Penn National expected to get done as desire to hold paper outweighs frustration over lower yield

By Sara Rosenberg

New York, Nov. 25 - Penn National Gaming Inc.'s proposal to essentially lower pricing on its existing term loan B by 100 basis points by obtaining a new $400 million term loan D might have some investors groaning in frustration. But with market technicals being what they are and investors being flush with cash, the deal is expected to get done as people are unwilling to give up their paper.

"No one that has responded has said no [to the amendment]," a market source told Prospect News. "Investors are not ecstatic. But there's justification for it.

"In all fairness the company has reduced leverage. Senior leverage has come down by 1.4 or 1.5 times since the original deal was done in March. And the market is ripe for it. It seems like no one is willing to give up the paper."

"It's aggressive but it will get done," a fund manager said. "[Investors] don't want to lose the paper and it's a reasonable credit."

On Tuesday morning, the syndicate went out to existing lenders with an amendment to the existing credit agreement that would allow the company to obtain a $400 million term loan D with an interest rate of Libor plus 250 basis points. The existing term loan B, which is priced with an interest rate of Libor plus 350 basis points, would be rolled into the new institutional tranche. The term loan D will mature on the existing term loan B's maturity date, which is in March 2009.

Investors are not being offered any sort of fees or incentives to approve the amendment.

The term loan A, which has a balance of about $11 million, will be fully repaid, and the $100 million revolver will remain in place as is.

Bear Stearns is the lead bank on the Wyomissing, Pa., gaming company's deal.

Meanwhile, Atrium Cos. Inc.'s institutional tranche was reverse flexed by 50 basis points as high investor demand led to strong market reception for the facility since its launch last week. CIBC World Markets and UBS Securities are the lead banks on the deal.

The $180 million five-year term loan B is now priced with an interest rate of Libor plus 275 basis points, compared to initial pricing of Libor plus 325 basis points, according to a market source.

Furthermore, the greenshoe on the deal was increased to $100 million from $50 million.

News of the change in pricing and greenshoe size was first posted on Intralinks Tuesday morning, but the actual modifications occurred Monday afternoon, the source added.

The $230 million facility (B1/B+) also contains a $50 million five-year revolver with an interest rate of Libor plus 300 basis points.

The term loan B has an option to be extended for an additional two years.

Proceeds will be used to help support Kenner & Co.'s buyout of the Dallas window manufacturer in a transaction valued at about $610 million.

Under the agreement, each outstanding share of Atrium Cos.' common stock and each option, with the exception of some shares and options owned by certain members of management, will be acquired by KAT Holdings Inc., a newly formed affiliate of Kenner & Co., and all outstanding debt will continue to be outstanding or refinanced.

United Agri Products North America has closed on its $500 million five-year asset based revolving credit facility in terms of funding, however, the deal is still in syndication and is anticipated to remain in-market until mid December, according to a market source. GE and UBS Securities are the lead banks on the deal.

Late Monday, ConAgra Foods Inc. announced that it completed the divestiture of United Agri to Apollo Management LP in a management-led buyout for $500 million in cash and $60 million in the form of preferred securities.

The new revolver, which carries an interest rate of Libor plus 275 basis points, was obtained by United Agri to help support its acquisition.

United Agri Products is a Greeley, Colo., developer and distributor of crop production products and services to growers.

National Waterworks Inc.'s $80 million add-on to its term loan B was tabled for now as the company withdrew its consent solicitation last week, according to a source. JPMorgan, Goldman Sachs and UBS were the lead banks on the deal.

The add-on, which was priced with an interest rate of Libor plus 275 basis points, was going to be used by the parent company, National Waterworks Holdings Inc., to pay a $110 million dividend to its stockholders.

However, the company had to withdraw its consent solicitation to amend the restricted payments covenant under its 10½% senior subordinated notes to permit payment of the dividend, according to a company news release.

"The company will continue to consider paying a dividend to the extent permitted by the indenture governing the notes," the release added.

National Waterworks is a Waco, Texas, water and wastewater company.

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