Primary activity to pick up with Brocade, Landry's, 1-800 Contacts and Invitrogen; all set for Sept. 1 week

By Sara Rosenberg

New York, Aug. 29 - The primary market is starting off the month of September with a flurry of activity, especially compared to the last few weeks in August, as Brocade Communications Systems Inc., Landry's Restaurants Inc., 1-800 Contacts Inc. and Invitrogen Corp. have all scheduled bank meetings for the latter part of the first week of the month.

On top of that, Ashland Inc. and Fresenius Kabi are expected to come to market in the first half of September, and SRAM and Turner Bros. are both expected to launch sometime during the month.

Brocade Communications is the largest deal so far that's on tap to hold a retail bank meeting on Thursday.

The senior secured facility totals $1.125 billion, comprised of a $125 million five-year revolver and a $1 billion five-year term loan.

According to a commitment letter filed with the Securities and Exchange Commission, pricing on the revolver and the term loan will be based on ratings and both tranches will have a 3% Libor floor for 30 months. If the corporate family rating is Ba2/BB, pricing will be Libor plus 350 basis points, and if ratings are lower than Ba2/BB, pricing will be Libor plus 400 bps.

Sources previously told Prospect News that expected ratings on the credit facility are Ba2/BB and expected corporate ratings are Ba1/BB-.

Financial covenants include a maximum consolidated leverage ratio with an initial level of 4.25 times and with step-downs to be agreed upon, a maximum consolidated senior secured leverage ratio with an initial level of 2.3 times and with step-downs to be agreed, and a minimum consolidated fixed-charge coverage ratio with an initial level of 1.25 times and with step-ups to be agreed.

Bank of America and Morgan Stanley are the joint lead arrangers and joint bookrunners on the credit facility, with Bank of America the administrative agent and Morgan Stanley the syndication agent.

Proceeds will be used to help fund the acquisition of Foundry Networks Inc. for a combination of $18.50 of cash plus 0.0907 shares of common stock in exchange for each share of Foundry common stock. The transaction has an aggregate purchase price of about $3 billion on a fully diluted basis.

Other financing for the transaction will come from $500 million of senior unsecured notes and $1.4 billion in cash from the combined company.

The company estimates that its debt to EBITDA ratio at the end of fiscal year 2009 will be in the range of 2.4 to 2.5 times.

The acquisition is expected to close in the fourth quarter, subject to approval by Foundry's stockholders, regulatory approval and certain other conditions.

Brocade is a San Jose, Calif., provider of data center networking services that help organizations connect, share and manage their information in the most efficient manner. Foundry is a Santa Clara, Calif., provider of high-performance enterprise and service provider switching, routing, security and web traffic management services.

Landry's readies deal

Also coming to market on Thursday is Landry's Restaurants' $300 million senior secured credit facility.

The facility consists of a $50 million five-year revolver and a $250 million five-year term loan A, which, according to filings with the SEC, are expected to be priced at Libor plus 400 bps, with a 3.25% Libor floor.

Official price talk on the deal, however, has not yet been announced.

Wells Fargo Foothill and Jefferies are the co-lead arrangers, co-bookrunners and co-syndication agents on the deal, with Well Fargo the administrative agent.

Proceeds from the credit facility will be used to help fund the buyout of the company by Fertitta Holdings Inc for $21 per share in cash. The total value of the deal is about $1.3 billion, including about $885 million of debt.

Fertitta is a newly formed entity wholly owned by the company's chairman, president, chief executive officer and original founder, Tilman J. Fertitta, who beneficially owns about 39% of the company's outstanding common shares.

Landry's is a Houston-based restaurant, hospitality and entertainment company.

1-800 Contacts jumps on board

Last of the deals currently scheduled for a Thursday launch is 1-800 Contacts' credit facility that is being led by JPMorgan.

No details on the size, structure or pricing are available as of yet on this transaction.

About a year ago, the company was acquired by Fenway Partners LLC. When that buyout was announced, it was said that the company was getting a $235 million senior secured credit facility, consisting of a $20 million six-year revolver, a $140 million seven-year first-lien term loan and a $75 million 71/2-year second-lien term loan.

Whether this new upcoming deal is actually the buyout facility reemerging was unclear prior to press time.

1-800 Contacts is a Draper, Utah, direct marketer of replacement contact lenses.

Invitrogen general syndication to start Friday

Rounding out the first week of September week will be Invitrogen's $2.65 billion senior secured credit facility (BBB-/BBB-), which is scheduled to launch on Friday.

The facility consists of a $250 million revolver, a $1.5 billion term loan A and a $900 million term loan B.

The deal was already launched to senior managing agents in June, at which time price talk on the revolver and the term loan A started circulating in the Libor plus 250 bps area.

There is currently no price talk available on the term loan B.

Bank of America, UBS and Morgan Stanley are the joint lead arrangers and joint bookrunners on the facility, with Bank of America the left lead and administrative agent, and UBS and Morgan Stanley the co-syndication agents.

Proceeds will be used to help fund the acquisition of Applied Biosystems, help repay all of Invitrogen's debt, other than its convertible notes and certain other exceptions, and provide for ongoing working capital and general corporate purposes of the combined company.

Under the agreement, Invitrogen is buying Applied Biosystems from Applera Corp. in a cash and stock transaction valued at $6.7 billion.

The transaction is targeted to close in the fall, subject to approval by Invitrogen and Applera-Applied Biosystems shareholders and the satisfaction of customary closing conditions, completion of the previously filed and announced separation of Applera's Celera group, and regulatory approvals. It is not subject to financing.

On July 1, Applera announced that it completed the separation of its Celera business and that the remaining Applera business, which is what Invitrogen is purchasing, changed its name to Applied Biosystems.

Following the close of the transaction, the combined company will be named Applied Biosystems, Inc. and will have its corporate headquarters in Carlsbad, Calif.

Invitrogen is a provider of life science technologies for disease research, drug discovery and commercial bioproduction. Applied Biosystems is a developer and marketer of instrument-based systems, consumables, software and services.

Ashland expected soon

Also on the calendar for September is Ashland's proposed $1.75 billion senior secured credit facility, which is targeted to launch in the early to mid-month timeframe.

The facility consists of a $500 million five-year revolver talked at Libor plus 275 bps, a $500 million five-year term loan A talked at Libor plus 275 bps and a $750 million seven-year term loan B.

According to filings with the SEC, pricing on the revolver and term loan A will, after six months, be based on a grid, under which the spread could range from Libor plus 200 bps to 325 bps based on leverage, pricing on the term loan B is expected at Libor plus 325 bps, and the deal will carry a 3% Libor floor.

Financial covenants include a maximum leverage ratio and a minimum fixed-charge coverage ratio.

Bank of America and Scotia Capital are the joint lead arrangers and joint bookrunners on the credit facility, with Bank of America the administrative agent.

Proceeds will be used to help fund the acquisition of Hercules Inc. for $18.60 per share in cash and 0.093 of a share of Ashland common stock. The total transaction value is about $3.3 billion, including $0.7 billion of net assumed debt.

Other financing will come from $750 million of senior unsecured notes.

Closing is expected to occur by the end of the year, subject to the approval of Hercules' shareholders, the receipt of regulatory approvals and other customary conditions.

Ashland is a Covington, Ky., chemical company. Hercules is a Wilmington, Del., manufacturer and marketer of specialty chemicals.

Fresenius Kabi nears

Another possible early month deal is Fresenius Kabi, which has said that it is currently expecting to launch general syndication of its $2.4 billion senior secured credit facility (Baa2) in Europe and the United States in early September.

The facility consists of a $500 million five-year revolver to be made available to a financing subsidiary of Fresenius, a $150 million five-year revolver to be made available to APP Pharmaceuticals Inc., a $900 million five-year term loan A and an $850 million six-year term loan B.

The company previously estimated that the term loan A will be priced around Libor plus 287.5 bps and that the term loan B will be priced around Libor plus 350 bps.

During the first phase of syndication, 20 of Fresenius' key relationship banks from Europe, North America and Japan, acting as mandated lead arrangers and joint lead arrangers, provided strong commitments towards the deal - oversubscribing the targeted amount.

Financial covenants include a consolidated leverage ratio, a consolidated fixed-charge coverage ratio, an interest expense coverage ratio and limits amounts spent on capital expenditure.

Deutsche Bank, Credit Suisse and JPMorgan are the senior mandated lead arrangers on the deal, with Deutsche Bank the global coordinator.

Proceeds from the credit facility will be used to help fund the acquisition of APP Pharmaceuticals in a transaction that could be valued at up to $5.6 billion, refinance APP's existing senior credit facility, and for general corporate and working capital purposes.

The transaction is expected to close at the end of 2008 or beginning of 2009, subject to certain conditions, including regulatory approvals, and approvals under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Fresenius Kabi is a Bad Homburg, Germany, infusion therapy and clinical nutrition company. APP is a Schaumburg, Ill., hospital-based injectable pharmaceutical company.

SRAM seen as September business

On a broader range of timing is SRAM's $265 million credit facility (Ba3/B+), which is simply being labeled as September business for now.

The facility consists of a $25 million revolver and a $240 million term loan.

GE Capital is the lead bank on the deal that will be used to help fund Lehman Brothers Merchant Banking's acquisition of a minority interest in the company.

Other financing will come from $110 million of mezzanine debt.

The transaction is expected to close in late September.

SRAM is a Chicago-based bike components company.

Turner on board, too

Lastly, the Turner Bros. $88 million six-year credit facility is also on tap for the month of September after opting to delay its previously scheduled August bank meeting till after the Labor Day holiday weekend.

The facility consists of a $15 million revolver and a $73 million term loan, with both tranches talked at Libor plus 475 bps with an original issue discount of 98. There is no Libor floor.

GE Capital is the lead bank on the deal that will be used to fund Huntsman Gay Capital Partners' acquisition of the company from Saw Mill Capital.

Other financing will come from $52 million of mezzanine debt that is being placed by the company/sponsor.

Turner Bros. is a provider of industrial plant maintenance services using its fleet of cranes and specialized transportation equipment.

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