Pricing on Itron B loan falls to Libor plus 225 basis points; Calpine heads higher on debt offerings

By Sara Rosenberg

New York, Nov. 6 - Itron Inc.'s term loan B (Ba3/BB-) was reverse flexed by 25 basis points on Thursday and a pricing grid was added to the tranche calling for even lower pricing depending on leverage. Meanwhile, in the secondary, Calpine Corp.'s second lien term loan B headed higher by about a point during market hours as investors reacted positively to the company's latest liquidity increasing initiatives.

Itron's $185 million term loan B was flexed down to Libor plus 225 basis points from Libor plus 250 basis points, and pricing can be reduced to Libor plus 200 basis points if leverage falls below two times, according to a market source.

The tighter spread could have been anticipated based on the positive market reaction that the deal received. In fact, market sources who attended the Oct. 29 bank meeting indicated that books could shut down early due to the large amount of commitments that were coming in for the institutional piece.

The facility also contains a $55 million revolver with an interest rate of Libor plus 275 basis points, which is unchanged from initial talk.

Allocations on the deal are expected to occur in the near future.

Some things that were said to be working in the deal's favor include the fact that Itron is a first-time issuer, which is a big plus in the current market environment where investors are itching to get their hands on some brand new paper, low senior and total leverage, and the overall simplicity in understanding the business.

Bear Stearns is the sole lead arranger, sole bookrunner and syndication agent. Wells Fargo is the administrative agent on the deal.

Proceeds will be used to help fund the acquisition of Schlumberger's Electricity Metering business for a purchase price of $255 million. This acquisition was first announced in July, however, in late August, the company received a second request for information from the FTC in connection with Itron and Schlumberger's filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Itron is a Spokane, Wash.-based technology provider and source of knowledge for collecting, analyzing and applying critical data about electric, gas and water usage to the global energy and water industries.

As for the secondary market, Calpine's second lien term loan B moved quite a bit on Thursday as the paper was quoted at 94½ bid, 95 offered, according to a trader, up from previous levels of 93½ bid, 94 offered.

The San Jose, Calif., power company was slated to price $400 million of second priority senior secured notes due 2010 via Morgan Stanley and $600 million of senior unsecured convertible notes due 2023 via Deutsche on Thursday. Late in the day terms emerged on the high-yield bond deal - it priced at 10.243%.

Proceeds from both offerings were earmarked for the repurchase or repayment of existing debt, including the company's existing 4% convertible.

On Wednesday, Calpine's second lien term loan dropped by about a point to 92½ bid, 93 offered immediately following the company's release of earnings numbers that included a cut in guidance, but managed to bounce back to essentially prior levels of 93½ bid, 94 offered by the end of the day as investors decided that things weren't as negative as they first appeared.

In the third-quarter earnings release, the company updated its 2003 earnings guidance, lowering the total earnings per share estimation from previous guidance that was released with second quarter results.

For the year ended Dec. 31, the company expects earnings per share to be in the range of $0.85 to $1.00, compared to previous guidance of $0.90 to $1.20 per share. And core operating earnings guidance was reduced to $0.18 to $0.22 per share from $0.25 to $0.35 per share based on lower spark spreads expected during the fourth quarter, according to the news release.

For the third quarter, the company reported earnings per share of $0.51, or $237.8 million of net income, compared with earnings per share of $0.34, or $151.1 million of net income, for the third quarter of 2002.

In other primary news, Sola International Inc.'s $225 million credit facility, which just launched Tuesday, has already reached at least three times oversubscription on the $175 million six-year term loan B, according to a market source.

The deal's success is really no surprise since the bank meeting was reported to be well attended with over 90 investors participating, and a number of commitments had already been received on the day of the launch.

The facility also contains a $50 million five-year revolver.

Both the institutional and the pro rata tranches are priced with an interest rate of Libor plus 300 basis points.

UBS Investment Bank and JPMorgan are joint lead arrangers and bookrunners, with UBS listed on the left. And, Union Bank of California has already signed on as administrative agent.

Proceeds will be used to refinance existing debt.

Standard & Poor's rated the credit facility at BB-, and a rating from Moody's Investors Service is expected to emerge next week, the source said.

Sola is a San Diego designer, manufacturer and global distributor of plastic and glass eyeglass lenses.

Details on Environmental Systems Products' credit facility have firmed up as the size of the loan has now been determined to be $270 million as opposed to the previously reported size of up to $295 million, according to a syndicate document.

Furthermore pricing on the second lien tranche was flexed up by 50 basis points.

The facility consists of a $20 million five-year revolver (B1) with an interest rate of Libor plus 350 basis points and a 100 basis points commitment fee, a $125 million five-year first lien term loan (B1) with an interest rate of Libor plus 350 basis points and a $125 million seven-year second lien term loan (B3) with an interest rate of Libor plus 700 basis points.

Upon launching, the deal was structured as a $20 million five-year revolver with an interest rate of Libor plus 350 basis points, a $125 million to $150 million five-year first-lien term loan with an interest rate of Libor plus 350 basis points and a $125 million seven-year second-lien term loan with an interest rate of Libor plus 650 basis points.

Credit Suisse First Boston is the lead arranger and bookrunner on the refinancing deal.

Environmental Systems Products is an East Granby, Conn., vehicle emissions and safety testing company.

Amphenol Corp. closed on its repricing of its $413 million term loan B on Thursday, according to a syndicate source. Deutsche was the lead bank on the deal.

Under this newest transaction, the company managed to lower the interest rate on the institutional tranche to Libor plus 200 basis points from Libor plus 250 basis points.

Originally, the company obtained a $500 million term loan B, but since closing on the facility in March, Amphenol has managed to pay down $87 million of the bank debt using free cash flow, a move that had many investors feeling positively toward the name and pushed some to ask for an increase in their positions during this repricing transaction.

Amphenol is a Wallingford, Conn., designer, manufacturer and marketer of electrical, electronic and fiber-optic connectors, interconnect systems and coaxial and flat-ribbon cable.

Ball Corp. also closed on its term loan B repricing on Thursday, the syndicate source added. Deutsche was the lead bank on this deal as well.

Under the transaction, the company lowered the interest rate on its $190 million institutional tranche to Libor plus 175 basis points from Libor plus 225 basis points.

The tranche was sized at $350 million, but the company is paying down $160 million of the outstanding term debt with free cash flow, so essentially, only $190 million will be repriced at the new rate.

Ball is a Broomfield, Colo., manufacturer of metal and plastic packaging.

Scientific Games Corp. closed on its $537.825 million credit facility (Ba3/BB-) on Thursday, consisting of a $462.825 term loan C with an interest rate of Libor plus 275 basis points and a $75 million revolver with an initial interest rate of Libor plus 275 basis points.

During syndication the term loan was upsized by $175 million and the revolver was upsized by a total of $25 million. Initially the revolver was launched as a $50 million revolver with a $20 million greenshoe. This greenshoe was taken advantage of, and an additional $5 million was added to the tranche as well.

The term loan C will be used to refinance the company's existing term loan B, which is currently sized at about $287 million and carries an interest rate of Libor plus 350 basis points, and to help fund the previously announced acquisition of IGT OnLine Entertainment Systems Inc. from International Game Technology for $143 million in cash.

The revolver will be used for general corporate purposes.

Bear Stearns is the sole lead arranger, sole bookrunner and syndication agent. Bank of New York is the administrative agent. Credit Suisse First Boston and Deutsche Bank signed on as co-arrangers and co-documentation agents.

Scientific Games is a New York provider of services, systems and products to both the instant ticket lottery industry and the pari-mutuel wagering industry.

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