Applied Systems, Focus Financial, Parkway Generation term loans free to trade

By Sara Rosenberg

New York, Nov. 18 – Applied Systems Inc. added a new money first-lien term loan to its amendment and extension transaction, finalized sizes on the extended first-and second-lien term loans and reduced pricing on the extended second-lien tranche before freeing up for trading on Friday.

Other deals to make their way into the secondary market during the session included Focus Financial Partners LLC and Parkway Generation LLC.

Applied Systems updated

Applied Systems added to its amendment and extension proposal a new money covenant-lite first-lien term loan due September 2026 to its transaction, that was talked with a size of $190 million in the morning and was increased to $215 million in the afternoon, a market source remarked.

The new money loan will repay $174.1 million of non-extended first lien term loan borrowings and $40.9 million of non-extended second-lien term loan borrowings.

Also, final sizes on the company’s extended tranches surfaced following an 11:30 a.m. ET recommitment deadline, with the extended covenant-lite first-lien term loan due September 2026 sized at $1,546,340,000, including the $215 million of new money, and the extended covenant-lite second-lien term loan due September 2027 sized at $564,710,000.

By comparison, the extended first-lien term loan was described at launch as up to $1.79 billion, with a minimum size of $895 million, and the extended second-lien term loan was described at launch as up to $606 million.

Applied flexes second-lien

Along with sizing updated, Applied Systems lowered pricing on its extended second-lien term loan to SOFR plus 675 basis points from SOFR plus 700 bps, the source continued.

The new money first-lien term loan and extended first-lien term loan are priced at SOFR plus 450 bps with a 0.5% floor, in line with price talk announced on the extended first-lien term loan at launch.

The new money first-lien term loan has an original issue discount of 99.5.

As before, the extended first- and second-lien term loans have a 50 bps extension fee, the first-lien term loan debt has 101 soft call protection for six months, the second-lien term loan debt has a 0.75% floor and 101 hard call protection for one year, and the loans have no CSA.

The company is getting an extended $80 million revolver due June 2026 as well.

Closing is expected in early December.

Applied frees up

Applied Systems’ bank debt broke for trading on Friday afternoon, with the extended and new money first-lien term loan quoted at 99¾ bid, par ¼ offered, and the extended second-lien term loan quoted at par bid, 101 offered, a trader said.

Nomura Securities, Jefferies LLC and Macquarie Capital (USA) Inc. are leading the deal that will be used to extend the existing revolver from June 2024, extend a portion of the existing first-lien term loan from September 2024, and extend the existing second-lien term loan from September 2025 while changing pricing from Libor plus 550 bps with a 0.75% floor.

The $284.29 million non-extended first-lien term loan remains priced at Libor plus 300 bps with a 0.5% floor and has no call protection.

The non-extended first-lien term loan was quoted at 99 bid, 99¾ offered in trading on Friday, the trader added.

Applied Systems is a University Park, Ill.-based cloud software provider to the property & casualty and benefits insurance industry.

Focus hits secondary

Focus Financial’s $1.76 billion term loan B due June 30, 2028 freed to trade as well, with levels quoted at 98½ bid, 99 offered, according to a trader.

Pricing on the term loan B is SOFR plus 325 bps with a 0.5% floor and it was sold at an original issue discount of 98.25. The debt has 101 soft call protection for six months and no CSA.

The company is also getting a $240 million delayed-draw term loan A.

During syndication, the term loan B was upsized from a revised amount of $1.75 billion and an initial size of $1.65 billion and the discount was tightened from revised talk of 98 and initial talk in the range of 97 to 98. Also, the term loan A was downsized from a revised amount of $250 million and an initial size of $350 million.

Focus refinancing

Proceeds from Focus Financial’s term loans (Ba3/BB-) will be used to refinance existing debt, including an existing first-lien term loan, and for general corporate purposes, which may include acquisitions.

The company is also extending its $650 million revolver from June 2024.

RBC Capital Markets and Stone Point Capital Markets are co-lead arrangers on the deal, and joint lead arrangers include BMO Capital Markets, Truist Securities, BofA Securities Inc., Capital One, Fifth Third, MUFG, Citizens, Huntington, Goldman Sachs Bank USA and BankUnited.

Focus Financial is a New York-based partnership of independent, fiduciary wealth management firms operating in the registered investment advisor industry.

Parkway breaks

Parkway Generation’s fungible $66,322,314 incremental term loan B due February 2029 and $8,677,686 term loan C due February 2029 surfaced in the secondary market, with the strip of debt quoted at 98½ bid, 99¼ offered, a trader remarked.

In order to facilitate the fungible trading of the term loan B/term loan C foans following the incurrence of the incremental loans, a pro-rata portion of each existing term C Loan will be converted into term B loans in the amount of $8,677,686. As a result, pro forma for the transaction, the term loan B will grow by $75 million to $1.07 billion and the term loan C will be unchanged at $140 million.

Pricing on the term loan debt (BB) is SOFR+CSA plus 475 bps with a 0.75% floor and it was sold at an original issue discount of 98.6. CSA is 11.4 bps one-month rate, 26.2 bps three-month rate and 42.8 bps six-month rate. The debt has 101 soft call protection for six months.

Parkway transitioning

With this transaction, Parkway Generation’s existing term loan debt will shift to SOFR+CSA plus 475 bps with a 0.75% floor from Libor plus 475 bps with a 0.75% floor.

Existing lenders were offered a 50 bps amendment fee.

Morgan Stanley Senior Funding Inc. is the left lead on the deal.

The incremental term loan debt will be used to fund a special dividend and pay transaction fees and expense.

Closing is expected on Tuesday.

Parkway Generation is a portfolio of natural gas-fired power generation facilities.

Fund flows

In other news, actively managed loan fund flows on Thursday were negative $46 million and loan ETFs were positive $55 million, according to market sources.

Loan funds reported weekly outflows of $180 million, including positive $328 million ETFs. This was the thirteenth consecutive withdrawal for loans and twenty second in the past 23 weeks.

Outflows for the past 13 weeks totaled $13.1 billion or 14% of weekly AUM, sources said.

Net inflows for loan funds since the beginning of 2021 are down to $41 billion and dedicated loan fund AUM is down to $109 billion from as much as $142 billion in May.

Outflows for loan funds year to date total $5.6 billion, including negative $2.6 billion ETF, sources added.

Loan indices soften

IHS Markit’s iBoxx loan indices were down on Thursday, with the Leveraged Loan indexes (MiLLi) closing out the day down 0.14% and the Liquid Leveraged Loan indices (LLLi) closing out the day down 0.28%.

Month to date, the MiLLi is up 1.10% and year to date its down 1.68%. The LLLi is up 1.06% month to date and down 2.41% year to date.

Average secondary market bids in the U.S. on Thursday were 92.46, down 0.04% from the previous day and down 4.53% year to date.

According to the IHS Markit data, some of the top advancers on Thursday were Envision Healthcare’s July 2022 second out covenant-lite term loan at 40, up from 38.67, Casa Systems’ December 2016 covenant-lite term loan at 83.92, up from 82.25, and Cooper-Standard’s November 2016 covenant-lite term loan B at 92.36, up from 90.86.

Some top decliners on Thursday were Heritage Power’s July 2019 term loan at 32.56, down from 33.90, AMC Entertainment’s April 2019 covenant-lite term loan B at 58.60, down from 60.98, and Pathway Vet’s January 2021 covenant-lite term loan at 89.38, down from 92.61.

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