US LBM term loan weakens; TransDigm, Flow Control disclose talk; Axalta Coating on deck

By Sara Rosenberg

New York, Nov. 29 – US LBM’s first-lien term loan softened in a secondary market on Tuesday that was otherwise described as generally unchanged and the company received ratings downgrades from Moody’s Investors Service.

Over in the primary market, TransDigm Inc. released price talk on its amended and extended first-lien term loan G in connection with its lender call, Flow Control Group (FCG Acquisitions Inc.) came to market with an incremental first-lien term loan, and Axalta Coating Systems Ltd. joined this week’s new issue calendar.

US LBM retreats

US LBM’s first-lien term loan was lower in trading on Tuesday, with one trader quoting it at 86¼ bid, 87¾ offered, down from 87 bid, 88½ offered, and another trader quoting it at 85¾ bid, 87¼ offered, down from 87 bid, 88½ offered.

During the session, Moody’s downgraded the company’s senior secured first-lien term loan and corporate family rating to B3 from B2, and senior unsecured notes and senior unsecured PIK toggle notes to Caa2 from Caa1. The outlook remains stable.

“Bain Capital continues to follow aggressive financial strategies, evidenced by a return of equity financed with borrowings under US LBM’s revolving credit facility. A material reduction in liquidity in an environment of declining single-family home construction and economic uncertainty warrants the rating downgrade. Bain has now monetized its entire investment in US LBM, favoring its interests over debt holders, said Peter Doyle, a Moody’s VP-senior analyst, in the ratings release.

According to Moody’s, US LBM paid a $650 million dividend to Bain with the revolver draw. Pro forma revolver availability on Sept. 30, 2022, is about $850 million versus $1.5 billion prior to the borrowings.

US LBM is a Buffalo Grove, Ill.-based distributor of specialty building materials.

TransDigm proposed terms

Moving to the primary market, TransDigm emerged in the morning with plans to hold a lender call at 1 p.m. ET on Tuesday to launch a $1.725 billion amended and extended first-lien term loan G due February 2027 talked at SOFR plus 350 basis points with a 0% floor, an original issue discount of 97.5 to 98 and 101 soft call protection for one year, according to a market source.

Commitments are due at 11 a.m. ET on Friday, the source added.

Goldman Sachs Bank USA is the left lead on the deal that will extend the maturity of the existing $1.725 billion term loan G from August 2024 and shift pricing to SOFR from Libor.

TransDigm is a Cleveland-based supplier of highly engineered aircraft components for use on commercial and military aircraft.

Flow Control launches

Flow Control Group launched in the morning without a lender call a fungible $90 million incremental first-lien term loan due April 2028 talked with an original issue discount of 94 to 95, a market source said.

The incremental term loan is priced at SOFR plus 475 bps with a 0.5% floor.

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

KKR Capital Markets is leading the deal that will be used to fund acquisitions under letters of intent.

The incremental term loan is fungible with the company’s existing $200 million incremental first-lien term loan due April 2028.

Flow Control is a Charlotte, N.C.-based distributor and technical adviser for mission critical flow control and industrial automation products and related services.

Axalta joins calendar

Axalta set a lender call for 11 a.m. ET on Wednesday to launch a $2 billion seven-year senior secured term loan B, a market source remarked.

The term loan has 101 soft call protection for six months, the source added.

Barclays is the left lead on the deal that will be used with cash from the balance sheet to refinance the company’s existing $2.021 billion term loan B due June 2024 and to pay related fees and expenses.

The borrowers are Axalta Coating Systems U.S. Holdings Inc. and Axalta Coating Systems Dutch Holding BBV.

Axalta is a Glen Mills, Pa.-based coatings company focused on providing customers with innovative, colorful and sustainable solutions.

Fund flows

In other news, actively managed loan fund flows on Monday were negative $22 million and loan ETFs were negative $27, market sources said.

Outflows for loan funds week-to-date total an estimated $94 million, sources added. Outflows in the prior week totaled $514 million.

Loan indices mixed

IHS Markit’s iBoxx loan indices were mixed on Monday, with the Leveraged Loan indexes (MiLLi) closing out the day up 0.04% and the Liquid Leveraged Loan indices (LLLi) closing out the day unchanged.

Month to date, the MiLLi is up 1.17% and year to date its down 1.62%. The LLLi is up 0.94% month to date and down 2.53% year to date.

Average secondary market bids in the U.S. on Monday were 92.32, down 4.68% year to date.

According to the IHS Markit data, some of the top advancers on Monday were Tosca’s February 2021 covenant-lite term loan at 86, up from 81, Clarion Events’ February 2018 covenant-lite term loan B2 at 68.50, up from 65.43, and Harsco’s March 2021 covenant-lite term loan at 92.50, up from 89.88.

Some top decliners on Monday were Isagenix’s June 2018 term loan at 21.25, down from 21.67, AMC Entertainment’s April 2019 covenant-lite term loan B at 55.52, down from 56.36, and Pure Fishing’s December 2018 covenant-lite term loan at 68.07, down from 68.93.

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