Protection One securing lower B spread; Federal IT sets price talk; NewPage launches restructured deal

By Sara Rosenberg

New York, April 7 - Protection One Inc. cut pricing on its term loan B as the deal was somewhere around three times oversubscribed. Meanwhile, Federal Information Technology Systems LLC released price talk on its recently launched deal now that ratings from both agencies have come out. Also, NewPage Corp. launched its restructured credit facility that now has a total size of $1.325 billion, compared to the previously anticipated size of $1.12 billion.

Protection One reverse flexed pricing on its $250 million term loan B to Libor plus 300 basis points from original price talk of Libor plus 350 basis points, according to a market source.

Recommitments from lenders were due Thursday. The original commitment deadline for the deal had been this past Monday.

Pricing on Protection One's $25 million revolver was left unchanged at Libor plus 325 basis points.

The term loan B was offered to investors at par, and revolver commitments of $10 million got an upfront fee of 75 basis points.

Bear Stearns and Lehman Brothers are the lead banks on the $275 million credit facility (B2/B+), with Bear Stearns the left lead.

Proceeds will be used to refinance existing bank debt and some bonds.

Protection One is a Lawrence, Kan., provider of commercial and residential security services.

Federal IT price talk

Federal IT announced price talk of Libor plus 300 basis points on its $80 million term loan B on Thursday morning as a rating of B2 came out from Moody's Investors Service, joining the B+ rating Standard & Poor's assigned to the deal on April 4, according to a market source.

The term loan is being offered to investors at par, and commitments are due April 19.

"Prior to the pricing announcement there were five guys in [and] other people have come in after pricing was announced today," the source said.

Federal IT's facility also contains a $10 million revolver, but that tranche is not being sold as the two lead banks on the deal - Bear Stearns and Wachovia, with Bear Stearns the left lead - have decided to eat up that portion of the transaction, the source explained.

Proceeds from the $90 million credit facility, which launched via a bank meeting this past Tuesday, will be used to help fund the acquisition of Sensor Systems Inc.

Federal IT is a Kelso portfolio company, but with this transaction, Pegasus Advisors is being added as an equity sponsor.

Following closing of the transaction total leverage will be less than 4x.

Federal IT is a Morristown, N.J.-based provider of information technology services to the intelligence defense sector. Sensor Systems is a Sterling, Va.-based developer of image exploitation and analysis software primarily for the intelligence community.

NewPage launches

NewPage launched its credit facility into syndication on Thursday with a reworked structure that consists of a $350 million asset-based term loan, a $750 million term loan B and a $225 million "timber" tranche, according to a market source.

Previously, the deal was expected to consist of a $400 million revolver, a $550 million term loan and a $170 million "timber" tranche, although that structure was said to be incredibly flexible and likely to change.

Goldman Sachs and UBS are joint lead arrangers on the deal, with Goldman the left lead.

Proceeds from the $1.325 billion credit facility and a $900 million three-part bond offering that is set to kickoff on Monday will be used to help fund Cerberus Capital Management LP's leveraged buyout of MeadWestvaco Corp.'s Papers business and associated assets.

Under the terms of the agreement, NewPage will acquire the Papers business for $2.3 billion, which consists primarily of mills located in Chillicothe, Ohio; Escanaba, Mich.; Luke, Md.; Rumford, Maine; and Wickliffe, Ky.

The acquisition is subject to customary closing conditions, including regulatory approvals and financing, and is expected to be completed in the second quarter.

NewPage is a Dayton, Ohio, producer of coated and carbonless papers.

EaglePicher sees low bid

EaglePicher Inc.'s bank debt was "flying around in the 98s" on Thursday compared to previous trading levels in the 99s "as the general belief is that the company is continuing to get weaker, and closer and closer to bankruptcy," a trader told Prospect News.

However, according to a second trader, the paper was not active and remained quoted at the 99 bid, par offered level, with the exception of "one low bid" spotted during the session. The trader agreed that most market players feel that the company is getting closer to a bankruptcy filing but remarked that the bank debt is "totally covered," which is why it has stayed closer to that par region.

No particular news was out on the company during the session, but over the past few months, EaglePicher's performance has been under some scrutiny.

In fact, in late-March S&P lowered its ratings on EaglePicher including the senior unsecured debt to CCC- from CCC and senior secured debt to CCC+ from B- and kept all ratings on Credit Watch negative.

And, in early-February, Moody's downgraded most of EaglePicher's ratings including the senior unsecured notes to Caa3 from Caa1 and senior secured bank credit facilities to Caa1 from B3.

Moody's downgrade was a result of the company announcing that it was not in compliance with certain financial covenants under its credit agreement and accounts receivable securitization facility as at fiscal year end Nov. 30, which was later temporarily corrected with a forbearance agreement that's in affect until June 30.

S&P's downgrade was based on a combination of several factors, including that extremely tight liquidity, that fact that cash and availability on its credit agreement totaled only $11 million at March 10, its forbearance agreement with senior lenders expires June 10, 2005, the continued challenges associated with its automotive supplier businesses, the potential tightening of credit from vendors, the possibility of alternative financing that could result in coercive exchange or possible bankruptcy filing and challenges in selling and obtaining sufficient proceeds from possible divestitures in a timely manner.

EaglePicher is a Phoenix-based diversified manufacturer.

Team Health repricing closes

Team Health Inc. closed on the repricing of its term loan B, which was accomplished by getting a $203.125 million term loan C with an initial interest rate of Libor plus 275 basis points that was used to repay the term loan B that carried an interest rate of Libor plus 325 basis points.

Pricing on the term loan C can vary from Libor plus 225 basis points to Libor plus 325 basis points based on ratings.

The new term loan C also allows the company to repurchase a portion of its outstanding senior subordinated notes under certain circumstances.

Bank of America was the lead bank on the deal, which was completed on Wednesday.

Team Health is a Knoxville, Tenn., provider of outsourced physician services.

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