Lenders have until Friday to work through the A&E request for Carlyle-owned NEP as the broadcast and live production services company tries to push the 2025 maturities on its $1.42bn dollar and $519mn-equivalent euro term loans out to the summer of 2026, an extension of less than a year for the Caa1/B-/B- rated business (Moody’s/S&P/Fitch).
The transaction is being described by lenders as “self-help” and a “band-aid” deal, to give the sponsor time to find a long-term solution for what is fundamentally a good business. It was presounded among the larger lenders, so a sizeable portion of the syndicate is already comfortable with the terms, sources said.
Unlike vanilla A&E requests, NEP is proposing to add a PIK element onto the existing cash-pay margin, plus a PIK upfront fee, and a 2% cash exit fee (details below).
One of the features of the transaction is that any lenders who stay in an unextended stub piece will become second in line to receive repayments from asset disposals, behind those that agree to extend. On other deals, such as Amneal and Keter, differing treatment of extending and non-extending lenders has met resistance from lenders in the US and Europe, although those cases involved stripping collateral from unextended debt.
CLO managers will also need to be comfortable taking part of their compensation in PIK format – although the mix of PIK and cash-pay should help with that, say sources – and with the ratings aspect.
During the year, A&E deals have often resulted in a rating upgrade as the borrower in question shows that it is managing the risk inherent in having short debt maturities. But in this instance, NEP’s ratings, including the Caa1 from Moody’s, are not expected to improve immediately on the back of the deal.
Moody’s cites concerns about weak free cash flow and a high interest burden, noting debt of $2.5bn including the second-lien. Further, Moody’s has said the deal is likely to be classed as a distressed exchange, potentially adding another complexity for CLO managers.
As part of the offer to investors, Carlyle has materially amended the documentation in lenders’ favour. The extended loans don’t feature aggressive language around priming and numerous other points that have become common in loan terms, a buysider says.
Covenant Review had previously given the documentation a composite score of 4-, but that has now moved to 3+ in a reflection of the changes. The scores published on the extended initial dollar loan are as follows: Composite Score 3+, Collateral Protection 2-, Default Protection 3+, and Lenders’ Repricing Optionality 3+.
Looking at the further prospects for NEP, the key development will be the sale of its live events division, say buysiders. In September, the borrower was reported to be exploring a sale of this asset that could raise up to $2bn. If the sale goes ahead, it could open the way for a refinancing of the remaining debt on regular terms, or the sponsor might choose to put the whole company on the block, buysiders say.
Support for the extension is also helped by NEP’s leading position in the industry, and the business should have a strong year ahead in 2024 with the Olympics and other events coming up.
The sponsor has not injected fresh equity as part of the A&E, according to sources, but has previously done so to help with liquidity issues, including $95mn earlier this year.
A spokesperson for Carlyle declined to comment on the transaction.
Away from NEP, there are some other cross-border deals with 2025 maturities and low ratings, that will need to be addressed soon. One of these, also owned by Carlyle, is Veritas, which was recently cut to CCC+ by S&P, while Clearlake-backed Alkegen (formerly Unifrax) was downgraded by S&P to CCC+ in the summer. Both have dollar and euro first-lien term loans due 2025.
Price talk on NEP currently runs as follows:
– The $1.092bn August 19, 2026 TLB is guided S+325bps with a 0% floor, plus 150bps accrued PIK interest, a 150bps PIK upfront fee, and a 200bps cash exit fee.
– The $123mn incremental June 1, 2026 TLB is guided S+825bps with a 1% floor, plus 150bps accrued PIK interest, a 200bps PIK upfront fee, and a 200bps cash exit fee.
– The $209mn August 19, 2026 incremental TLB is guided S+400bps with a 0.5% floor, plus 150bps accrued PIK interest, a 150bps PIK upfront fee, and a 200bps cash exit fee.
– The $519mn-equivalent August 19, 2026 euro TLB is guided E+350bps with a 0% floor, plus 150bps accrued PIK interest, a 150bps PIK upfront fee, and a 200bps cash exit fee.
Barclays (lead left), JPMorgan, HSBC, Macquarie, MUFG, Mizuho and PNC are bookrunners. Barclays is also agent.
Replies are due on December 15 at 12:00 UKT and 12:00 NYT.
The issuer’s originally $1.13bn/€397mn TLBs due October 2025 were syndicated in 2018 alongside an originally $240mn second-lien term loan due October 2026, as part of a cross-border financing supporting Carlyle Group’s acquisition of Crestview Holdings’ remaining stake in the company. Incremental facilities followed, mainly to repay RCF drawings.
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