Market conditions strengthened across loans and high-yield this week, driving increased issuance after a few leaner weeks. High-yield in particular was expected to see its biggest output in nine weeks amid inflows and a rush to market ahead of rate hikes, while loan conditions moved more in issuers’ favor, spurring a return of refinancing action.

New-issue loan activity staged a moderate comeback, driven in part by the revival of opportunistic activity. As such, the week’s $10.9 billion of gross launched volume across 12 issuers nets out to $5.4 billion. Stripping MKS Instruments’ relaunched $3.81 billion U.S. dollar execution out of the week’s activity, M&A and opportunistic deal flow are more evenly matched at $3.79 billion/six deals and $3.2 billion/five deals this week.

Portfolios in brief: Holds reflect most recent reporting period available

ARCC, FCRD, CGBD: DTI Holdco/Epiq (B3/B-) – Refi

A Credit Suisse-led arranger group set price talk of S+475-500, with a 0.75% floor and a 98 OID on the $960 million first-lien term loan for Epiq, proceeds of which would be used to refinance the issuer’s existing capital structure. A $250 million second-lien term loan is being placed privately; the issuer is also putting in place a $125 million revolver. The seven-year loan would include six months of 101 soft call protection. Issuance is at DTI Holdco. The borrower’s existing term loan, originally $1.195 billion, matures in September 2023. It was syndicated in 2016 to back DTI Holdco’s acquisition of Epiq Systems, though was repriced in 2019 to L+475 with a 1% floor from L+525. Holders of the existing first-lien debt instruments include Ares Capital with a total of just over $4.8M, First Eagle Alternative Capital BDC ($3.9M), and, with $1.9M each, TCG BDC and TCG BDC II. TCG BDC’s Middle Market Credit Fund also holds about $18.5M of the issuer’s subordinated debt.

Audax: Duff & Phelps/Kroll (B3/B-) – Refi, cash

Goldman Sachs and Stone Point Capital Markets today outlined an OID of 99 on the $225 million add-on term loan for Kroll, formerly known as Duff & Phelps. The incremental debt would be fungible with the borrower’s existing term loan due April 2027, which is being migrated over to SOFR-based pricing in connection with the transaction. The coupon will be S+375 with a 1% floor, versus L+375 with a 1% floor on the existing loan today. There would be no CSA. Proceeds would repay revolver borrowings and place cash on the balance sheet. Audax Credit BDC holds about $2.5M of the existing first-lien debt.

FSK: Element Materials (B2/B) – LBO

Alongside this morning’s reverse flex, Element Materials Technology offered investors a slate of revisions to documentation. With respect to margin step-downs, the dollar tranche, as revised, includes a single 25 bps step-down at 4.5x first-lien leverage, versus two 25 bps step-downs at 5x and 4.5x as originally proposed. The euro tranche originally included three 25 bps leverage-based step-downs at 5x, 4.5x and 4x first-lien leverage, but like the dollar loan now includes a sole step-down at 4.5x first-lien leverage. As noted earlier, ticking fees have been amended so that they are free from 0-45 days (from 0-90 days), 50% at 46-90 days (from 91-150 days) and 100% at 91+ days (from 151+ days). As reported, a BofA Securities-led arranger group tightened pricing on the cross-border term loan, split between $1.425 billion and $400 million euro-equivalent term loans. Pricing on the dollar tranche tightened to S+425/0.5%/98.5-99 (from S+450/0.5%/97.5-98) and E+425/0%/98.5-99 (from E+450/0%/98). The dollar leg includes a CSA of a flat 10 bps; both legs carry 101 soft call protection for six months. The $1.825 billion cross-border loan backs Temasek’s acquisition of Element Materials. Pro-forma leverage is 5.2x through the loans and 6.6x total based off $353 million of adjusted EBITDA. FS KKR Capital holds $1.9M of the existing first-lien debt due June 2024 (L+350, 1% floor).

ARCC, ORCIC, NMFC: Mavis Tire (B3/B-) – M&A, refi

Jefferies set a 99-99.25 offer price on the $275 million add-on term loan for Mavis Tire Express, proceeds of which would be used to fund an acquisition and repay revolver borrowings. Alongside the incremental debt, the issuer is seeking a negative consent amendment to migrate its existing term loan due 2028 to SOFR-based pricing. The loan would include the ARRC-recommended CSA of 11.4/26.2/42.8, and the margin would shift to S+400 from L+400 today, with no change to the 0.75% floor today. The borrower’s originally $1.915 billion term loan was syndicated in April 2021 as an investor group led by BayPine, in partnership with TSG Consumer Partners and existing shareholder West First Management, agreed to purchase Mavis; prior sponsor Golden Gate Capital retained a minority stake. Holders of the existing first-lien debt include Ares Capital ($15.6M) and Owl Rock Core Income Corp. (nearly $10M). NMFC Senior Loan Program III holds $4.2M of the existing subordinated debt.

BBDC, PSEC, MRCC: Octave Music/TouchTunes (B2/B-) – LBO

A Citizens Bank-led arranger group circulated price talk of at S+525 with a 0.5% floor and a 98-98.5 OID on the $385 million first-lien term loan for TouchTunes. The loan would support the issuer’s acquisition by TA Associates. The issuer is offering six months of 101 soft call protection. Antares Capital is a joint lead arranger on the deal. The Octave entity was last in the loan market in February 2020 for a refinancing, pricing a $290 million term loan B due May 2025 (L+525, 0% floor). Existing first-lien debtholders include Barings Private Credit ($2.8M), Prospect Capital ($30.4M), and Prospect Sustainable Income Fund ($580K). MRCC Senior Loan Fund I holds $3.9M of the existing subordinated debt.

Audax: Veracode (B3/B-/B) – LBO

Deutsche Bank today set price talk of S+400-425 with a 0.50% floor and a 98.5 OID on the $580 million first-lien term loan backing TA Associates’ acquisition of Veracode. The seven-year TLB would include a flat 10 bps CSA and six months of 101 soft call protection. The financing also includes a $235 million privately placed second-lien term loan. The transaction, announced in March, values the company at $2.5 billion. Current majority investor Thoma Bravo will retain a minority stake in the business; closing is expected in the second quarter. Veracode’s existing term loan due 2027 (L+400, 0.75% floor), originally $300 million, was syndicated in October 2020 to refinance debt, leveraging the issuer at 4.1x, all senior. Audax Credit BDC holds $993K of the existing first-lien debt.

Investment details provided by Advantage Data.