.75.

Some top decliners on Friday were Electronics for Imaging’s July 2019 covenant-lite term loan at 73.88, down from 77.11, Mitel Networks’ November 2018 covenant-lite term loan at 56.19, down from 58.29, and Clarion Events’ February 2018 covenant-lite term loan B2 at 60.83, down from 62.5.

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