Service King has tapped Bank of America to arrange a USD 700m term loan due 2025, with syndication for the new facility set to launch tomorrow (3 December), according to three sources familiar with the situation. Proceeds from the loan will refinance existing loans set to come due next year. 

The new facility, which also includes a USD 91m revolver, will contain a springing maturity at 90 days before the company’s unsecured note maturity in October 2022, two of the sources added. An investor call will be held at 11am ET tomorrow, the sources said. 

“It makes sense to add this provision. They can’t come to the market for a traditional loan when investors don’t know what’s happening with the bonds yet,” one of the sources said. “This deal, if it gets done, buys them time to get their house in order.”

The collision repair center operator included going concern language in its 3Q20 earnings report, tied to the upcoming maturities of its revolver and term loans. The existing revolver would come due in May 2021 if it does not address its term loan (due August 2021) by then, as reported. 

Liquidity tightened at quarter-end, given a USD 94.5m in cash balance and no availability under the USD 100m revolver, the sources said. At the end of the second quarter, the all-cash liquidity was USD 111m.

As of 30 September, the company posted negative USD 16.9m of unadjusted LTM EBITDA. After certain addbacks, adjusted EBITDA comes to USD 39.7m.

Factoring in USD 23.2m of cost and labor savings and USD 89.5m of COVID-19 adjustments, Service King generated USD 153.6m of pro forma adjusted EBITDA.

The adjusted EBITDA figure put LTM leverage at nearly 18x through USD 713m of first lien debt, and 27.4x through USD 1.09bn of total debt. The first lien and total leverage come to 4.6x, and 7.1x, respectively, when considering all USD 113.9m in add-backs.

Clearlake Capital owns a significant majority of the company’s outstanding bonds, as reported. 

The USD 375m 7.875% senior unsecured notes due 2022 last traded in size at 85.125 to yield 17.717% on 30 November, up from trades at 83.5 to yield 18.852% on 24 November, according to MarketAxess. 

The USD 586mm Libor+ 275bps (1% floor) first lien term loan due 2021 is quoted in the 94.938/96.613 context today, up slightly from trades in the 94.568/96.341 context earlier this week, according to Markit. 

TIMING:

• Investor call at 11am ET

TERMS:

• Led by Bank of America
• USD 700m term loan due 2025
• USD 91m revolver
• Proceeds from the transaction will refinance the company’s outstanding term loan and revolver
• Sector: automotive
• Business description: collision center operator
• Current ratings: Caa1/CCC corporate, B2/CCC+ secured
• Financial sponsors: Blackstone and Carlyle

2020 Debtwire