HC2 Holdings is working with Jefferies to refinance its USD 342m 11.5% senior secured notes maturing in June of this year, according to two sources familiar with the matter.
Jefferies is prepping a new secured deal, likely in the USD 300m area, the sources said. The new notes are expected to launch broadly later this month, one of the sources added.
HC2 may be able to reduce its cost of capital substantially, after a string of asset sales announced over the last eight months in which proceeds have been used to reduce debt and strengthen its liquidity position. The new deal could come as tight as the 7%-8% area, speculated one of the sources and a third source.
HC2 is a conglomerate with businesses spanning sectors such as infrastructure, clean energy, telecom and life sciences. Former CEO Phil Falcone was ousted last year amid activist pressure, after six years at the helm.
As of 30 September, the company was 9.9x levered through USD 646.4m of total debt and USD 65.2m of LTM adjusted EBITDA, according to SEC filings. Its all-cash liquidity at the time stood at USD 228.8m.
HC2’s pricey 11.5% notes, issued in November 2018 to refinance near-term notes, traded at a discount in recent months, changing hands in early November at 97 yielding 14.6%, according to MarketAxess. The asset sale news helped support trading levels, and the B-/Caa1 rated notes last traded yesterday (11 January) at 100.625 to yield 10.707%.
For relative value, the company’s infrastructure segment can be compared to Tutor Perini, while its clean energy segment can be compared to Antera Services, although HC2’s existing notes trade much wider to both due its varied industry exposure, two of the sources said.
Tutor Perini’s CCC+/B3 USD 500m 6.875% senior unsecured notes due 2025 traded yesterday at 101.875 to yield 5.985%, compared to trades at 97.79 to yield 7.477% on 23 December, according to MarketAxess.
Artera’s B-/B3 USD 987m 9.033% senior secured notes due 2025 traded on 8 January at 111.25 to yield 5.301%, compared to trades at 108.875 to yield 6.538% in early December, according to MarketAxess.
Meanwhile, HC2’s USD 55m 7.5% convertible senior notes due 2022 traded on 22 December at 97.25 to yield 9.588%, down from trades at 100.25 to yield 7.317% in early December.
Jefferies and HC2 did not respond to requests for comment.