Deluxe Entertainment sets talk, makes covenant changes to $600 million eight-year first-lien notes

By Paul A. Harris

St. Louis, Oct. 8 - Deluxe Entertainment Services talked its $600 million offering of eight-year senior secured first-lien notes (B1/B) on Thursday to yield 12% and to price with 2 points to 3 points of original issue discount, according to a source familiar with the deal.

Meanwhile the Hollywood, Calif.-based digital cinema services company introduced further covenant changes.

The annual offer to repurchase bonds in each year beginning in 2010 was increased to $30 million from $25 million.

Debt incurrence is now set at 2:1 interest coverage; formerly it was the more favorable of 2:1 interest coverage or 2.5-times leverage.

The credit facility carve-out is now set at $225 million. Formerly it had been set at the greater of $225 million and the borrowing base.

Also the liens test covenant was decreased to 3.0 times from 3.5 times.

The order book is set to close at 10 a.m. ET on Friday.

Credit Suisse Securities and J.P. Morgan Securities Inc. are joint bookrunners for the Rule 144A offering.

The notes come with four years of call protection. However the company may redeem 10% of the issue at 103.0 each year during the non-call period.

Proceeds will be used to refinance bank debt.

The prospective issuer is a Hollywood, Calif.-based digital cinema services company.

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