Service King sets talk for refi TL, pitches new debt as bridge to turnaround

Service King circulated talk on its proposed USD 700m term loan due 2025 at Libor+ 700bps (75bps floor) with a 98.5 OID, according to four sources familiar with the situation. 

Nearly half or USD 325m of the term loan is spoken for via reverse inquiry from third-party investors, the sources said. Commitments are due 15 December, one of the sources added.

The collision center operator is pitching the loan as a bridge to a turnaround, buying the company time until car traffic returns to normalized levels, the sources said. 

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. 

Service King included going concern language in its 3Q20 earnings report, tied to the upcoming revolver and term loan maturities. The existing revolver is set to come due in May 2021 if the company does not address its term loan (due August 2021) by then. 

Liquidity tightened at 3Q20-end, with USD 94.5m in cash 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.

Through 3Q20 ended 30 September, the company posted negative USD 16.9m of unadjusted LTM EBITDA. After certain addbacks, adjusted EBITDA for the LTM period amounted 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 LTM adjusted EBITDA. 

The adjusted EBITDA figure put 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, slightly up from trades at 83.5 to yield 18.852% on 24 November, according to MarketAxess. 

Quotes on the USD 586m L+ 275bps (1% floor) first lien term loan due 2021 edged up today to 95.216/96.92 from 94.938/96.613 yesterday, and up from trades in the 94.568/96.341 context earlier this week, according to Markit. 

PRICE TALK/TIMING:

  • USD 700m term loan due 2025, talked at Libor+ 700bps (0.75% floor) and 98.5 OID
  • Commitments due 15 December

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

Bank of America declined to comment. Service King declined to comment. 

2020 Debtwire

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