Quality Home Brands, PaeTec tweak deals; Level 3, Datatel float spread talk ahead of launch

By Sara Rosenberg

New York, June 6 - Quality Home Brands and PaeTec Corp. both made a round of changes to their credit facilities on Tuesday, including shifting some funds between their first- and second-lien term loan tranches and modifying pricing.

Also in the primary, Level 3 Financing, Inc. and Datatel Inc. came out with price talk on their proposed term loan debt as the transactions are gearing up to launch during Wednesday's upcoming, jam packed with bank meetings session.

Quality Home Brands tweaked its credit facility structure, moving some funds out of its second-lien term loan and into its first-lien term loan, lowering pricing on the second-lien loan and adding a step down provision to the first-lien loan, according to a market source.

The 61/2-year first-lien term loan is now sized at $290 million, up from an original size of $270 million, and while pricing remained unchanged at Libor plus 250 basis points, a step down to Libor plus 225 basis points was added to the tranche effective once the company's total debt/EBITDA falls below 3.5x, the source said.

On the flip side, the seven-year second-lien term loan is now sized at $100 million, down from an original size of $120 million, and pricing on the tranche was reverse flexed to Libor plus 625 basis points from original talk at launch of Libor plus 650 to 675 basis points, the source added.

The second-lien term loan contains call protection of 101 for one year. This call protection has been part of the structure since the deal was brought to market last month.

As for the company's $30 million six-year revolver, size and pricing were left unchanged, with the tranche carrying an initial interest rate of Libor plus 250 basis points.

Bear Stearns and BNP Paribas are the lead banks on the $420 million credit facility, with Bear Stearns the left lead.

Proceeds will be used to fund the acquisition of a lighting company and to refinance existing bank debt.

Quality Home Brands is a Bronx, N.Y., lighting fixtures, ceiling fans and decorative products company.

PaeTec reworks structure

PaeTec also modified its credit facility structure during market hours, moving some funds out of its second-lien term loan and into it first-lien term loan, adding some additional first-lien debt into the mix, lowering pricing on both term loan tranches and changing call protection premiums on the second-lien loan, according to a market source.

The first-lien term loan B (B1/B) is now sized at $275 million, up from an original size of $240 million, and pricing on the paper was reduced to Libor plus 350 basis points from original talk at launch of Libor plus 375 basis points, the source said.

Meanwhile, the second-lien term loan (B3/CCC+) is now sized at $100 million, down from an original size of $125 million, and pricing was reduced to Libor plus 750 basis points from original talk at launch of Libor plus 775 basis points.

In addition, call protection premiums on the second-lien term loan were changed to 102 in year one and 101 in year two as opposed to 103 in year one, 102 in year two and 101 in year three as was initially proposed, the source continued.

The $10 million of extra first-lien term loan debt that was added into the deal - being that the second-lien was only downsized by $25 million and the first-lien was upsized by $35 million - is staying at the company to enhance liquidity so net leverage will be unchanged at around 4x.

PaeTec's $25 million revolver (B1/B) was left unchanged in terms of size and pricing, which is initially set at Libor plus 375 basis points.

Recommitments are due from lenders by lunchtime on Wednesday, with allocations then expected to go out on Wednesday afternoon and closing targeted for Friday, the source added.

Ratings on the transaction are expected to hold at current levels following the changes.

Merrill Lynch and Deutsche Bank are joint bookrunners on the now $400 million deal (up from $390 million), with Merrill the left lead. CIT and CIBC are involved in the transaction as well.

Proceeds will be used to refinance the company's existing $100 million credit facility and buy back $262 million of preferred shares from private equity investors.

PaeTec is a Fairport, N.Y., competitive local exchange carrier.

Level 3 sets talk

Level 3 Financing revealed price talk on its proposed $730 million amended and restated term loan ahead of its scheduled Wednesday afternoon bank meeting that will officially kick start syndication on the transaction, according to a market source.

The term loan will be launched to investors with opening talk of Libor plus 275 basis points, the source said.

By comparison, the company's existing $730 million term loan, which is being refinanced through this new deal, carries an interest rate of Libor plus 700 basis points.

In addition to significantly lowering the interest rate, the company is looking to modify the pre-payment provisions and make other specified changes through this amendment and restatement.

Merrill Lynch is the lead bank on the deal.

Level 3 Financing is a wholly owned subsidiary of Level 3 Communications, Inc., a Broomfield, Colo., international communications and information services company.

Datatel price talk

Datatel released price talk on its first- and second-lien term loan debt that will be presented to lenders with a bank meeting on Wednesday, according to a market source.

The $120 million first-lien term loan (B1/B+) is expected to be launched with opening talk of Libor plus 225 basis points and the $100 million second-lien term loan (B3/CCC+) is expected to be launched with opening talk of Libor plus 525 basis points, the source said.

Credit Suisse is the lead bank on the deal that will be used for a dividend recapitalization.

Basically, the company is getting about $120 million in additional term loan debt through this transaction and refinancing about $100 million of existing first- and second-lien term loan debt, the source explained.

Pricing on the existing first-lien term loan is currently set at Libor plus 225 basis points and pricing on the existing second-lien term loan debt is currently set at Libor plus 525 basis points, meaning that this transaction is not expected to result in any sort of pricing change even though the debt is being refinanced, the source added.

Datatel is a Fairfax, Va., provider of information management software for higher education institutions.

Ferro closes

Ferro Corp. closed on its new $700 million credit facility (B+), according to a company news release, consisting of a $250 million five-year multi-currency revolver with an interest rate of Libor plus 325 basis points and a 50 basis point commitment fee, and a $450 million six-year delayed-draw term loan with an interest rate of Libor plus 325 basis points and a 75 basis point fee.

The term loan is delayed draw for one year.

Borrowings under the revolver will be used for working capital and general corporate purposes.

The revolver has a $50 million accordion feature that the company can exercise once its 2005 Securities and Exchange Commission filings are complete.

Up to $95 million of the term loan can be used to refinance the company's existing revolver borrowings, with the remaining $355 million available, if needed, to refinance existing long-term notes and debentures.

National City Bank and Credit Suisse acted as joint lead arrangers on the deal, with KeyBank acting as documentation agent.

Ferro is a Cleveland-based producer of performance materials for industry.

J. Ray McDermott closes

J. Ray McDermott, SA closed on its $500 million senior secured credit facility (B1/B+), according to a company news release, consisting of a $400 million five-year revolver with an interest rate of Libor plus 250 basis points and a 50 basis point commitment fee, and a $100 million six-year synthetic letter-of-credit facility with an interest rate of Libor plus 250 basis points.

Credit Suisse acted as the lead bank on the deal.

Proceeds are being used to provide the company with letter-of-credit capacity and working capital availability to support its growth initiatives.

J. Ray is a Houston-based provider of engineering, procurement, construction and installation services for offshore oil and gas field developments.

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