Bombardier sets price talk; Reynolds cuts term loan spread, adds step down; Professional Paint breaks

By Sara Rosenberg

New York, May 24 - Bombardier Recreational Products Inc. came out with opening price talk on its credit facility as the deal was launched to investors through a bank meeting Wednesday that saw strong attendance.

Also in the primary, Reynolds American Inc. lowered pricing on its term loan B, although not by as much as was previously rumored unless the addition of the step down is taken into account.

And, in the secondary, Professional Paint Inc.'s credit facility freed for trading during Wednesday's session, with bids on the first-lien term loan seen atop par and bids on the second-lien term loan seen in the 101 area.

Bombardier Recreational released price talk on its proposed credit facility as the deal was presented to lenders in New York during Wednesday's market hours, according to a market source.

The $790 million seven-year term loan B (B1) that will contain incurrence covenants (as opposed to maintenance covenants) was launched with opening price talk of Libor plus 250 basis points, the source said.

As for the C$250 million five-year revolver (Ba2), that was launched with opening price talk of Libor plus 225 basis points, the source added.

The company is scheduled to hold a bank meeting in Toronto on Thursday to launch the deal to Canadian investors.

Merrill Lynch is the global transaction coordinator on the entire deal. Merrill Lynch and RBC Capital are joint lead arrangers on the term loan B, with Merrill Lynch, RBC and UBS joint bookrunners. BMO Nesbitt Burns and Merrill Lynch are joint lead arrangers on the revolver, with BMO, Merrill Lynch and RBC joint bookrunners.

Proceeds will be used to help fund a recapitalization that will include tendering for the company's $200 million 8 3/8% senior subordinated notes due 2013.

The tender offer expires on June 16.

Bombardier is a Valcourt, Quebec, motorized recreational vehicles company.

Reynolds trims pricing

Reynolds American scaled back pricing on its $1.55 billion six-year term loan B and added a step down that becomes effective once the company meets a specified leverage test, according to a market source.

The term loan B is now priced with an interest rate of Libor plus 187.5 basis points, down from original talk at launch of Libor plus 200 basis points, and the spread can step down to Libor plus 175 basis points if leverage falls below 2x, the source said.

Being that leverage is currently just north of 2x, the source implied that the step down in pricing could potentially be a near-term event.

Pro forma for the transaction, total debt to adjusted EBITDA will be 2.1x, adjusted EBITDA to cash interest expense will be 6.5x and total debt to total capitalization will be 41.4%.

Last week, there was talk floating around the marketplace that term loan pricing would be coming down to Libor plus 175 basis points - not quite the case, but if the step down is factored into the equation, then the rumors proved true.

Reynold's $2.05 billion senior secured credit facility (Ba1/BBB-/BBB-) also includes a $500 million five-year revolver.

Lehman Brothers and JPMorgan are joint lead arrangers and joint bookrunners on the deal, with Lehman on the left. Citigroup and General Electric Capital Corp. joined on to the deal as joint lead arrangers as well. Lehman and Citi are co-syndication agents, GECC is documentation agent and JPMorgan is administrative agent.

Proceeds from the term loan, along with proceeds from $1.65 billion in senior notes and $375 million of available cash, will be used to fund the acquisition of Conwood.

The revolver, which is expected to be undrawn at close, will be available for working capital needs.

Under the acquisition agreement, Reynolds has agreed to pay $3.5 billion for the holding company that owns Memphis, Tenn.-based Conwood, the nation's second-largest manufacturer of smokeless tobacco products.

Reynolds American is a Winston-Salem, N.C.-based manufacturer and marketer of cigarettes and other tobacco products.

The headquarters of the newly combined companies will be located in Memphis, and full integration is expected to be completed by the end of 2007.

Professional Paint frees to trade

Meanwhile, in trading news, Professional Paint's credit facility hit the secondary, with the $213 million first-lien term loan quoted at par ½ bid and the $43.5 million second-lien term loan quoted at 101 bid, according to a market source.

No offers were seen on either term loan tranche during market hours, the source added.

The first-lien term loan is priced with an interest rate of Libor plus 225 basis points. During syndication, the loan was upsized from $205 million and pricing was reverse flexed from Libor plus 250 basis points.

The second-lien term loan is priced with an interest rate of Libor plus 575 basis points and contains call protection of 102 in year one and 101 in year two. During syndication, this loan was downsized from $48.8 million and pricing was reverse flexed from Libor plus 625 basis points.

Professional Paint's $331.5 million credit facility also contains a $75 million revolver with an interest rate of Libor plus 225 basis points. During syndication, pricing on this tranche was reverse flexed from Libor plus 250 basis points as well.

Allocations on the deal actually went out on Tuesday, but the facility didn't break for trading until Wednesday.

Merrill Lynch acted as the lead bank on the transaction that is being used to refinance existing bank debt and fund the acquisition of a paint supplier in Florida.

The increase in the total amount of term loan debt that the company ended up using is a result of it having to pay a little bit more for the acquisition because audited financials showed that the paint supplier had higher EBITDA than was originally outlined.

Professional Paint is a Lone Tree, Colo., manufacturer and distributor of architectural paints and coatings.

Secondary sees good volume

The overall secondary loan market saw some improvement on Wednesday as trading activity picked up, although levels remained relatively unchanged, according to a trader.

"We started to see some decent two-way flow. It looks like we're getting to a point where the market is starting to look cheap again," the trader said.

Some names that saw a strong amount of activity during the session included Georgia-Pacific Corp. and Cebridge Connections Inc.

Georgia-Pacific's term loan B closed the session quoted at par 1/8 bid, par 3/8 offered, up an eighth of a point to unchanged, depending on the trader asked.

And, Cebridge's term loan closed the day quoted at 99½ bid, 99 7/8 offered, also up an eighth to unchanged, depending on the dealer.

Georgia-Pacific is an Atlanta-based manufacturer and marketer of tissue, packaging, paper, building products and related chemicals. Cebridge is a St. Louis-based provider of cable television and internet access.

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