Learning Care talks restructured $265 million notes and warrants at 13%, pricing at 96 to 97

By Paul A. Harris

St. Louis, March 19 - Learning Care Group (US) No. 2 Inc. introduced a new structure and set price talk for its $265 million high-yield notes offer, an informed source told Prospect News on Friday.

The company plans to sell 13% five-year senior secured PIK notes, with a coupon that will pay 10½% in cash, with the remaining 2½% of interest to be paid in-kind.

The notes come with penny warrants for 10% of the company's common equity.

Price talk is 96 to 97.

The order books close at 11 a.m. ET on Monday, and the notes/warrants deal is expected to price after that.

Barclays Capital Inc., Wells Fargo Securities and Morgan Stanley & Co. Inc. are joint bookrunner for the Rule 144A for life offering.

In late February the company began marketing five-year senior secured cash-pay notes, with no warrants.

In addition to the PIK structure and the warrants, call protection was increased to three years from 2.5 years.

Apart from the structural changes, the deal underwent covenant modifications.

The fixed charge coverage covenant was increased to 2.25 times from 2 times.

Also, a first lien leverage ratio of 4 times (calculated without giving effect to cost savings) will be added to the first paragraph of the debt coverage covenant.

The company will also conduct quarterly conference calls and make financial statements available on its web site

Proceeds will be used to refinance the company's term loan and mezzanine loan and for general corporate purposes.

The prospective issuer is a Novi, Mich.-based education services company.

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