HealthTronics, Fender break for trading; Chiquita collateral package sparks curiosity

By Sara Rosenberg

New York, March 23 - HealthTronics Inc. allocated its senior secured credit facility on Wednesday, with the term loan paper trading around in the mid-to-high par area. Also hitting the secondary was Fender Musical Instruments Corp., with its first-lien term loan nearing 102 type levels and its second-lien term loan quoted in the lower-101 context.

In the primary, Chiquita Brands International Inc. launched its $650 million credit facility to investors, and although the deal should syndicate fairly smoothly, the collateral package contained in the credit agreement has raised some eyebrows.

HealthTronics $125 million six-year term loan freed up for trading with quotes seen at par ½ bid, 101 offered immediately following the break, according to a market source.

By the end of the day, levels widened out a little to par ¼ bid, 101 offered, a trader added.

The term loan is priced with an interest rate of Libor plus 175 basis points. At launch in February, the tranche was talked at Libor plus 250 basis points but was reverse flexed during syndication on strong demand.

"Allocations were pretty small. It's a small deal and I'm sure other people put in large orders so what else could they do," the market source said.

HealthTronics' $175 million senior secured credit facility (Ba3/BB-) also contains a $50 million five-year revolver.

JPMorgan is the lead bank on the deal that will be used to refinance existing bank debt and unsecured senior subordinated notes.

HealthTronics is an Austin, Texas, provider of healthcare services, primarily to the urology community, and manufacturer of medical devices and specialty vehicles used for the transport of high technology medical and broadcast & communications equipment.

Fender breaks

Fender Musical Instruments' $170 million first-lien term loan (B1/B+) opened for trading at 101 5/8 bid, 101 7/8 offered on Wednesday afternoon, with the bid being for $3 million and the offer being for $3 million as well, according to a fund manager.

But, by the end of the day, trading levels on the first-lien term loan moved up to 101 7/8 bid, 102 offered, the fund manager said.

Meanwhile, the $100 million second-lien term loan (B3/B-) opened for trading at 101 bid, 101½ offered, with the bid being for $2 million and the offer being for $2 million as well, and the paper stayed at those levels until the close of business, the fund manager said.

As for allocations, they were "terrible," the fund manager added, explaining that his shop got 8% of its original order and they "were one of the better allocations."

Fender's first-lien term loan is priced with an interest rate of Libor plus 225 basis points. When the deal was first launched, accounts were unofficially told that the first-lien term loan would be priced around Libor plus 250 basis points but levels came in on strong oversubscription.

The second-lien term loan is priced with an interest rate of Libor plus 450 basis points - exactly where accounts were expecting it to fall out.

The $320 million credit facility also contains a $50 million revolver (B1/B+).

Goldman Sachs is the lead bank on the recapitalization deal.

Fender is a Scottsdale, Ariz., manufacturer of guitars, amplifiers and related equipment.

Chiquita splits collateral

Overall, Chiquita's newly launched credit facility should be pleasing to investors as leverage seems manageable and the acquisition of the Fresh Express fresh-cut produce segment of Performance Food Group Co. seems reasonable, but the collateral package being offered up to back the loan is worth looking into, according to a buyside source.

"It's a funky structure. The term loan A is secured by something different than what the term loan B is secured by. The A is focused more on the existing business. The B is focused more on Fresh Express. And, there are carve outs on top of that. It depends on how comfortable you are with the collateral package - specific assets instead of all assets," the source said.

"The capital structure is OK for the business prospects. Two something times bank debt and around four times total debt. Prospects of what they're buying is reasonably good. Fresh Express seems like a pretty good business.

"I would guess it would do fine. There are a lot worse loans right now and Chiquita is nowhere near the bottom of the barrel type stuff. [The collateral] is interesting. It's something to think about but at the end of the day I don't think it derails anything," the buyside source added.

Chiquita's $650 million credit facility, which launched via a bank meeting Wednesday afternoon, consists of a $125 million five-year term loan A with an interest rate of Libor plus 175 basis points, a $150 million five-year revolver with an interest rate of Libor plus 175 basis points and a commitment fee of 50 basis points and a $375 million seven-year term loan B with an interest rate of Libor plus 225 basis points.

It was previously anticipated that the deal would be sized at $600 million, but it was upsized by $50 million as the company now expects to only raise $300 million in junior capital - comprised of convertible preferreds and high-yield bonds - as opposed to $350 million in junior capital.

The increase in the facility came from adding $25 million to the term loan A, which was previously expected to be sized at $100 million, and adding $25 million to the term loan B tranche, which was previously expected to be sized at $350 million.

Wachovia and Morgan Stanley are joint lead arrangers and joint bookrunners on the deal, with Wachovia the left lead, and Goldman Sachs as documentation agent.

Proceeds from the term loans, the junior capital and $75 million of cash on hand will be used to finance the $855 million cash acquisition of Fresh Express and refinance existing Chiquita debt.

Borrowings under the revolver will be primarily available for working capital requirements and general corporate purposes.

Pro forma for the acquisition, the company's debt to EBITDA ratio is expected to be 4 times and EBITDA to interest coverage of 3.5 times, but by 2006 the company expects the debt ratio to drop below 3 times and interest coverage to rise to more than 5 times.

Closing of the transaction is expected to be completed during second quarter.

Chiquita is a Cincinnati marketer, producer and distributor of bananas and other fresh produce.

Masonite postpones bonds

Masonite International Corp. postponed its $825 million bond offering due to adverse market conditions on Wednesday but left its credit facility unchanged in terms of size, for now at least, according to a market source.

"Masonite did in fact postpone its bonds today. I think their plan is to come back when market conditions are better. As of right now this has no affect on the bank deal. KKR does have other financing options available. They have some time [to close on the LBO] so they're under no pressure," an informed source told Prospect News.

The $1.525 billion credit facility (B2/BB-) consists of a $1.175 billion term loan B with an interest rate of Libor plus 200 basis points - after a reverse flex on Tuesday that brought pricing down from Libor plus 225 basis points - and a $350 million revolver talked at Libor plus 250 basis points.

The term loan is being offered to investors at par, and the revolver carries upfront fees of 125 basis points for commitments of $25 million and 100 basis points for commitments of $15 million.

Proceeds from credit facility will be used to help fund Kohlberg Kravis Roberts & Co.'s leveraged buyout of the company. The bonds were supposed to be used for LBO financing as well.

The Bank of Nova Scotia (left lead and administrative agent) and Deutsche Bank are co-lead arrangers on the credit facility, Deutsche and UBS Securities are co-syndication agents, and SunTrust and Bank of Montreal are agents.

Deutsche Bank Securities, UBS Investment Bank and Scotia Capital are joint leads on the bonds.

Masonite International is a Mississauga, Ont.-based building products company.

Reddy Ice cuts spread

Reddy Ice Holdings Inc. reverse flexed pricing on its $240 million term loan to Libor plus 175 basis points from price talk in the Libor plus 200 basis points area - not much of a surprise being that the tranche was oversubscribed instantly after it launched early last week, according to a market source.

CIBC is the lead bank on the deal.

The $300 million credit facility (B1/B+), which primarily went out to existing lenders, also contains a $60 million revolver.

The Dallas-based packaged ice company is getting the new credit facility in connection with an initial public offering of common stock.

Proceeds from the loan and the IPO will be used to repay the existing credit facilities in full and tender for $152 million of 8 7/8% senior subordinated notes.

St. John Knits closes

St. John Knits International Inc. closed on its new $255 million credit facility (B+) consisting of a $210 million seven-year term loan with an interest rate of Libor plus 250 basis points and a step down to Libor plus 225 basis points if leverage falls below 23/4x, and a $45 million five-year revolver with an interest rate of Libor plus 250 basis points.

JPMorgan was the lead bank on the deal that is being used to refinance outstanding debt, including redeeming 12.5% senior subordinated notes due 2009.

St. John Knits is an Irvine, Calif., elegant knitwear clothing company.

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