Dresser retranches, cuts B loan spread; Generac sets price talk; Rent-A-Center breaks

By Sara Rosenberg

New York, Oct. 26 - Dresser Inc. came out with some changes on its credit facility, including upsizing the revolver while eliminating the synthetic letter-of-credit facility tranche, and lowering term loan B pricing.

Also in the primary, Generac Power Systems, Inc. released price talk on its already in-market first-and second-lien credit facility on Thursday.

In trading news, Rent-A-Center Inc.'s credit facility hit the secondary, with the term loan B quoted atop par.

Dresser modified its $935 million senior secured credit facility (B1/B) on Thursday as the decision was made to do away with the synthetic letter-of-credit facility and shift those funds to the revolver, and pricing on the term loan B was reverse flexed with the addition of two step downs, according to a market source.

Under the changes, the revolver now carries a size of $150 million, up from an original size of $100 million, the source said. Pricing on this tranche was left unchanged at Libor plus 250 basis points.

The synthetic letter-of-credit facility that was removed from the capital structure had been sized at $50 million and was being talked at Libor plus 300 bps at launch.

Meanwhile, Dresser's $785 million term loan B saw a reduction in pricing, with the new spread level set at Libor plus 275 bps compared to price talk at launch of Libor plus 300 bps, the source continued.

In addition, the term loan B contains two step downs, the first being to Libor plus 250 bps once 2005 audited financials are filed and then after that, pricing can drop to Libor plus 225 bps if Ba3/BB- ratings are achieved, the source added.

Morgan Stanley and Credit Suisse are the lead banks on the deal.

Proceeds from the term loan will be used to refinance the company's existing $70 million senior secured credit facility, $125 million senior unsecured term loan and $550 million principal amount of senior subordinated notes.

The revolver will be available for general corporate purposes.

Dresser is a Dallas-based designer, manufacturer and marketer of highly engineered equipment and services sold primarily to customers in the flow control, measurement systems, and compression and power systems segments of the energy industry.

Generac spread guidance

Generac Power Systems came out with price talk on its $1.53 billion credit facility on Thursday morning now that the transaction has had some time in the market to gauge investor interest and indications on the private ratings that the deal will receive have been communicated to the syndicate, according to a market source.

The $150 million revolver and $950 million first-lien term loan are both being talked in the Libor plus 275 bps area, and the $430 million second-lien term loan is being talked in the Libor plus 650 bps area, the source said.

Goldman Sachs and JPMorgan are the lead banks on the deal that launched with a bank meeting on Oct. 17, with Goldman the left lead.

Proceeds will be used to help fund the acquisition of Generac by CCMP Capital Advisors from the company's founder, Robert Kern, and other shareholders.

Generac is a Waukesha, Wis., manufacturer of standby power products.

Encore Medical tweaks

Encore Medical Corp.'s seven-year term loan was actually upsized to $350 million (not $335 million as was previously outlined in an 8-K filing) from an original size of $325 million with $10 million of the additional funds going towards an acquisition of a privately-held, complementary medical device company and $15 million coming out of the company's bond offering, according to a market source.

In addition, a step down in pricing was added to the term loan tranche under which pricing can fall from the current Libor plus 250 bps spread to Libor plus 225 bps at less than 5.5 times total leverage, the source said.

Encore's now $400 million senior secured credit facility (Ba3/B), up from $375 million, also includes a $50 million six-year revolver priced at Libor plus 250 bps with a 50 bps commitment fee.

Bank of America and Credit Suisse are the lead arrangers and bookrunners on the deal, with Bank of America also acting as administrative agent and Credit Suisse acting as syndication agent.

Proceeds from the majority of the credit facility financing will be used to help fund the leveraged buyout of Encore by Blackstone Capital Partners V LP for $6.55 in cash per share, with a total transaction value of about $870 million.

Other LBO financing will include a commitment from Blackstone to provide equity and the proposed $200 million (down from $215 million) senior subordinated notes offering.

Encore is an Austin, Texas, orthopedic device company.

Rent-A-Center frees to trade

Moving to the secondary market, Rent-A-Center's credit facility broke for trading with its $725 million six-year term loan B quoted at par ¼ bid, par ½ offered, according to a trader.

The term loan B is priced at Libor plus 175 bps. During syndication, pricing was reverse flexed from original talk at launch of Libor plus 200 bps.

The company's $1.3225 billion credit facility (Ba2/BB) also contains a $400 million five-year revolver and a $197.5 million five-year term loan A, which are both priced at Libor plus 175 bps as well.

JPMorgan is the lead bank on the deal.

Proceeds will be used to refinance existing bank debt and fund the acquisition of Rent-Way, Inc. for $10.65 in cash per share. The transaction is valued at about $567 million, including the liquidation of all of Rent-Way's debt, such as its bonds and convertibles.

Pro forma for the transaction, Rent-A-Center's total net debt to leverage will be around 3.2 times, but that is expected to drop to around 2½ times within the first 12 to 18 months through the use of free cash flow.

Rent-A-Center is a Plano, Texas, rent-to-own operator. Rent-Way is an Erie, Pa., rental purchase company.

Reynolds closes

The Reynolds and Reynolds Co. completed its merger with Universal Computer Systems Inc., according to a company news release.

To help fund the merger, Reynolds got a new $2.485 billion credit facility consisting of a $75 million revolver (Ba2/BB-) priced at Libor plus 250 bps with a step down to Libor plus 225 bps at less than 4.75 times leverage, a $1.64 billion first-lien term loan (Ba2/BB-) priced at Libor plus 250 bps with a step down to Libor plus 225 bps at less than 4.75 times leverage, a $520 million second-lien term loan (B3/B-) priced at Libor plus 550 bps and a $250 million third-lien term loan (B3/B-) priced at Libor plus 750 bps.

During syndication, the revolver pricing was reverse flexed from Libor plus 275 bps with the addition of the step, the first-lien term loan was upsized from $1.485 billion and pricing was reverse flexed from Libor plus 275 bps with the addition of the step, and the third-lien loan was downsized from $405 million with pricing flexed up from Libor plus 700 bps.

Deutsche Bank, Credit Suisse and Bank of America acted as the lead banks on the deal, with Deutsche the left lead.

Under the merger agreement, Universal Computer bought Reynolds for $40.00 per share in cash, with the surviving Dayton, Ohio-based dealer services company named The Reynolds and Reynolds Co. The transaction is valued at $2.8 billion, including the assumption of Reynolds' debt.

Equity financing for the merger came primarily from a group of investors led by Goldman Sachs Capital Partners, Vista Equity Partners and others.

Petco closes

Leonard Green & Partners, LP and Texas Pacific Group completed its leveraged buyout of Petco Animal Supplies Inc. for $29 per share in cash, according to a news release.

To help fund the LBO, Petco got a new $900 million senior secured credit facility consisting of a $180 million six-year last-in, first-out asset-based revolver priced at Libor plus 150 bps, a $20 million six-year first-in, last-out asset-based revolver priced at Libor plus 250 bps and a $700 million covenant-light seven-year term loan B (Ba3/B) priced at Libor plus 275 bps.

During syndication, the term loan B was upsized from $650 million and pricing was reverse flexed from original talk of Libor plus 300 bps.

As part of the LBO financing, GS Mezzanine purchased newly issued eight-year 10½% senior subordinated notes. The size of this mezzanine financing was reduced to $450 million from $500 million due to the term loan B upsizing.

Credit Suisse, Bank of America and Wells Fargo acted as the lead banks on the deal, with Credit Suisse the left lead.

Petco is a San Diego-based specialty retailer of premium pet food, supplies and services.

© 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.