Regal Cinemas $1.25 billion term B gets large orders by day's end

By Sara Rosenberg

New York, April 19 - Although Regal Cinemas Corp.'s new deal was not launched until late afternoon on Monday, syndication on the large institutional tranche had already made some headway by the end of the day with some very large orders finding their way into the books. Existing and potential new lenders found themselves intrigued by this latest transaction.

"The bank meeting was well attended," a market source told Prospect News. "The transaction and the company as a whole have done really well in the past. Existing lenders made up a term loan of close to $500 million. There's rollover and substantial increase. They're looking for larger exposures. If they had $10 million, they're looking for much larger multiples of that."

As for those investors who maybe chose not to or were unable to get involved in the existing deal, this new credit facility is giving them an opportunity, that they seem to be responding to favorably, to participate as well, the source explained.

At 3 p.m. ET Regal Cinemas presented investors with its proposed $1.35 billion credit facility consisting of a $100 million five-year revolver with an interest rate of Libor plus 275 basis points and a $1.25 billion 61/2-year term loan B with an interest rate of Libor plus 275 basis points, which is being offered at par.

Commitments are due on April 30.

Credit Suisse First Boston is the sole lead arranger and bookrunner on the deal.

Proceeds from the credit facility, combined with proceeds from a proposed $400 million subordinated notes offering, will be used to refinance existing debt and to fund the tender offer and consent solicitation for all of the company's $350 million principal amount of 9 3/8% senior subordinated notes due 2012. In addition approximately $930 million of the proceeds from the debt deals, together with available cash, will be distributed to parent company Regal Entertainment Group, which plans to use about $710 million to pay an extraordinary dividend of about $5.00 per share to its holders of Class A and Class B common stock, with the balance set aside for general corporate purposes, including potential acquisitions, according to a company news release.

In reaction to news of the debt-financed dividend payment, Standard & Poor's revised its outlook on Regal Entertainment Group and subsidiary Regal Cinemas Inc. on Monday to negative from stable. A rating on the credit facility has not yet been determined.

"The transaction will restrict the company's debt capacity at the current rating level and make the rating vulnerable to additional aggressive financial moves that further increase Regal's leverage or meaningfully diminish its discretionary cash flow potential," said S&P credit analyst Steve Wilkinson, in the rating release.

"The special dividends highlight the equity return orientation of the company's majority shareholder, the Denver, Colo.-based Anschutz Co., which owns about 57% of the firm and holds an even larger voting interest.

"The transaction will increase lease-adjusted debt about 26%, and push lease-adjusted debt to EBITDA, including a full year's results from its acquisition of certain theaters from Hoyts Cinemas on March 28, 2003, and excluding an extra week from its 2003 calendar year, to the mid-5x area from the low-4x area. Lease-adjusted coverage of interest expenses will drop to the low-2x area from the high-2x area. Higher interest expenses will also limit discretionary cash flow somewhat, although the percentage of EBITDA that flows through to discretionary cash flow should remain solid in the 15%-20% range," Wilkinson concluded in the release.

Regal Entertainment Group is a Centennial, Colo., theaters circuit.

Gundle/SLT timing, pricing

Specific timing and pricing emerged on Gundle/SLT Environmental Inc.'s $65 million credit facility, which consists of a $40 million revolver and a $25 million term loan.

The launch of the deal is now scheduled for Thursday. Previously, the deal was expected to be April business, but an exact date had not yet been established.

As for pricing, the revolver is expected to carry an interest rate of Libor plus 275 basis points and the term loan is expected to carry an interest rate of Libor plus 300 basis points, according to a market source.

Syndication of the credit facility is expected to be a club style execution, an informed source previously told Prospect News.

Proceeds from the credit facility and a proposed $150 million bond offering will be used to back the acquisition of Gundle/SLT Environmental Inc. by Code Hennessy & Simmons LLC. Under the acquisition agreement, all of Gundle/SLT's common stock will be converted into cash at the rate of $18.50 per share.

UBS is the sole lead on both the bank and the bond financing.

Gundle/SLT is a Houston manufacturer and marketer of geosynthetic lining solutions, products and services.

Astoria Energy closes

Astoria Energy LLC closed on its new $700 million credit facility that will be used to help finance the construction of New York City's largest new power plant in more than 25 years, according to a company news release.

The credit facility consists of a $500 million eight-year first lien term loan with an interest rate of Libor plus 500 basis points (Ba3/B+) and a $200 million second lien term loan with an interest rate of Libor plus 875 basis points.

Originally, when the deal was launched via conference call on March 26, it was structured as a $690 million eight-year term loan B. Although the syndicate never confirmed it, some sources placed price talk on the tranche at Libor plus 450 basis points.

Later on in the syndication process, the deal was restructured to increase the total size to $700 million by reducing the first lien term loan and adding a second lien term loan tranche.

Then the deal was once again modified, this time from a pricing standpoint, with the $200 million second lien term loan reverse flexed to Libor plus 875 basis points from Libor plus 887.5 basis points and the $500 million first lien term loan coming in at the lower end of price talk at Libor plus 500 basis points. Price talk on the first lien piece had been Libor plus 500 to 525 basis points.

Credit Suisse First Boston was the lead bank on the deal.

The company also obtained $283 million in equity to fund the construction project, according to the news release. Equity investors include CDP Capital-Americas, a subsidiary of the Caisse de dépôt et placement du Québec, SNC-Lavalin Generation Inc., the Energy Investors Funds Group, on behalf of US Power Fund LP, and project sponsors SCS Energy LLC and AE Investor.

Astoria Energy is a subsidiary of SCS Energy LLC, a Concord, Mass., electric company.

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