The $45 million loan ranks ahead of investors that didn’t participate in the new financing. The minority lenders that were primed argue that was unfair because they weren’t given a chance to participate in the deal, the people said. The new loan is trading around 100 cents on the dollar, while the loan that was primed is trading around 35 cents.
Falling Revenue
For TriMark, the company saw its revenue falling and hired advisers to help it consider its options. It ultimately picked a transaction to raise $120 million from lenders including Oaktree and Ares Management Corp., people with knowledge of the matter said. Also in the group of existing lenders in the new deal were Blackstone Group Inc.’s credit arm GSO Capital Partners, Sculptor Capital Management, and BlackRock Inc. Their new loan is trading around face value, about 40 cents on the dollar higher than the loan that was primed. TriMark is owned by Centerbridge.
For both Boardriders and TriMark, minority lenders had covenants including limits on future company borrowings removed, the people familiar said. And the required schedule for repaying principal was slowed down, the people said.
The additional step of removing covenants is highly unusual in the loan world and is a big loss for investors, Xtract’s Sullivan said.
“It’s gone beyond Serta -- now it’s worse. By stripping it down to the ultra bare bones, all that leaves you with is just a promise to pay,” he said.
Representatives for Brigade, Canyon, MidOcean, Ares, GSO, Sculptor, BlackRock and Centerbridge declined to comment.
Fighting Back
Lenders are fighting back, and some companies are deciding not to embrace these transactions. In May, debtholders rebelled against Elliott Management Corp. and Siris Capital Group, the owners of global travel reservation company Travelport, after those two firms tried to move assets out of the reach of creditors.
And when Oaktree proposed a priming transaction for PSAV Inc., a company that provides technology and staging services for events, the borrower elected to raise new capital through a loan that was in the same class as the existing facility.
“Priming transactions such as those executed by Serta and Boardriders are still the exception and the priming play is not the ‘new normal,’” said Judah Gross, a director at Fitch Ratings. “That being said, the higher degree of frequency with which such deals get done may indicate that priming transactions are not as taboo as once assumed.”
This article was provided by Bloomberg News.