Wackenhut breaks at par 5/8, trades as high as 101; Oriental Trading oversubscribed ahead of launch

By Sara Rosenberg

New York, July 8 - Wackenhut Corrections Corp.'s $150 million credit facility (Ba3/BB-) began trading on Tuesday with the B tranche breaking at par 5/8 and then proceeding to trade up to as high as 101. By the end of the day the B loan was quoted at par ½ bid, 101 offered, according to a trader.

Meanwhile, in the primary, new deals have received much attention from paper-hungry investors, with one of the latest examples being the oversubscribed Oriental Trading Co. term loan B, which has yet to officially launch.

The Wackenhut facility consists of a $100 million term loan with an interest rate of Libor plus 300 basis points and a $50 million revolver with an interest rate of Libor plus 300 basis points.

Syndication of the deal went very well as the B loan was almost immediately oversubscribed and the revolver was almost immediately fully subscribed. In fact, due to the overwhelming demand, the B loan was reverse flexed to 300 over from price talk of Libor plus 375 basis points. The company's existing term loan B was priced at Libor plus 400 basis points. Pricing on the new revolver compared to the existing one is the same.

Many of the commitments, especially those that came in prior to the June 18 bank meeting, were from people who were familiar with and liked the credit, and were either existing lenders or people who wanted to be existing lenders when Wackenhut brought a deal to market last year.

In December 2002 the company obtained a $175 million senior secured facility, consisting of a $50 million five-year revolver and a $125 million six-year term loan. BNP Paribas and Wachovia Securities, Inc. acted as co-lead arrangers on the deal that was used to purchase four properties in operation under an operating lease facility for approximately $155 million.

Proceeds from this new $150 million credit facility will be used by the Palm Beach Gardens, Fla. correctional and detention facilities company to help repurchase all its common stock held by Group 4 Falck A/S.

BNP Paribas is leading the new deal.

Oriental Trading's $250 million six-year term loan B had already received $325 million in orders by Tuesday afternoon and the syndicate anticipates receiving more commitments prior to Wednesday's launch, a syndicate source told Prospect News on Tuesday.

Furthermore, at least half of the $40 million six-year revolver is "spoken for" by the lead arrangers and a few other banks, the syndicate source added.

The term loan B is talked at Libor plus 350 basis points and the revolver is talked at Libor plus 300 basis points.

Credit Suisse First Boston and BNP Paribas are leading the deal.

The Omaha, Neb. direct marketer of novelties and toys is obtaining the facility as part of a recapitalization effort.

Both Jostens Inc. and Reddy Ice Group Inc. (Packaged Ice Inc.), which launched on Tuesday, were heard to be doing well and the expectation is that the deals, like so many others have recently done, will fill up pretty quickly, according to a fund manager.

"There are only a few deals out there so people are just throwing in orders," the fund manager said.

Jostens came to market with a $650 million credit facility, consisting of a $125 million five-year revolver with an interest rate of Libor plus 275 basis points and a $525 million seven-year term loan B with an interest rate of Libor plus 300 basis points. Credit Suisse First Boston and Deutsche Bank are leading the deal.

Prior to the bank meeting, the term loan B was said to have already received some orders with talk being that there was a good amount of commitments in the book.

The company is a repeat issuer that has been well received in the past by the bank loan market, has pretty reasonable leverage levels, leading market position and a steady revenue stream.

Proceeds will be used to help fund the leveraged buyout of Jostens by DLJ Merchant Banking Partners III, L.P. and affiliated funds, each managed by CSFB Private Equity for cash consideration of approximately $48 per common share. Jostens is currently 88% owned by Investcorp, a global investment group, its co-investors and MidOcean Partners. The transaction is expected to close by Sept. 30, 2003.

Jostens is a Minneapolis provider of school related affinity products.

Reddy Ice launched a proposed $170 million credit facility (B1/B+), consisting of a $35 million revolver and a $135 million term loan B. Credit Suisse First Boston, Bear Stearns and CIBC are the lead banks on the deal.

Price talk on the institutional and the pro rata tranche was Libor plus 400 basis points but, that proposed spread will be revisited by the syndicate due to strong market technicals, a source close to the deal previously told Prospect News.

Proceeds will be used to help fund the leveraged buyout of the Dallas packaged ice company by Trimaran Capital Partners and Bear Stearns Merchant Banking.

In follow-up news, commitments are due later this week for Medco Health Solutions Inc.'s $1.15 billion senior secured credit facility, consisting of a $350 million five-year term loan A with an interest rate of Libor plus 200 basis points, a $250 million five-year revolver with an interest rate of Libor plus 200 basis points and a $550 million seven-year term loan B with an interest rate of Libor plus 225 basis points.

The B loan, which was offered at par, is currently oversubscribed, which is not much of a surprise since it was already half done on the day of the bank meeting, which took place in late June.

JPMorgan, Goldman Sachs and Citigroup are the lead banks on the deal.

Security will be substantially all assets, other than the company's pharmaceutical manufacturer accounts receivable, including a pledge of the capital stock of the company's subsidiaries.

Amortization on the term loan A will begin on Sept. 30, 2003 and the company will repay principal on a quarterly basis of 10% in the first year, 15% in the second year, 20% in the third year, 25% in the fourth year and 30% in the fifth year.

Amortization on the term loan B will also begin on Sept. 30, 2003 and principal will be repaid at a rate of 0.25% each quarter for the first seven years, with the remaining 93% due in equal quarterly installments during the final year.

Medco is obtaining this facility as part of its spin-off from Merck & Co. Inc. Proceeds from the term loans, combined with proceeds from a $500 million note offering and a $500 million accounts receivable financing facility, will be used to pay a portion of a cash dividend to Merck.

The revolver is expected to be undrawn at distribution and will be used for working capital and general corporate purposes.

Medco is a Franklin Lakes, N.J. pharmacy benefits management company.

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