CLO Market Round-Up: Law Firm Quits Financing Deal; Bedding Manufacturer to Reduce Debt

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Companies with positions in the corporate loan universe find their names in the headlines each week. In our weekly round-up, we recap TreppWire stories that highlight noteworthy news and tie in the firms' presence in the CLO market. Last week, the headlines revolved around potential bankruptcy filings, the purchase of stocks, private offering payments, and more.

If you are interested in seeing our coverage of the CLO headlines in your inbox every morning, reach out to us here. Trepp has recently been named a category leader in the Chartis RiskTech Quadrant®

In our weekly round-up, we will also be providing a list of the loans that faced the largest movement in their prices from the week before. You can find Trepp's full list, along with the managers with the largest exposure to each loan, in our product. for CLO Solutions 2020, which evaluated 13 CLO offerings in the market.


Read below for an overview of the noteworthy stories that we reported on last week and see how these developments might impact leveraged loan prices.

Law Firm Representing Travelport Calls it Quits on Disputed Financing Deal

Law firm Kirkland & Ellis LLP backed out of an advisory role for travel booking company Travelport Worldwide Limited due to a business dispute. Kirkland represented Elliot in a financing deal that was in conflict with the interests of other clients of the law firm, as reported by the Wall Street Journal.

In early June, Siris Capital Group LLC and Elliott Management Corp. affiliates provided $1 billion in financing to Travelport. The financing was contingent on Travelport pledging the intellectual property assets as collateral for Siris and Elliot. As a result, this step has moved valuable assets out of the reach of its lenders, sparking a controversy. The law firm representing the lenders have stated that the transaction is not allowed under Travelport’s $2.9 billion first-lien loan and have accused the company of defaulting on its debt.

Subsequently, Travelport has filed a lawsuit seeking declaration that a default has not occurred. A New York court might get the final say on whether the company acted within its rights. Similar financing deals have recently been used and disputed for firms such as JCPenney and Neiman Marcus.

The firm is represented in the CLO market with four credits totaling over $4.0 billion. The largest is the $2.8 billion Travelport Finance - Term Loan (03/19) (L+500 due mid-2026) which was held by over 370 CLO vehicles in April. The credit was traded in the $90-$100 range in early 2020 but saw a decline in its traded price in late-February (to the mid-$70s) through mid-March (mid-$60s). A few managers managed to sell the credit in the $85-$90 range right before the price dropped significantly. While there were a surprising buy trades after late-February, most managers have sold the credit since, albeit at a much lower price ($60-$65). IHS Markit quoted the credit in the low-$60s this week.

The other, not as heavily traded, credits include the $500 million Travelport Finance - Travelport Finance T/L 2nd Lien (Toro) (L+900 due mid-2027), the $420 million Travelport Finance - Term Loans (L+650 due early-2022), and the $372 million Travelport Finance - Term Loan (3/18) (L+400 due early-2025).

Douglas Dynamics Plans to Repay Its Term Loan Fully

Douglas Dynamics has completed the refinancing of its existing senior secured credit facilities with $375 million of new credit facilities. The new facilities include a 6-year, $275 million Senior Secured Term Loan B Facility due June 2026 and a 3-year, $100 million Senior Secured ABL Revolving Credit Facility due June 2023.

Proceeds from the refinancing will be used for general corporate purposes, including repaying in full the $226 million Term Loan B Facility that was scheduled to mature in December 2021. The credit is represented in the CLO market with the $314 million Douglas Dynamics – Term Loan B (L+300 due December 2021) according to the Trepp CLO database. It was held by over 80 CLO vehicles in April.

The loan was traded in the $97 to $101 range in 2019 and early 2020. The quoted price declined in mid-March to the low-$80s but rebounded soon after. It was bought in the high-$90s in April and was quoted at right below par this week by IHS Markit.

Bedding Maker Seeks to Reduce Its Debt

Serta Simmons Bedding has entered into an agreement with its first and second lien holders. The agreement is expected to reduce the company’s debt by $400 million and also provides $200 million in new capital (which will be paid before existing First Lien Term Loans).

The New York Post  recently reported that the bedding maker is facing a liquidity crunch due to store shutdowns from the coronavirus outbreak. S&P Ratings had downgraded the firm to 'CCC' from 'CCC+' in late-2019. The move caused a stir as the firm had issued a statement against the downgrade.

The firm is represented in the CLO market with two credits. The larger of the two is the $1.95 billion Serta Simmons Bedding LLC New Term Loan which was priced at L+350 and is due in late-2023. The credit was held by over 100 CLO vehicles in April. It has been extensively sold at a discount for some time and has only seen ‘sell’ trades since March 2019 starting in the mid-$70s. It was being sold in the low-$40s in May, according to IHS Markit.

The second $450 million Serta Simmons Holdings - Term Loan 2nd Lien Lien which was priced at L+800 and is due in late-2024. The credit posted similar trading activity as the first credit (this was marked by a considerable decline in trading prices and majority 'sell' trades), albeit at a lower frequency. IHS Markit quoted the credit in the single-digits last week.

PG&E Plans to Raise Cash In the Favorable Bond Market

California-based investor-owned utility Pacific Gas and Electric Company (PG&E) is seeking an $11 billion debt financing package, as reported by the Wall Street Journal. The utility firm filed for Chapter 11 bankruptcy protection in January 2019 following a surge in damage claims resulting from the California wildfires in 2017 and 2018. The article also notes that PG&E is separately raising $9 billion in equity financing.

The judge overseeing the bankruptcy case has shown a willingness to sign such an order. The company is planning to raise this financing before July because of a blackout period during the run up to reporting second-quarter earnings, as reported by the Los Angeles Times.

According to the article, the financing includes $4 billion in high-yield bonds and a $750 million term loan led by JP Morgan Chase & Co. The remaining package consists of an investment-grade bond portion offered by Bank of America Corp., JP Morgan, and other banks. Bankers are targeting a timeline of next week for the debt offering.

Proceeds from this offering would only comprise a small portion of the $25.5 billion in payments that the firm owes in damages. On a separate note, the firm is also moving its headquarters from San Francisco to Oakland in an effort to save money on real estate costs. (More on that below).

The firm is represented in the CLO market with the $1.5 billion Pacific Gas and Electric Company - Term Loan DIP which was priced at L+225 and is due at the end of this year. It was held by roughly 30 CLO vehicles in April.

It was quoted at $99 in early March. The price has dropped subsequently with the credit trading at around $94 in mid-March. The traded price has since picked up and was quoted at around par last week by IHS Markit. March volatility led to a number of buy and sell trades in late March and early April. This was followed by a number of sell trades by a manager in early May.

Swissport’s Belgium Unit To File for Bankruptcy

An article by Bloomberg Law noted that Swissport Belgium, the subsidiary of Swissport International operating at Brussels Airport, is planning to file for bankruptcy along with its Belgium cleaning business. Most recently, Swissport International was looking to raise €380 million ($417) million in new financing as its business was severely impacted by the pandemic, as reported by Bloomberg Law.

The company is owned by China’s HNA Group and provides airport ground and cargo handling services for 300 airports across 47 cities. It is represented in the CLO market with the €900 million Swissport International - Term Loan B which was priced at L+450 and matures in August 2024. The credit was sold in late March in the high-$50s.

Chuck E. Cheese Coping With Dwindling Cash Reserves

TheWall Street Journal reported that Texas-based food and games chain Chuck E. Cheese is raising money to prevent a bankruptcy filing. The firm had used up significant cash reserves when it closed its doors during the pandemic. The firm, however, plans to begin reopening some of its outlets in short order.

The firm is in talks with lenders and bondholders for interest payment relief on its $1 billion debt and hopes to raise capital to continue operations. It has an upcoming $1.9 million quarterly payment due at the end of June. Separately, the article noted that the firm has shopped around for a $200 million bankruptcy loan.

Chuck E. Cheese recently said that it will pay nearly $3 million in retention bonuses to three top executives, including $1.3 million earmarked for Chief Executive Officer David McKillips. We have seen several news reports about bonus payouts for distressed companies prior to a bankruptcy filing as retention payments are illegal under bankruptcy law. (JCPenney paid millions in bonuses to top employees before filling for bankruptcy.)

The firm is represented in the CLO market with the $760 million CEC Entertainment – Term Loan B which was priced at a whopping L+650 and due in August 2026. The credit is held by over 140 CLO vehicles.

The credit traded in the $95-$99 range until February 2020 with more selling than buying in the first two months of the year. The traded price plunged in March following which there were only sell trades at around $50 due to credit risk. IHS Markit marked the credit in the low-$50s last week.

Investors May Not "Like the Way This Looks": Men’s Wearhouse Owner Mulling Bankruptcy

Bankruptcy filings by big-box retailers such as JCPenney and Neiman Marcus after mandatory COVID shutdowns have been prominent among news headlines in recent months. Bloomberg Law reports that another retailer may soon be looking to follow the same path. The owner of Men’s Wearhouse and Jos. A. Bank, Tailored Brand Inc., is reportedly considering a bankruptcy. (We assume many office workers had given up their tailored suits and shirts in favor of pajamas and pastel T-shirts during the stay-at-home period.)

(The firm is famous for its tag line "you're going to like the way you look.")

The retailer is working with advisors to restructure its $1 billion in debt. No decision has been made and things continue to stay fluid. In early May, the company’s CEO had said that the firm was taking aggressive measures to shore up liquidity. This included furloughing and laying off employees, withdrawing from its credit facility, and suspending dividends in September. The firm is receiving counsel from law firm Kirkland & Ellis and investment bank PJT Partners Inc. A group of lenders is working with law firm Gibson Dunn and investment bank Houlihan Lokey Inc.

The firm is represented in the CLO market with the $900 million The Mens Wearhouse - Tranche B-2 Term Loan which was priced at L+325 and due in April 2025. It was held by roughly 200 CLO vehicles as of April.

The credit exchanged hands in the $68-$78 range in late 2019. It was purchased in January in the low- to mid-$80s and in February in the low-$70s. It's interesting to note that the credit did not see any ‘sell’ trades in 2020 even after the pandemic hit in March 2020. The marked price has declined considerably since then and the credit was marked in the mid-$20s by IHS Markit late last week.

Follow-Up: Ascena Exploring Balance Sheet Alternatives

An article in RetailDive (citing Debtwire) noted that Ascena Retail Group has hired law firm Kirkland & Ellis and others to “explore balance sheet alternatives”. Kirkland & Ellis has worked on many high-profile retail bankruptcies over the years and from this year alone, its client list includes Neiman Marcus, JCPenney, Stage Stores, and Pier 1. Ascena executives, however, said in mid-March that bankruptcy was not on the table after buying back debt to clear its balance sheet.

Already encumbered by high leverage, the retailer was significantly impacted by the COVID outbreak. The retailer had closed all of its 2,800 stores and drew $230 million from its credit facility to shore up liquidity as a result of the COVID crisis. It has since opened about 450 of its stores by late-May.

Ascena is currently represented in the CLO market with the $1.8 billion Ascena Retail Group Inc – Term Loan B (L+450 due August 2022). It was held by over 150 CLO vehicles in April. The credit was traded in the $60s in mid-2019 and saw its marked price decline to the low-$50s until November. Subsequently, the price rose slightly in the latter part of the year. The credit saw a number of sell transactions this January in the high-$60s but the price plunged in mid-March due to pandemic-related store closures. It was marked in the low-$20s last week by IHS Markit.

PE Firms Bid To Take MásMóvil Private

KKR and others have agreed to a €3.0 billion takeover bid of Spanish telecom company MásMóvil, according to the Financial Times. The firms offered €22.50 per share for the company and gave the company an enterprise value, including debt, of almost €5.0 billion. If approved by the firm’s shareholders, it will be one of the largest private equity deals since the coronavirus outbreak and will also be the largest delisting of a listed European telecom company in more than two years.

Reuters reported that Morgan Stanley, Barclays, and BNP Paribas are raising €3.5 billion in debt for this leveraged buyout by KKR, Cinven and Providence. The financing is expected to include €1.5 billion in leveraged loans and €2.0 billion in high yield bonds.

The firm is represented in the CLO market with the €1.45 billion MasMovil Ibercom - Masmovil Cov-Lite B2 NEW Term Loan which was priced at E+262 and due in mid-2026. The credit was raised in 2019 and was the first leveraged loan borrower in Europe to include an environmental, social and governance component to a leverage loan package, according to S&P Ratings.

General Pricing Data


Issuance in the CLO market slowed down last week with three deals priced in both US and EU market compared to seven the week prior. One of these deals were sourced from the EU Market while the rest were sourced in the US.

The best execution in the US market for new deals was Sound Point XXVI which featured an AAA class at L+185. The deal is managed by Sound Point and arranged by Citi.

The information provided is based on information generally available to the public from sources believed to be reliable.

Originally published in TreppWire, which is distributed every morning as a client-only email newsletter. TreppWire enables readers to stay up-to-date on market activity, while providing a competitive advantage over others. TreppWire leverages Trepp’s market expertise and proprietary data sets to provide daily market commentary, trend analysis, research, and breaking news to its clients.


CLO Market Round-Up: Law Firm Quits Financing Deal; Bedding Manufacturer to Reduce Debt