Lyons lower with downgrades; McAfee Enterprise retreats with incremental, downgrades news

By Sara Rosenberg

New York, Dec. 22 – Lyons Magnus Inc. (Sierra Enterprises LLC) saw its first-lien term loan soften a little bit in trading on Thursday following downgrades from Moody’s Investors Service to the corporate family and first-lien credit facilities ratings.

Also, McAfee Enterprise’s (Magenta Buyer LLC) first-lien term loan softened with news of an incremental term loan and downgrades from S&P Global Ratings, and Gulf Finance LLC’s term loan B stabilized in the secondary market after spending a few days on the rise due to the expectation of a partial repayment from a proposed asset sale.

Lyons Magnus dips

Lyons Magnus’ first-lien term loan was quoted at 67½ bid, 72½ offered on Thursday, down from 68 bid, 73 offered on Wednesday, after Moody’s cut the company’s corporate family rating to Caa3 from B3 and revolving credit facility and first-lien term loan ratings to Caa2 from B3, a trader remarked. The outlook is negative.

The downgrades reflect Moody’s view that the potential for a debt restructuring, which the rating agency could consider a distressed exchange, has increased materially due to the belief that that the current leverage may be unsustainable and if fundamentals do not improve in sufficient time, Lyons Magnus might not be able to refinance its revolver due August 2024 and its first-lien term loan due November 2024 without impairing creditors or at a manageable interest cost.

According to Moody’s, Lyons Magnus’ debt to LTM EBITDA was 10.8x as of June 25, 2022 and that is expected to improve to about 9x for fiscal 2022. Free cash flow in the LTM period ended June 25, 2022, was negative $32 million, and Moody’s anticipates the company will continue to incur negative free cash flow in fiscal 2022.

Lyons Magnus, a Paine Schwartz Partners portfolio company, is a Fresno, Calif.-based producer of beverage and ingredient solutions for foodservice, healthcare and food manufacturing customers.

McAfee Enterprise slides

McAfee Enterprise’s first-lien term loan dropped to 85½ bid, 87½ offered from 88 bid, 89½ offered following news of an incremental term loan and ratings downgrades, according to a market source.

The company placed a non-fungible $415 million incremental term loan due July 2028 that is priced at a fixed-rate of 12% and is non-callable for one year, then at 103 in year two and par thereafter, another source said.

Jefferies LLC is leading the deal that will be used to fund a dividend and add cash to the balance sheet.

S&P Global Ratings rated the incremental term loan at B-, lowered the company’s issuer credit rating and existing first-lien credit facility rating to B- from B, and cut the second-lien term loan rating to CCC from CCC+.

In the rating release, S&P said that it expects the company to have negative free operating cash flow in 2022 and break even in 2023 due to the transition to ACV contracts and higher interest expense.

Moody’s Investors Service assigned a B2 rating to the incremental term loan, the same rating as the existing first-lien debt, and Fitch Ratings rated the incremental term loan at BB-, same as the rating on the existing first-lien term loan.

McAfee Enterprise is a security software company.

Gulf Finance steady

Gulf Finance’s senior secured term loan B was quoted at 94½ bid, 96½ offered on Thursday, unchanged from Wednesday’s levels, putting an end to its recent trend of gaining a few points a day for the past few days, a market source said. On Tuesday, the term loan B was quoted at 90 bid, 92 offered and on Monday, it was quoted at 85 bid, 87 offered.

As reported earlier, the company is seeking an amendment to its term loan B to allow for an asset sale to Global Partners LP and some of the proceeds from that sale would be used to repay a portion of the outstanding term loan B. Sale proceeds would also be used to pay down Gulf Operating LLC’s ABL borrowings.

Signatures for the amendment are due at 5 p.m. ET on Wednesday.

Global Partners LP has entered into an agreement to purchase all of the outstanding equity interests of New Haven NewCo, Woodbury NewCo, Portland NewCo, Linden NewCo and Chelsea NewCo from Gulf Oil Ltd. Partnership for $273 million in cash, subject to certain customary adjustments.

Closing on the acquisition is expected in the first half of 2023, subject to customary conditions.

Gulf SOFR amendment

In addition to the asset sale amendment, Gulf Finance is shopping a negative consent amendment to its term loan B that will transition pricing to SOFR from Libor, another source remarked.

The deadline for the SOFR amendment is 5 p.m. ET on Dec. 30, the source added.

Morgan Stanley Senior Funding Inc. is leading the two amendments.

Gulf Finance is a refined products terminaling, storage and logistics business and a distributor of petroleum products.

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