McGraw-Hill Unveils PIK Toggle Offering as High Yield Mart Heats Up

McGraw-Hill has set talk in the 9.5% area for a $250 million offering of five-year (non-call one) PIK toggle notes, sources say. Pricing is expected today, Dec. 7, via bookrunners Credit Suisse (lead) and Jefferies, following the closing of books at noon EST.

Proceeds, along with those from a term loan add-on, will be used to refinance $443.6 million of 8.5% PIK toggle notes due 2019.

The educational concern is the third issuer since the middle of November to come to the high yield market with a PIK toggle offering, which allows the issuer to pay interest with additional debt, as opposed to cash. The other two:

  • Technology/healthcare concern Multiplan last month issued $1.3 billion in PIK toggle notes backing a dividend to private equity sponsor Hellman & Friedman. The offering priced to yield 9.25% (8.5% if repaid in cash). Multiplan was the largest PIK toggle since the financial crisis. The issue was rated B-/Caa2.
  • Lab testing company Sotera in November completed a $75 million PIK toggle offering to yield 8.875% (8.125% if repaid in cash), backing a distribution to sponsor Warburg Pincus. The issue was rated CCC+/Caa2.

As reported, McGraw-Hill is currently in market with a $150 million incremental first-lien term loan. Price talk is for an issue price of 99.75. Commitments are due today. The add-on will be fungible with the existing covenant-lite TLB due May 2022, which is priced at L+400, with a 1% LIBOR floor.

The company has launched a tender offer for the $443.6 million outstanding of its 8.50%/9.25% PIK toggle notes due 2019 at total consideration of $1,002.75 per note, including a $30 consent payment for notes tendered by the early deadline of Dec. 12. Credit Suisse is running the tender. The bonds are also currently callable at par.

The new notes will slip behind its 7.875% senior notes due 2024, which closed last night at par, yielding 7.87%, according to S&P Global Market Intelligence. The 2024s mark its last visit to the bond market, in April 2016.

Current PIK toggle ratings are CCC+/Caa1/B, and term facility ratings are B+/B1, with a 2 recovery rating from S&P Global Ratings. Moody’s earlier this week downgraded the term loan facility rating by one notch. Corporate ratings are B/B2, with stable and negative outlooks.

McGraw-Hill Global Education Holdings is a provider of outcome-focused learning solutions, delivering curated content and digital products to students in higher education, K–12, professionals, and corporations across 140 countries. — Staff reports

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