UBS is conducting outreach in support of a non-deal roadshow for Lexmark International, according to three sources familiar with the matter.

In May, the printing technology company said it had obtained a loan commitment from China Citic Bank for a USD 339m delayed-draw term loan to refinance Lexmark’s 2020 notes, as reported.

As of today (16 September), the USD 340m 7.125% senior secured notes due 2020 were still outstanding and last traded on 11 September at 97.25 to yield 12.915%, in line with recent levels, according to MarketAxess.

Lexmark was acquired by China-based Apex Technology (now known as Ninestar Group) in 2016 in a USD 3.6bn LBO. As of May, the company’s capital structure comprised the notes and roughly USD 1.35bn of loans, mostly funded by Chinese banks and maturing in 2023, with Citic as the largest existing lender, as reported.

Soon after Lexmark obtained the USD 339m loan commitment from China Citic this past May, Standard & Poor’s upgraded the company by one notch to CCC+, but warned of concerns over Lexmark’s longer-term sustainability.

“While the debt commitment alleviates the company’s near-term liquidity challenges, we continue to expect higher debt amortization payments will lead to negative adjusted free operating cash flow (FOCF) after debt service,” the S&P analysts wrote at the time. “Our uncertainty with respect to the company’s ability to service debt longer-term leads us to believe that the capital structure is unsustainable.”

Also in May, Moody’s affirmed its B3 corporate rating for Lexmark and changed the outlook to stable from negative.

Moody’s estimated that leverage was just under 6x as of the end of 2018. The agency also said that despite challenges related to “the persistent contraction in printed pages, declining demand for printer equipment and supplies in most regions, and intense competition,” Lexmark’s EBITDA and free cash flow could continue to rebound after a significant drop in 2017.

Back in 1Q18, the 7.125% notes traded down to the low 60s, according to MarketAxess. The notes rebounded incrementally over the course of the year.

Lexmark and UBS did not respond to requests for comment.

2019 Debtwire