HC2 considers slicing refi structure as syndication stretches another week

HC2 Holdings bankers are floating more structural revisions to the issuer’s senior secured refinancing, focused around splitting a chunk of the deal into a second lien, according to four sources following the deal. The deal, which launched on 24 October, remains in flux despite a round of changes made this past Monday (5 November).

Lead Jefferies originally launched a USD 535m five-year secured bond, and Monday’s changes included a USD 5m upsize while cutting the tenor to three years. The company released price talk on Wednesday (7 November) at 11.5% with 98.75 OID to yield 12%, wide of initial whispers in 9.25%-9.5% range. Books were expected to close the same day at 4:30pm ET, with pricing expected on Thursday (8 November).

Now, the issuer is telegraphing that it will reduce the first lien paper to USD 470m and carve out a USD 55m second lien that will likely be taken down by a few select investors, the sources said.

Bankers could roll out official changes as soon as Tuesday (13 November), they added.

Moody’s gave the covenant package in HC2’s secured offering a quality score of 1.57, the highest score assigned to any North American bond since March 2013, the agency said.

Proceeds for the bond will be used to refinance the company’s existing USD 510m 11% senior secured notes due 2019. The 11% notes softened slightly yesterday (8 November) to trade at 99.75 to yield 11.245% from trades at par at beginning of the roadshow on 22 October, according to MarketAxess.

HC2 is a diversified holding company with eight reportable segments: construction, marine services, energy, telecommunications, life sciences, broadcasting, insurance and other, according to company documents.

Moody’s estimates that HC2’s leverage at 30 June was 11.1x, but its 12-18 month forward view is that leverage will decline to 7.6x, according to a 24 October credit report.

Jefferies did not respond to a request for comment. The company declined to comment.

CLICK HERE for Xtract Research’s covenant analysis on the USD 540m senior secured notes due 2021 (Xtract Research subscription required).

2018 Debtwire

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