CanWest upsizes, firms pricing; Source Interlink adds covenant; Harlan tweaks; Vertrue extends deadline

By Sara Rosenberg

New York, July 2 - CanWest MediaWorks firmed up the upsizings to its term loan tranche and set pricing on its term loan B at the wide end of talk, and Source Interlink Cos. Inc. added a maintenance covenant to its term loan B.

Also in the primary, Harlan Sprague Dawley, Inc. removed the super-priority status from its revolvers, Vertrue Inc. moved the commitment deadline on its credit facility and Bombardier Recreational Products Inc. opted to take its credit facility out of market.

Moving to the secondary, Movie Gallery Inc.'s term loan B was quoted really wide as news of covenant defaults and an evaluation of strategic alternatives hit the market, and LCDX once again ended up weaker on the day.

CanWest MediaWorks has finalized the changes to its credit facility, determining just how much the term loan A and the term loan B are being upsized by and firming up pricing on the term loan B tranche at the high end of guidance, according to a market source.

The term loan A is now sized at C$265 million, up from C$250 million, with pricing remaining in line with initial talk at Libor plus 200 basis points, the source said.

Meanwhile, the term loan B, which is being done in U.S. dollar equivalent, is now sized at C$500 million, up from C$450 million, and pricing is set at Libor plus 200 bps, the wide end of original talk of Libor plus 175 bps to 200 bps, the source continued.

The upsizings were done as a result of the company's decision last week to downsize its bond deal to $400 million from $650 million.

When the bond offering was reduced, it was said that the bank deal could be increased by as much as C$140 million, split between the term loan A and the term loan B. However, the final changes were not decided upon until now.

CanWest's C$1.015 billion (up from C$950 million) credit facility (Ba1/BB-) also includes a C$250 million revolver that is priced at Libor plus 200 bps, with a 52.5 bps unused fee.

With the changes, senior leverage was increased by 0.2 of a turn to 3.2 times and total leverage was reduced by 0.5 a turn to 5.0 times, the source added.

Recommitments are due from lenders on Tuesday at noon.

Scotia Capital is the sole lead bank on the revolver and the term loan A, which are being sold in Canada, and Scotia and Citigroup are joint leads on the term loan B, with Scotia the left lead.

Proceeds will be used to help fund a privatization agreement between CanWest MediaWorks Income Fund and CanWest MediaWorks LP, under which the fund's outstanding units will be redeemed for C$9.00 in cash each.

Closing of the acquisition is expected to occur on or about July 10.

CanWest MediaWorks is a Don Mills, Ont.-based media company.

Source Interlink adds leverage covenant

Source Interlink added a senior secured leverage ratio to its $880 million seven-year term loan B (B1/B+) that was previously covenant-light, according to a market source.

Under the proposed covenant, the leverage ratio is 6.5 times for the fiscal quarter ending October 2008, 6.0 times for the fiscal quarters ending January 2008 and April 2009, 5.75 times for the fiscal quarters ending July 2009 and October 2009, 5.5 times for the fiscal quarters ending January 2009 and April 2010, 5.25 times for the fiscal quarters ending July 2010 and October 2010, 5.00 times for the fiscal quarters ending January 2010 and April 2011, 4.75 times for the fiscal quarters ending July 2011 and October 2011, and 4.5 times for each fiscal quarter after that, the source said.

Price talk on the term loan B remained unchanged at Libor plus 250 bps, the source added.

Source Interlink's $1.18 billion credit facility also includes a $300 million six-year ABL revolver (Ba3/BB-) that is talked at Libor plus 150 bps.

Citigroup and JPMorgan are the lead banks on the deal.

Proceeds from the credit facility, along with $465 million of subordinated notes, will be used to fund the acquisition of Primedia Inc.'s Enthusiast Media division, which is comprised of over 70 magazine titles and 90 web sites, for $1.178 billion in an all-cash transaction.

Pro forma adjusted EBITDA is $203 million.

Source Interlink is a Bonita Springs, Fla., provider of merchandising and fulfillment services for home entertainment products.

Harlan eliminates super-priority

Harlan Sprague Dawley removed the super-priority status from its $15 million six-year U.S. revolver (B2/BB-) and $15 million six-year euro-denominated revolver (B2/BB-), while leaving price talk unchanged at Libor plus 225 bps, according to a market source.

The company's $360 million senior secured credit facility also includes a $330 million seven-year first-lien term loan (B2/BB-) talked at Libor plus 225 bps.

UBS Investment Bank is the lead bank on the deal.

Proceeds will be used to finance Harlan's acquisition of E.M. Developments Ltd., SafePharm Laboratories Ltd., ILS Ltd. and SafePharm USA, Inc. and to refinance existing debt.

Harlan is an Indianapolis-based provider of preclinical research tools and services for the pharmaceutical, biotechnology, agrochemical, industrial chemical and food industries.

Vertrue resets deadline

Vertrue extended the commitment deadline on its $660 million senior secured credit facility to July 11 from Monday, according to a market source.

The facility consists of a $30 million six-year revolver (Ba3) talked at Libor plus 225 bps to 250 bps, with a 50 bps commitment fee, a $430 million seven-year first-lien term loan (Ba3) talked at Libor plus 225 bps to 250 bps and a $200 million eight-year second-lien term loan (Caa1) talked at Libor plus 550 bps to 575 bps.

The second-lien term loan carries call protection of 102 in year one and 101 in year two.

Last week, a leverage covenant was added to the first- and second-lien term loans, which previously contained no financial covenants at all.

The first-lien term loan (Ba3) leverage covenant opens at 7.25 times and the second-lien term loan leverage covenant opens at 7.5 times.

There was no need to add a leverage ratio to the revolver because the tranche already carried one.

Lehman and JPMorgan are the joint lead arrangers and joint bookrunners on the deal, with Lehman the administrative agent and JPMorgan the syndication agent.

Proceeds will be used to help fund the buyout of Vertrue by management, One Equity Partners, Oak Investment Partners and Rho Ventures for $48.50 in cash per share of common stock. The transaction is valued at about $800 million.

Other buyout financing will come from a $175 million equity commitment.

In connection with the buyout, Vertrue will redeem, repurchase or defease all of its outstanding 9¼% senior notes due 2014.

A portion of the second-lien term loan can be delayed draw for 45 days if a defeasance deposit needs to be made for the notes.

In addition, immediately after the buyout, the company will deposit in a segregated escrow account an amount equal to the aggregate principal amount of its 5.5% convertible senior subordinated notes due 2010 that have not been converted into equity on or prior to the date of the buyout.

Vertrue is a Norwalk, Conn., internet direct marketing services company.

Bombardier pulls deal

Bombardier Recreational Products decided to postpone its in-market credit facility because of the currently poor primary conditions, with no indication on when the deal may come back, according to an informed source.

The deal consisted of a $1.15 billion covenant-light term loan B (Ba2/B+) talked at Libor plus 250 bps, in line with existing term loan pricing, and a C$250 million revolver (B1) talked at Libor plus 225 bps, in line with existing revolver pricing.

The term loan B would have carried 101 soft call protection for one year.

Merrill Lynch, RBC Capital, BMO and UBS were acting as the lead banks on the deal.

Proceeds were going to be used to refinance existing debt and to pay a dividend to shareholders.

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

Movie Gallery down and wide

Switching to the secondary market, Movie Gallery's term loan B was lower and wide after news of covenant non-compliance and evaluation of company alternatives emerged, according to a trader.

The term loan was quoted at 80 bid, 90 offered, down from 93 bid, 94 offered, the trader said.

"Everybody is trying to figure out what's going on with the company," the trader added.

Late in the day Monday, Movie Gallery announced that as a result of significantly softer-than-expected second-quarter results, it was not able to meet the financial covenants contained in its senior facility for the fiscal quarter ending July 1.

The company went on to say that it is in discussions with its lenders regarding the situation and intends to work closely with them to develop a plan to remedy the defaults, which may include seeking a waiver, amendment, forbearance or similar agreement.

Movie Gallery has fully drawn the remaining availability under its revolver and currently has liquidity consisting of approximately $50 million of cash on hand.

Goldman Sachs is the agent on the loan.

Movie Gallery also announced that Bill Kosturos, a managing director at restructuring and corporate advisory firm Alvarez & Marsal, has resumed his role at the company as chief restructuring officer.

Alvarez & Marsal was retained by Movie Gallery in 2006 to bolster its accounting and finance functions and to assist in improving its overall operating performance and is also helping to evaluate available strategic and restructuring alternatives.

In addition, the Dothan, Ala.-based video rental company hired Lazard Freres & Co. LLC on Sunday to serve as an independent financial adviser.

Movie Gallery intends to consider a number of alternatives, including asset divestitures, recapitalizations, alliances with strategic partners and a sale to or merger with a third party.

Furthermore, the company said that it will continue to take actions to conserve cash and improve profitability, including accelerating the closure of unprofitable stores, consolidating stores in certain markets, realigning its cost structure to better reflect its reduced size and seeking a more competitive capital structure.

LCDX trades down

In other trading news, LCDX was once again lower as everything in the market felt a little heavy in light pre-holiday trading, according to a trader.

The index went out at 97.25 bid, 97.35 offered, down from 97.70 bid, 97.80 offered, the trader said.

Petroleum Geo-Services close

Petroleum Geo-Services ASA closed on its $950 million senior secured credit facility (Ba2), according to a news release.

The facility consists of a $600 million eight-year term loan B and a $350 million five-year revolver, with both tranches priced at Libor plus 175 bps.

During syndication, the term loan B was upsized from $500 million and the revolver was upsized from $300 million.

The term loan B has no financial maintenance covenants.

Barclays and UBS acted as the lead banks on the deal, with Barclays the left lead.

Proceeds, together with available cash, have been used to repay and cancel the company's previous credit facility, which consisted of a $244 million term loan B and a $150 million revolver, and to fund the acquisition of MTEM Ltd.

Proceeds will also be used to fund an approximately $300 million special dividend and for general corporate purposes.

Petroleum Geo-Services is a Lysaker, Norway, geophysical company.

Courtside closes

Courtside Acquisition Corp. completed its acquisition of American Community Newspapers LLC, and the company is now changing its name to American Community Newspapers Inc., according to a news release.

To help fund the transaction, Courtside got a new $125 million senior secured credit facility consisting of a $20 million six-year revolver at Libor plus 300 bps, with a 50 bps commitment fee, a $35 million six-year term loan A at Libor plus 300 bps and a $70 million 61/2-year term loan B at Libor plus 325 bps.

The company also priced $27 million of 15½% seven-year senior PIK notes.

BMO Capital Markets acted as the lead bank on the deal.

Courtside is a newspaper publisher.

Medical Staffing closes

Medical Staffing Network Holdings Inc. closed on its new $155 million senior secured credit facility, according to a company news release.

The facility consists of a $30 million six-year revolver priced at Libor plus 350 bps, a $100 million six-year first-lien term loan B priced at Libor plus 350 bps and a $25 million seven-year second-lien term loan priced at Libor plus 600 bps.

The second-lien term loan carries call protection of 101 for one year.

During syndication, pricing on the revolver and the first-lien term loan was revised from original talk at launch of Libor plus 275 bps to 300 bps to Libor plus 325 bps to 350 bps, before firming up at the wide end of the changed guidance.

General Electric Capital Corp. and Merrill Lynch Capital acted as the lead banks on the deal.

Proceeds were used to fund the $92 million cash acquisition of InteliStaf Holdings Inc., to refinance Medical Staffing Network's existing debt and to provide for working capital and general company purposes.

Medical Staffing Network is a Boca Raton, Fla., provider of per diem nurse staffing services. InteliStaf is an Oakbrook Terrace, Ill., health care staffing company.

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