Telx breaks; Microsemi better with Zarlink acquisition; Go Daddy, Blackboard revise OIDs

By Sara Rosenberg

New York, Sept. 22 - Telx Group Inc.'s credit facility freed up for trading on Thursday, with the term loan B quoted above its original issue discount price, which firmed at the wide end of revised guidance.

Also in trading, Microsemi Corp.'s term loan headed higher with news that an agreement has been reached for the purchase of Zarlink Semiconductor Inc., and Rite Aid Corp.'s term loans were softer despite the release of favorable earnings results as the market in general felt a little heavier.

Over in the primary, Go Daddy Group Inc. released changes on its credit facility, setting pricing on its term loan at the high end of talk and sweetening the original issue discount, and Blackboard Inc. widened the original issue discount on its first-lien term loan.

Telx starts trading

Telx Group's credit facility hit the secondary market on Thursday, with the $255 million six-year term loan B quoted at 95½ bid, 96½ offered, according to a trader.

Pricing on the B loan B Libor plus 650 basis points with a 1.25% Libor floor, and it was sold at an original issue discount of 94. There is 101 soft call protection for one year.

During syndication, the term B was downsized from $290 million as the company's mezzanine debt was increased by $35 million, pricing was flexed up from talk of Libor plus 600 bps to 625 bps, the original issue discount guidance moved to 94 to 95 from 96 to 97, before settling in at the wide end of that modified talk, and call protection was added.

Morgan Stanley Senior Funding Inc. and TD Securities (USA) LLC are leading the $305 million senior secured credit facility (B1/B+), which also includes a $50 million five-year revolver and will be used to help fund the buyout of the company by ABRY Partners and Berkshire Partners LLC from GI Partners.

Telx is a New York-based provider of interconnection and colocation facilities.

Microsemi heads up

In more trading happenings, Microsemi's term loan was stronger in the secondary market with the company's announcement that a friendly agreement for the purchase of Zarlink Semiconductor has finally been agreed upon, according to traders.

The term loan was quoted by one traderat 97¾ bid, 98¾ offered, up from 97¼ bid, 98¼ offered, and by a second trader at 98½ bid, versus 98 bid on Wednesday.

Under the agreement, Microsemi is buying Zarlink for C$3.98 in cash per share and about C$1.6 in cash per 6% unsecured subordinated convertible debenture. The total transaction value is about $525 million, net of Zarlink's cash which is currently $107 million.

Microsemi has been bidding for Zarlink for quite some time now. In July, it made its offer public after submitting two written proposals that were rejected by Zarlink's board. The offer in July was for C$3.35 per share in cash, and the prior written proposals were for C$3.25 to C$3.55 per share in June and C$3.00 per share in May.

Microsemi plans loan

To help fund the Zarlink acquisition, Microsemi is getting an $800 million seven-year senior term loan B led by Morgan Stanley Senior Funding Inc. that is set to launch with a bank meeting on Tuesday, according to a market source.

The term loan is essentially comprised of the company's existing $375 million term B, which will be amended, restated and extended, and $425 million of new B loan borrowings, the source said.

Company officials said in a conference call on Thursday that the interest rate on the term loan B is expected to be between 5% and 6%, and debt to EBITDA will be around 3.0 times, officials remarked.

The tender offer for Zarlink's shares and debentures expires on Oct. 12, with closing subject to customary conditions, including the tender of 66 2/3% of the outstanding shares.

Microsemi is an Aliso Viejo, Calif.-based provider of semiconductor services. Zarlink is an Ottawa, Canada-based designer of mixed-signal semiconductor products for communications and medical applications.

Rite Aid slides

Rite Aid's term loans headed lower in trading as investors shrugged off good numbers released in the morning and let the paper retreat with the overall slightly lower bias in the market, according to a trader.

The tranche 2 loan was quoted at 92 bid, 93 offered, down from 92¼ bid, 93¼ offered, and the tranche 5 loan was quoted at 91¾ bid, 92¾ offered, down from 92 bid, 93 offered, the trader said.

For the fiscal 2012 second quarter ended Aug. 27, Rite Aid reported a net loss of $92.3 million, or $0.11 per diluted share, compared to a net loss of $197 million, or $0.23 per diluted share, in the prior year.

Revenues for the quarter were $6.3 billion, compared to $6.2 billion in the fiscal 2011 second quarter.

And, adjusted EBITDA for the quarter was $184.3 million, versus $181.2 million last year.

Rite Aid updates outlook

Also on Thursday, Rite Aid, a Camp Hill, PA.-based drugstore chain, adjusted its full-year fiscal 2012 estimates for net loss, adjusted EBITDA, sales and capital expenditures.

Net loss for the year is now expected between $345 million and $495 million, or $0.40 to $0.56 per diluted share, compared to previous estimates of a net loss between $370 million and $560 million, or $0.42 to $0.64 per diluted share.

Adjusted EBITDA for the year is guided between $825 million and $900 million, compared to prior expectations of between $800 million and $900 million.

Sales are expected to be between $25.8 billion to $26.1 billion, not much of a difference from the $25.7 billion to $26.1 billion range given previously, while same store sales are expected to increase 0.75% to 2%, compared to earlier estimates of an increase of 0.5% to 2%.

Lastly, capital expenditures are now expected to be $250 million, down from $300 million previously.

Go Daddy tweaks deal

Moving to the primary, Go Daddy updated pricing on its $750 million term loan, firming it at Libor plus 575 bps, the wide end of talk of Libor plus 550 bps to 575 bps talk, and revising the original issue discount to 93 from 96, according to a market source.

As before, the term loan has a 1.25% Libor floor and 101 soft call protection for one year.

Barclays Capital Inc., Deutsche Bank Securities, Inc., RBC Capital Markets LLC and KKR Capital Markets are leading the deal and are asking for recommitments by noon ET on Friday.

The company's $825 million credit facility (Ba3/B) also includes a $75 million undrawn revolver.

Proceeds, along with $300 million of unsecured notes that have already been placed and $1.3 billion of equity, will be used to fund a strategic investment and partnership with KKR, Silver Lake and Technology Crossover Ventures.

Go Daddy is a Scottsdale, Ariz.-based provider of web hosting and domain names.

Blackboard modifies OID

Blackboard made some more changes to its $780 million seven-year first-lien term loan (B1/B+), this time moving the original issue discount to 92 from revised talk of 94 to 95 and initial talk at launch of 96½ to 97, according to a market source.

Pricing on the first-lien term loan is Libor plus 600 bps with a 1.5% Libor floor, and there is soft call protection of 102 in year one and 101 in year two. Earlier in syndication, the coupon had been increased from Libor plus 550 bps.

Initially, when the company detailed its financing plans in filings with the Securities and Exchange Commission, it was said that the first-lien term loan would be sized at $700 million. However, there was also room to upsize by $80 million if 100% of the outstanding equity interests of a portfolio company of Providence Equity Partners were to be contributed to the company.

Also, the regulatory filings had first-lien term loan pricing expected at Libor plus 475 bps with a 1.5% Libor floor.

Blackboard boosts sweep

In addition to the original issue discount revision, Blackboard increased the excess cash flow under its credit agreement to 75% from 50% and modified most-favored-nation protection to 25 bps from 50 bps, the source said.

The company's $1.23 billion senior secured credit facility also includes a $100 million five-year revolver (B1/B+) and a $350 million eight-year second-lien term loan (Caa1/CCC+).

Price talk on the second-lien term loan is Libor plus 975 bps with a 1.5% Libor floor and an original issue discount of 97½ to 98. This tranche is non-callable for one year, then at 102 in year two and 101 in year three.

By comparison, the company's previous regulatory filings had second-lien term loan pricing expected at Libor plus 800 bps with a 1.5% Libor floor.

Blackboard lead banks

Bank of America Merrill Lynch, Deutsche Bank Securities Inc. and Morgan Stanley & Co. Inc. are the lead banks on Blackboard's credit facility, which is expected to close and fund on Oct. 4.

Proceeds will be used to help fund the buyout of the company by Providence Equity Partners for $45 per share in cash. The transaction is valued at $1.64 billion, plus the assumption of $130 million of net debt.

Other funds for the transaction will come from $850 million of equity.

Completion of the buyout is subject to stockholder approval, which was obtained on Sept. 16, other customary conditions and regulatory approvals.

Blackboard is a Washington, D.C.-based provider of enterprise software applications and related services to the education industry.

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