Penn National Gaming credit facility may be light on pricing for leverage ratios

By Sara Rosenberg

New York, Jan. 23 - Penn National Gaming Inc.'s $800 million credit facility launched on Thursday, according to market sources. At first glance, one market professional found the deal to be slightly lacking in terms pricing primarily due to amount of leverage.

The loan consists of a $600 million term loan B with an interest rate of Libor plus 350 basis points, a $100 million revolver with an interest rate of Libor plus 300 basis points and a $100 million term loan A with an interest rate of Libor plus 300 basis points, sources said.

The company's bank debt pro forma is 3.4 times and total debt is 4.7 times. "Over three times is slightly high," the professional explained. "Looking at the ratios, pricing seems a little skimpy.

"They're saying it's a sellers market and they're pushing it," the professional continued. But, he added that there are a lot of deals out there right now for investors to choose from.

And with all of the new issues that have hit recently, investors are currently digesting what is on offer, according to another market professional. He noted there was a lot of pent up demand after the holidays and deals surged into the market.

"It's kind of like watching a snake digesting a mouse," he said of the current primary market.

Other possible negatives for the deal are the more skeptical attitude towards the gaming sector since Las Vegas "is getting weak," a regulatory climate for riverboats that isn't great right now, and the large size of the facility, according to the professional. However, offsetting this is the consistency of cash flows in the gaming industry.

Bear Stearns and Merrill Lynch are joint lead arrangers, joint bookrunners and syndication agents on the deal.

The loan is secured by assets and stock and will be used to help fund the acquisition of Hollywood Casino Corp. and refinance debt.

Penn National Gaming is a Wyomissing, Pa. owner and operator of gaming properties.

In other news, Houghton Mifflin's $250 million term loan B may be flexed down to Libor plus 300 basis points or Libor plus 325 basis points from Libor plus 375 basis points due to high demand, according to market sources.

When asked whether this change was coming, a syndicate source simply replied: "All in flux. Will know more tomorrow."

The $575 million credit facility also contains a $325 million revolver with an interest rate of Libor plus 325 basis points.

CIBC, Goldman and Deutsche are the lead banks on the deal that will be used to help fund the Boston publishing company's leveraged buyout from Vivendi Universal by Thomas H. Lee Partners, Blackstone Group, Bain Capital and Apax Partners.

The retail launch of TRW Automotive's credit facility is now expected to occur at the beginning of February as opposed to the previously expected launch date at the end of January, according to a syndicate source.

"They're still over in Europe for the bonds, so I'm guessing it won't happen till the beginning of February," the syndicate source explained.

JPMorgan, Credit Suisse First Boston, Lehman Brothers, Deutsche Bank and Bank of America are the lead banks on the deal.

The loan will consist of a $500 million revolver, a $410 million term loan A and a $900 million term loan B, the syndicate source said. The various tranches will be comprised of U.S. dollars and euros. "We're not sure what the split is going to be," the syndicate source told Prospect News. "It probably depends on how marketing goes."

Pricing on the tranches is still tentative, since it depends on how well the pre-marketing of the bonds progresses, the syndicate source explained. However, the pro rata is currently expected to be priced with an interest rate of Libor plus 350 basis points and the term loan B is expected to have an interest rate of Libor plus 400 basis points.

Proceeds from the loan will be used to help fund the acquisition of TRW by The Blackstone Group from Northrop Grumman Corp.

TRW is a Livonia, Mich. diversified supplier of automotive systems, modules and components.

Meanwhile, in Fleming Cos. Inc.'s fourth quarter earnings release, the company revealed that its latest proposed amendment of the debt/EBITDA covenant was passed. The company sought this amendment due to fourth quarter EBITDAL results, and the anticipated amount and timing of the proceeds from the retail store divestiture. (See story elsewhere in this issue.)

Responses on the proposed amendment were due by Wednesday, a fund manager previously told Prospect News.

The lender call discussing the amendment was held following the release of worse-than-expected financial estimates, at which time the company also updated participants on the progress of the previously announced asset sales.

Last month Fleming sought and successfully completed an amendment to its credit facility agreement that allowed for the sale of the retail assets. Under the amendment, Fleming agreed to sell $150 million in assets by Dec. 31 and an additional $250 million by March 31, 2003, a source previously told Prospect News.

With the proceeds from the asset sales, Fleming plans on repaying its entire term loan.

Another point brought out in the earnings release was the company's intention to continue paying down debt, despite the fact that there are no material debt maturities until 2007, in an effort towards strengthening its balance sheet.

Fleming is a Lewisville, Tex. distributor of consumable goods and operator of price impact supermarkets.

American Media Inc. completed its acquisition of Weider Publications Inc. for $350 million on Thursday. In conjunction with this acquisition, the company obtained a new $140 million term loan C and issued $150 million of senior subordinated notes due 2011 to help fund the purchase.

JPMorgan and Bear Stearns were the lead banks on the credit facility and the bonds.

"With the acquisition of Weider, AMI will dramatically expand our consumer magazine division and transform itself into a major media company with a better balanced portfolio of revenues between circulation and advertising," said David Pecker, chairman, in a news release. "Today, from celebrity journalism to country music, we have the #1 market share in all of our targeted publication categories, and the Weider acquisition gives us this same preeminence in the health & fitness industries."

American Media is a Delray Beach, Fla. publishing company.

© 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.