Movie Gallery upsizing in the works; Dole, Envirocare break; Northwest fills book at higher pricing

By Sara Rosenberg

New York, April 13 - Movie Gallery Inc. is in the process of upsizing its term loan B by $150 million and downsizing its bond offering by the same amount, with the reworked bond deal expected to be announced later this week. Meanwhile, Dole Food Co. Inc. upsized its U.S. term loan so that it could tender for more bonds and freed the new deal up for trading.

In other primary doings, now that Northwest Airlines Corp. increased pricing on its in-market term loan C by 100 basis points, market sentiment has shifted to a more positive place regarding the deal getting done. WCA Waste Corp.'s recently launched $200 million credit facility has sparked interest among the relatively small lending group that was approached on the deal, which marks the borrower's first-time venture into the institutional loan market. And, Gardner Denver Inc.'s newly launched incremental term loan A has already gotten commitments from lenders.

As for the secondary, Envirocare of Utah Inc. allocated on Wednesday as well, with the first-lien term loan freeing up for trading in the lower-pars and the second-lien term loan freeing up for trading below par. And, levels finally surfaced on American Wholesale Insurance Group Inc.'s first-lien term loan B on Wednesday afternoon, although allocations on the deal started going out late in the day Tuesday.

Movie Gallery is working on upsizing its term loan B to $700 million from $550 million and plans on launching a downsized bond offering of $325 million - reduced from $475 million - by early next week, although these changes are still unofficial at this time, according to a market source.

This shift in funds from the bonds to the loan has been rumored for a few weeks now because of the recent back-up in the high-yield market and the strong interest in the loan market.

"The bank deal has gone well so it has created a lot of opportunities," the source explained.

Pricing on the term loan B is still talked at Libor plus 300 basis points, although, according to the source, the spread could potentially move lower, maybe by 25 basis points, based on this high demand that the tranche has received. "I think there will be some interplay with where the bonds price," the source added.

Commitments started coming in for the loan way before the actual bank meeting took place around mid-March with some pointing to the relatively short maturities of the tranches - five and six years - as well as the fact that the term loans amortize well before their final maturities, as key characteristics working in favor of the deal.

Movie Gallery Inc.'s senior secured credit facility also contains a $95 million five-year term loan A with an interest rate of Libor plus 275 basis points and a $75 million five-year revolver with an interest rate of Libor plus 275 basis points.

Wachovia Capital Markets LLC is the sole lead arranger, sole bookrunner and administrative agent on the credit facility, and Merrill Lynch will be involved in the loan as well.

Wachovia committed 90% of the debt financing package, and Merrill Lynch committed 10%.

Proceeds from the term loans and the proposed bond offering will be used to pay the approximately $850 million purchase price for Hollywood Entertainment Corp., plus the assumption of about $350 million of debt. Movie Gallery will be acquiring all of the outstanding shares of Hollywood for $13.25 per share in cash.

Revolver borrowings will be available for working capital and general corporate purposes.

The revolver contains an accordion feature allowing for the expansion of the tranche by $25 million under certain circumstances.

Movie Gallery is a Dothan, Ala.-based owner and operator of video specialty stores. Hollywood is a Wilsonville, Ore.-based (and will remain based there following completion of the acquisition) video chain.

Dole upsizes, allocates

Dole Food's increased the size of its U.S. term loan to $400 million from $350 million with the additional proceeds going toward the tender of additional bonds, according to a market source.

Furthermore, later in the day, Dole allocated its new deal, and the U.S. term loan was seen trading in the 101 bid, 101¼ offered context, a trader added.

Pricing on the tranche remained at Libor plus 150 basis points.

Dole's credit facility also contains a $150 million revolver, a $150 million multi-currency revolver and a $350 million equivalent yen-denominated term loan, all priced at Libor plus 150 basis points as well.

Deutsche Bank and Bank of America are joint lead arrangers on the now $1.05 billion deal (Ba3/BB), with Deutsche the left lead.

Proceeds will be used tender for up to $275 million of the company's debt securities, including its 8 7/8% senior notes due 2011, 8 5/8% senior notes due 2009 and 7¼% senior notes due 2010.

Proceeds will also be used to refinance some bank debt including Dole's outstanding term loan D and term loan E, both of which carry an interest rate of Libor plus 225 basis points.

The company's second-lien term loan that carries an interest rate of Libor plus 500 basis points and contains call protection of 105 in year one, 104 in year two, 103 in year three and 101½ in year four will remain in place.

Dole is a Westlake Village, Calif., producer and marketer of fresh fruit, fresh vegetables, fresh-cut flowers and packaged foods.

Northwest lifts pricing

Northwest's $147.75 million term loan C due Nov. 23, 2010 saw a pricing increase to Libor plus 625 basis points from Libor plus 525 basis points and, based on this flex, the deal was anticipated to get done, a fund manager told Prospect News - an expectation that proved to be true, according to another market source.

"The deal's been circled. Everything is fine on that front. New commitments are not being accepted," the source asserted.

When the deal first launched via a conference call on March 30, some lenders expressed dissatisfaction with the opening pricing level of Libor plus 525 basis points because they felt the syndicate was essentially creating a new loan comparable to the company's existing term loan B but pricing it in line with the existing $575 million term loan A - which meant that the term loan C was underpriced being that Northwest's existing $400 million term loan B carries an interest rate of Libor plus 675 basis points.

Now, that pricing on the term loan C has moved closer to existing term loan B pricing, investors are more likely to sign off on the deal.

The price change was presented to accounts around mid-afternoon Tuesday, and recommitments were due by the end of the day.

Proceeds from the term loan C will be used to refinance the $147.75 million amortization payment due Nov. 23 on the existing term loan A and term loan B. The company does have the cash to make the amortization payment but wants to conserve it because of uncertainties related to fuel prices and lower revenue from lower ticket prices.

Call protection on the term loan C is 103 through Nov. 23, 2005, 102 through Nov. 23, 2006, 101 through Nov. 23, 2007 and par thereafter. Northwest's existing term loan A and term loan B, which were obtained in November 2004, also contain call protection of 103 in year one, 102 in year two and 101 in year three.

Amortization is 1% per year beginning on Nov. 23, 2006, with a bullet payment at maturity.

JPMorgan and Citigroup are the lead banks on the Eagan, Minn.-based airline company's deal.

WCA ignites verbal interest

WCA Waste's $200 million credit facility has already received positive verbal feedback from potential lenders since launching via a bank meeting Tuesday to a select group of investors, although no firm commitments had come in by Wednesday afternoon primarily because the deal really didn't have a pre-marketing stage.

"[They] were waiting for ratings before [they] priced it so they didn't pre-market it, but there's strong interest in it," a market source said.

"On [the] revolver, [it] only went out to existing lenders. It's the company's first institutional tranche so [it] went out to a small group of institutional lenders. [There are] revolver lenders that want some of the term B so it will be a fairly small group of lenders in this deal. I think it went out to less than 40 institutions," the source added.

The facility consists of a $75 million five-year revolver (B3/B) talked at Libor plus 300 basis points, a $100 million six-year term loan B (B3/B) talked at Libor plus 300 basis points and a $25 million 61/2-year second-lien term loan (Caa1/CCC+) talked at Libor plus 600 basis points, the source said.

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

Both the first- and second-lien term loans are being offered at par. The upfront fee on the revolver is 20 basis points for any size commitment.

Wells Fargo Bank is the lead arranger on the deal that will be used to refinance WCA Waste's existing $160 million credit facility, of which $119 million was outstanding, fund its acquisition program and for other general corporate purposes.

Commitments are due April 22.

WCA Waste is a Houston-based non-hazardous solid waste transportation, processing and disposal company.

Gardner Denver nets orders

Gardner Denver's $230 million incremental term loan A bank debt due 2010 had already gotten orders in from lenders ahead of Wednesday's bank meeting when the deal launched with opening pricing of Libor plus 175 basis points, according to a market source.

"The increase is not enormous. Some existing guys were approached ahead of the launch and some new guys were invited to the meeting," the source said.

The company's existing $225 million revolver due September 2009 and $150 million term loan A due September 2009, which are being rolled over into the amended and restated credit facility, were launched at existing pricing levels of Libor plus 200 basis points.

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

Proceeds from the new bank debt, along with proceeds from a proposed $125 million bond offering, will be used to help fund the acquisition of Thomas Industries Inc. for a purchase price of $40.00 per share and the assumption of $9.5 million of long-term capitalized lease obligations. The net transaction value, including assumed debt and net of cash, is about $476.4 million.

The transaction is subject to the approval of Thomas' stockholders and other customary closing conditions, including the receipt of applicable regulatory approvals. It is not subject to financing.

Gardner Denver is a Quincy, Ill.-based producer of blowers, compressors, petroleum and water jetting pumps and accessories. Thomas is a Louisville, Ky.-based designer, manufacturer and marketer of precision engineered pumps and compressors.

Envirocare breaks

Envirocare of Utah's credit facility opened for trading on Wednesday, with the first-lien term loan seen quoted at par ¼ bid, par ½ offered and the second-lien term loan seen quoted at 98½ bid, 99 offered, according to a trader.

The $440 million first-lien term loan B is priced at Libor plus 275 basis points, contains 101 soft call protection for one year and was originally issued to investors at par. The soft call was added to the deal during syndication.

The $170 million second-lien term loan C is priced at Libor plus 550 basis points, is non-callable for one-year, then at 102 in year two and 101 in year three, and was originally issued to investors at 98.5. Pricing on the tranche was flexed up from Libor plus 500 basis points during syndication, call protection was changed on two occasions - with the original provision being 102 in year one and 101 in year two and the first revision being 103 in year one, 102 in year two and 101 in year three - and the original issue discount was added as well.

Envirocare's facility also contains a $30 million revolver priced at Libor plus 275 basis points.

Citigroup and Calyon are the lead banks on the $640 million credit facility, with Citigroup the left lead, although Calyon will remain administrative agent.

Proceeds will be used to repay and refinance existing bank debt and fund a dividend.

Envirocare, which was recently purchased by investment firm Lindsay Goldberg & Bessemer, is a Salt Lake City provider of waste management services.

American Wholesale levels emerge

A market on American Wholesale Insurance Group's $110 million six-year first-lien term loan B materialized on Wednesday afternoon, with the paper quoted at par ½ bid, 101½ offered, although no trades were actually seen in the name, according to a market source.

The first-lien term loan B is priced with an interest rate of Libor plus 350 basis points.

American Wholesale Insurance Group's $150 million facility also contains a $40 million 61/2-year second-lien term loan with an interest rate of Libor plus 850 basis points. No secondary quotes were seen on this tranche as of Wednesday afternoon, the source added.

However, the deal in general was not expected to see much activity after the break since distribution was relatively limited, a different source previously explained.

Originally, the first-lien term loan B was sized at $100 million, but the tranche was upsized by $10 million as the second-lien term loan was downsized by $10 million to $40 million.

Also, price talk on the second-lien term loan was originally set at Libor plus 700 basis points but was increased to Libor plus 850 basis points during syndication.

Credit Suisse First Boston is the sole lead arranger on the deal that will be used to help fund the acquisition of Stewart Smith Group from Willis Group Holdings.

American Wholesale Insurance is a Charlotte, N.C.-based wholesale insurance organization. Stewart Smith is a New York-based wholesale insurance broker.

DirecTV closes

DirecTV Group Inc. closed on its $2.5 billion senior secured credit facility (Ba1/BB/BB+) consisting of a $1.5 billion eight-year term loan B, a $500 million six-year term loan A and a $500 million six-year revolver with an interest rate of Libor plus 150 basis points, all priced with an interest rate of Libor plus 150 basis points.

During syndication, the term loan B was upsized from $1.25 billion and pricing was reverse flexed from Libor plus 175 basis points, and the term loan A was upsized from $250 million.

The term loan B and the term loan A were upsized by $250 million each because the company decided not to approach the high-yield market with a $500 million unsecured senior notes offering to help fund its refinancing transaction.

Security is substantially all assets.

Proceeds from the facility were used to repay and terminate the company's existing $1 billion senior secured loan, replace an undrawn $250 million revolver and to repay an $875 million unsecured promissory note. Remaining proceeds are available for working capital or other purposes.

The revolver was undrawn at closing.

Bank of America and JPMorgan acted as the co-lead arrangers and co-bookrunners on the deal, with Bank of America the left lead. Bank of America is administrative agent, and JPMorgan is syndication agent. Credit Suisse First Boston, Goldman Sachs Credit Partners LP and Citicorp North America Inc. acted as co-documentation agents.

"The financing was very well received and we are pleased with its successful completion," said Michael Palkovic, chief financial officer, in a company news release. "This transaction strengthens our financial position, provides us with additional flexibility in our operating and financial covenants and was completed at what we consider to be a very attractive interest rate."

DirecTV is an El Segundo, Calif., broadcast satellite provider.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.