Nuance, National Renal set talk; Movie Gallery drops in wake of amendment call; HealthSouth breaks

By Sara Rosenberg

New York, March 7 - Nuance Communications Inc. and National Renal Institutes Inc. came out with price talk on their credit facilities as both deals officially kicked off syndication through the holding of bank meetings Tuesday.

On the secondary front, HealthSouth Corp.'s new deal freed for trading, with the term loan B quoted atop par, and Movie Gallery Inc.'s term loan fell in trading as the market reacted to the company's recently held amendment call.

Nuance Communications announced opening price talk Tuesday of Libor plus 225 basis points on both its revolver and term loan B tranche as the new deal was presented to lenders, according to a market source.

The six-year revolver is sized at $75 million, and the seven-year term loan B is sized at $355 million.

UBS Investment Bank and Credit Suisse are joint lead arrangers on the deal, UBS, Credit Suisse and Citigroup are joint bookrunners, Citigroup and Bank of America are co-arrangers, UBS is administrative agent and Citigroup is documentation agent.

Proceeds from the $430 million senior secured credit facility will be used to fund Nuance's acquisition of Dictaphone Corp. for $357 million in cash.

The companies have already been granted early termination of the antitrust waiting period under the Hart-Scott-Rodino Act for the acquisition by the U.S. Department of Justice.

The acquisition has also been approved by both companies' boards of directors and is expected to close by March 31.

Nuance is a Burlington, Mass.-based provider of speech and imaging solutions for businesses and consumers. Dictaphone is a Stratford, Conn.-based provider of dictation, transcription, speech recognition and natural language processing systems in the health care market.

National Renal guidance

Price talk on National Renal Institutes' new deal also surfaced on Tuesday as it too was presented to lenders via a "well attended" bank meeting, with both the $40 million revolver and the $218 million term loan B talked at Libor plus 300 basis points, according to a market source.

The term loan is being offered at par. The upfront fee on revolver commitments is 50 basis points.

RBC Capital Markets, Royal Bank of Scotland and Aries Management (who has agreed to provide the mezzanine financing and therefore was awarded a role in the loan) are the lead banks on the deal, with RBC the left lead.

Proceeds from the $258 million senior credit facility will be used to help fund the acquisition of over 100 dialysis clinics from Fresenius Medical Care Holdings Inc. and Renal Care Group for about $450 million in cash.

National Renal Institutes is a wholly owned subsidiary of Nashville, Tenn.-based DSI Holding Co. Inc., which is being invested in by equity firm Centre Partners.

Extensity tweaks structure

Extensity made a round of changes to its credit facility, including shifting $40 million out of its second-lien term loan and into its first-lien term loan, and lowering pricing on the upsized first-lien term loan tranche, according to a market source.

The first-lien term loan (B2/B) is now sized at $400 million, up from an original size of $360 million, and pricing was reverse flexed to Libor plus 250 basis points from original price talk at launch of Libor plus 275 basis points, the source said.

On the flip side, the second-lien term loan is now sized at $125 million, down from an original size of $165 million, but pricing on the tranche was left unchanged at Libor plus 725 basis points, the source added.

Entensity's $575 million credit facility also contains a $50 million revolver (B2/B).

The $450 million of first-lien bank debt for Extensity is being led by JPMorgan and Merrill Lynch as joint lead arrangers and joint bookrunners on the deal, with JPMorgan the left lead. The second-lien financing that is being led by D.B. Zwirn Finance as sole syndication agent and administrative agent.

Proceeds from the credit facility will be used to fund the acquisition of Geac Computer Corp. Ltd.'s financial applications and the Industry Specific Applications, which are becoming two separate business groups under Extensity, a newly formed Golden Gate Capital funded company.

Geac is a Markham, Ont., enterprise software company that addresses the needs of the chief financial officer.

HealthSouth tops par

Switching to trading, HealthSouth allocated its credit facility late-Tuesday, with the $2.05 billion term loan B quoted at par 3/8 bid, par 5/8 offered, according to a trader.

The term loan B is priced with an interest rate of Libor plus 325 basis points. At launch, the bank debt carried price talk of Libor plus 250 basis points but the spread was then revised upwards to a range of Libor plus 300 to 325 basis points. At the time of the revision it was anticipated by many that final pricing would end up at the high end of the revised guidance, which indeed proved to be the case.

Sources had attributed the need for higher spreads to the deal being unrated as it causes some people to view the transaction as high risk and it makes it difficult for CLO's to get involved.

The syndicate did build in pricing step downs in the term loan credit agreement that are based on ratings so that once the deal is rated and the primary risk is gone, the company can get a cheaper rate.

HealthSouth's $2.55 billion senior secured credit facility also contains a $500 million revolver.

J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and Merrill Lynch & Co. are joint lead arrangers and joint bookrunners on the senior secured credit facility, with J.P. Morgan on the left.

The company is getting the new senior secured credit facility as part of a recapitalization plan under which its will repay substantially all of its existing debt.

For this purpose, HealthSouth also syndicated a $1.3 billion senior unsecured interim term loan that is priced with an initial interest rate of Libor plus 450 basis points. After six months, the interest rate will increase by 100 basis points, and then will increase by 50 basis points every three months thereafter.

This interim loan, which allocated Tuesday as well, will be reduced in size once the company receives proceeds from its recently priced $400 million convertible perpetual preferred stock.

Merrill Lynch & Co., Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. are joint bookrunners on the unsecured interim loan, with Merrill Lynch on the left.

Deutsche Bank Securities Inc., Goldman, Sachs & Co. and Wachovia Capital Markets LLC are co-managers on both the senior secured credit facility and the senior unsecured interim loan.

HealthSouth is a Birmingham, Ala., provider of outpatient surgery, diagnostic imaging and rehabilitative health care services.

Movie Gallery weakens

Also in trading, Movie Gallery's term loan took a downwards turn during the session as investors were seemingly unpleased with what they heard during the company's two lender calls that took place on Monday, according to buyside and sellside sources.

"There were two calls [Monday] afternoon. The first was for public lenders. The second was a continuation of the first call but for private lenders only," the buyside source told Prospect News.

"[They] talked about [the] business environment and [a] financial covenants amendment request. [They're] not currently in default, but looking forward they need relief. There was talk of an amendment fee and an increase in pricing on all tranches.

"No specific details were given on the public portion of the call though," the source continued.

"As for why [the term loan] dropped, I'd say it's a result of what was discussed in the amendment calls," the source added.

The term loan closed the day quoted at 91 bid, 91¾ offered, down about a point to a point and a half from previous levels that were in the 92 bid, 93 offered type of range, according to the various sources.

However, at some point during the day the fall was even greater, as term loan levels had reached a low of 89½ bid, 90½ offered before rebounding slightly, the sources added.

Movie Gallery is a Dothan, Ala.-based operator of video retail stores.

DS Waters trades up

DS Waters of America LP saw its bank debt rise by about a half a point to a point during Tuesday's session, according to a trader, who said that the company was heard to have put out financial forecasts that seemed to have put investors in a good mood.

The company's term loan closed the day quoted around 99 and the company's revolver closed the day quoted around 97, the trader added.

DS Waters is a Flowery Branch, Ga.-based home and office water delivery business.

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