DirecTV slides on additional debt; Delphi breaks; Allison steady on numbers; Cash, LCDX drop

By Sara Rosenberg

New York, May 7 - DirecTV Holdings LLC's existing term loan traded lower on Wednesday after news hit that the company is working on getting over $2 billion in new bank and bond debt, and Delphi Corp.'s debtor-in-possession financial facility freed up for trading.

Also in trading, Allison Transmission's term loan B held firm following the release of earnings, which was particularly noticeable given that the rest of the cash market was weaker, and LCDX 10 traded down as well.

DirecTV's existing term loan weakened in trading on the heels of a new term loan C and bond deal being announced, according to a trader.

The existing term loan was quoted at 98 bid, 98½ offered, down from 99 bid, 99½ offered on Tuesday, the trader said.

"It traded off a little because of relative value," the trader remarked.

Early Wednesday morning, the company revealed plans for a new $1 billion five-year incremental term loan C (Baa3/BBB-) and $1.35 billion of eight-year senior notes due 2016.

The term loan C quickly came to market, launching with a conference call at 11:30 a.m. ET, and the syndication process is set up to go rather quickly as investors are only being given until Friday to commit to the deal.

Price talk on the term loan C is Libor plus 200 basis points to 225 bps with a 3% Libor floor, and the original issue discount is being guided in the 99 to 99¼ context.

"I don't see an issue here. Staple name that CLOs should gobble up just based on ratings. I would think it does fine," the trader said regarding syndication of the new term loan.

Bank of America and JPMorgan are the lead banks on the deal.

Proceeds from the term loan and the bonds, which priced on Wednesday at par to yield 7 5/8%, will be used for general corporate purposes, including to pay a dividend to its parent, DirecTV Group Inc.

DirecTV Group will then be able to use those funds to purchase stock under its share repurchase program, which was just increased to $3 billion.

In connection with these transactions, DirecTV Group entered into an agreement with Liberty Media, which limits their voting power to their current ownership percentage of 47.9%, regardless of the number of shares bought through the repurchase program.

Also on Wednesday, DirecTV Group announced first-quarter earnings that included revenues of $4.59 billion, up 17% from $3.91 billion last year, operating profit before depreciation and amortization of $1.18 billion, up 27% from $930 million last year, and operating profit of $657 million, up 17% from $563 million last year.

Net income for the quarter was $371 million, up 10% from $336 million in the first quarter of 2007, and earnings per share were $0.32, up 19% from $0.27 last year.

"DirecTV's first-quarter results highlight the overall operational and financial strength of our company. Our strategy of offering the best television experience to higher quality customers continues to drive superior financial results," said Chase Carey, president and chief executive officer, in a news release.

"As we discussed at our Investor Day earlier this year, we expect 2008 to be a year in which we take DirecTV to a whole new level in terms of profitability and cash flow growth. We took an important step toward this goal in the first quarter as DirecTV U.S. generated $603 million in cash flow before interest and taxes, representing a 76% increase over the prior year," Carey added in the release.

DirecTV is an El Segundo, Calif., provider of digital multichannel television entertainment.

Delphi frees to trade

Delphi's debtor-in-possession facility reallocated and broke for trading late in the day Wednesday, according to a trader.

The $2.75 billion second-lien term loan C was quoted at 99¼ bid, 99¾ offered, the trader said.

The second-lien loan is priced at Libor plus 525 bps with a 3.25% Libor floor. Lenders got a 200 bps amendment fee with this tranche.

Delphi's $4.35 billion DIP also includes a $1.1 billion revolver and a $500 million first-lien term loan.

The first-lien loan is priced at Libor plus 400 bps with a 3.25% Libor floor. Lenders got a 150 bps amendment fee with this tranche.

During the syndication process, the revolver was upsized from $1 billion, the first-lien term loan was downsized from $600 million and the second-line term loan was upsized from $2.5 billion.

JPMorgan and Citigroup are the lead banks on the deal, with JPMorgan the left lead.

Proceeds are being used to refinance the company's existing DIP with one that matures at a later date.

Delphi is a Troy, Mich.-based automotive electronics manufacturer.

Allison firm with earnings

Allison Transmission's term loan B was steady after the company went out with positive financials to lenders, according to a trader.

"Market was down as a whole, so the fact they they're unchanged is something," the trader remarked.

Allison's term loan B was quoted at 93½ bid, 93¾ offered, compared to Tuesday's levels of 93½ bid, 94 offered, the trader said.

"Earnings were good. They were a little better than what people were expecting," the trader added.

Allison Transmission is a Speedway, Ind., designer and manufacturer of automatic transmissions.

Cash, LCDX slide

Meanwhile, as mentioned above, the cash market in general was lower on the day, and LCDX saw a drop in levels, too, according to a traders.

One trader had the cash market down by at least a quarter, while a second trader said it was down by an eighth to a quarter.

For example, Idearc Inc., a Dallas-based provider of yellow and white page directories and related advertising products, saw its term loan quoted at 82½ bid, 83¼ offered, down from 83 bid, 84 offered, the first trader remarked.

"Combination of profit taking, oil and stocks down," the trader said in explanation of the general loan market performance.

All these factors seemed to have affected the index as well, with LCDX 10 quoted at 99.10 bid, 99.25 offered, down from Tuesday's levels of 99.60 bid, 99.70 offered, traders said. And, at some point during the session, one trader saw the index go as low as 98.80 bid, 99 offered.

As for stocks, Nasdaq closed down 44.82 points, or 1.80%, Dow Jones Industrial Average closed down 206.48 points, or 1.59%, S&P 500 closed down 25.69 points, or 1.81%, And NYSE closed down 171.51 points, or 1.80%.

Bright Horizons retranches

In other news, Bright Horizons Family Solutions, Inc. increased the size of its term loan B and removed the term loan A from its credit facility, according to market sources.

The seven-year term loan B is now sized at $365 million, up from $265 million, sources said. Price talk on the tranches is Libor plus 400 bps with a 3.5% Libor floor, and the original issue discount is guided around 95 to 96, but sources are saying that it's trending towards 96. At launch the discount was simply described as in the mid-90s context.

The $100 million six-year term loan A that was eliminated from the deal was being talked at Libor plus 350 bps.

"The A has amortization. The B doesn't. So, that's better for the company. And, people want the B loan," the source said in explanation of why the change in tranching was done.

Ever since the bank meeting for the deal took place in late April, word was that the term loan B was oversubscribed.

By making this change, the deal actually reverted back to its original structure. Based on filings with the Securities and Exchange Commission, the term loan B had been expected to be sized at $365 million, but prior to launch, the company carved out $100 million to create the term loan A.

Bright Horizons' $440 million senior secured credit facility (Ba3) also includes a $75 million six-year revolver that is talked at Libor plus 350 bps.

Financial covenants include a minimum cash interest coverage ratio and a maximum total leverage ratio.

Goldman Sachs is the lead arranger and bookrunner on the deal that will be used to help fund the buyout of the company by Bain Capital Partners LLC for $48.25 in cash per share. The transaction is valued at $1.3 billion.

Other financing will come from $300 million of senior subordinated mezzanine notes and $110 million of PIK holdco notes provided by GS Mezzanine Partners V LP, and $640 million in equity.

Bright Horizons is a Watertown, Mass., provider of employer-sponsored child care, early education and work/life services.

EB Brands wrapping soon

In other news, EB Brands' $82 million credit facility is expected to get done at initial terms and syndication should be completed sometime next week, according to a market source.

Closing on the deal is anticipated to take place about a week after syndication wraps, the source added.

The credit facility consists of a $30 million revolver and a $52 million term loan, with both tranches priced at Libor plus 450 bps with an original issue discount of 981/2.

GE Capital and National City are the co-arrangers on the deal, with GE the left lead.

Proceeds will be used to help fund Cortec's acquisition of the company.

EB Brands is a Yonkers, N.Y., designer and marketer of high-margin, high-impulse, niche accessories designed for the fitness, gift and travel markets.

Sarnova expected at initial terms

Sarnova's $125 million senior secured credit facility is another deal that is anticipated to wrap at initial terms and syndication of this transaction should also be done next week, according to a market source.

GE Capital and Orix are the lead arrangers on the deal, with BMO acting as the syndication agent and National City acting as the documentation agent.

The facility consists of a $15 million revolver, an $82 million term loan A and a $28 million delayed-draw term loan, with all tranches priced at Libor plus 500 bps with an original issue discount of 98.

Proceeds will be used to fund Water Street Healthcare Partners' acquisitions of Tri-anim Health Services and BoundTree Medical Products, with the newly combined company to be named Sarnova.

Tri-anim is a Sylmar, Calif., provider of specialty sales and distribution services for health care. Bound Tree Medical is a Dublin, Ohio, emergency medical products distributor.

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