Simmons adds $140 million unsecured tranche; Dr. Pepper/Seven Up term B close to oversubscription

By Sara Rosenberg and Paul A. Harris

New York, Dec. 9 - Simmons Co. has opted to add a $140 million senior unsecured floating-rate loan to its credit facility and to reduce the size of its proposed bond offering to $200 million from $340 million. Meanwhile, Dr. Pepper/Seven Up Bottling Group Inc.'s institutional tranche is moving along smoothly with the piece close to oversubscription a day after officially launching into the bank loan market.

Simmons' new unsecured tranche is talked at Libor plus 375 basis points to 400 basis points with call protection of 103 in year one, 102 in year two and 101 in year three, according to a source close to the deal. The tranche will be aimed at bank loan and bond investors with most of the focus going toward bank loan lenders, the source added.

Price talk on the bond offering is 7 7/8% to 8 1/8% with pricing scheduled to take place on Wednesday.

Simmons credit facility (B2/B+), which launched last week and was originally sized at $480 million excluding the newly added unsecured tranche, consists of a $75 million revolver and a $405 million term loan B with price talk in the Libor plus 275 basis points to 300 basis points area.

The bank meeting wrapped up late afternoon last Tuesday and was extremely well attended. Institutional market reception was reported to be strong as the secured term loan was way oversubscribed by the end of the day.

Goldman Sachs and UBS Securities are the joint lead arrangers and co-syndication agents on the Simmons bank deal, with Goldman listed on the left and acting as sole bookrunner. Deutsche Bank will also be involved in the bank financing and will receive an agent title. During the meeting, it was also announced that CIT and GECC signed on to the deal as co-documentation agents, the participant added.

Proceeds will be used to help support the company's acquisition by Thomas H. Lee Partners, chairman and chief executive officer Charlie Eitel and senior management from Fenway Partners.

In addition to the bank and bond financing, the company is expected to receive $330 million of equity from Thomas H. Lee and $70 million of equity from Fenway and senior management.

The transaction, which is expected to close before year-end, values the company at $1.1 billion, according to a company news release. Fenway, which acquired Simmons in October 1998 from Investcorp for about $513 million, will retain a 10% stake in the company once the transaction closes.

Simmons is an Atlanta manufacturer and distributor of branded bedding products.

Dr. Pepper/Seven Up Bottling Group's $730 million seven-year term loan B, which is priced with an interest rate of Libor plus 250 basis points, is "very close to being oversubscribed," a market source told Prospect News.

The $855 million credit facility (B1) also contains a $125 million six-year revolver with an interest rate of Libor plus 200 basis points.

Commitments are due on Dec. 16, with closing on the facility expected to occur by the end of next week or the beginning of the following week.

Deutsche and JPMorgan are the lead banks on the deal, with Deutsche listed on the left.

Proceeds will be used by the Dallas soft drink company to refinance existing debt.

Market speculation is that Sensus Metering Systems Inc.'s $265 million term loan B that is currently talked at Libor plus 300 to 325 basis points will end up pricing at the high end of that range with a step down to Libor plus 300 basis points if leverage falls below four times, according to a source.

However, according to a source close to the deal, nothing has been finalized although the speculation is "directionally correct."

The institutional tranche is split into two parts consisting of a $235 million U.S. term loan and a $30 million European borrower term loan.

The $340 million credit facility (B2/B+) also contains a $75 million revolver talked at Libor plus 300 basis points.

Credit Suisse First Boston and Goldman Sachs are the joint lead arrangers on the deal.

Proceeds, combined with proceeds from a subordinated debt offering and equity capital provided by the Resolute Fund LP, will be used to help support the leveraged buyout of Invensys plc metering business.

Under the acquisition agreement, IMS Meters Holdings Inc. will acquire the metering business for a gross cash consideration of $650 million. The transaction is expected to be completed by year end.

IMS, a manufacturer and seller of water, gas, electric and heat metering and communication solutions for the utility industry, is sponsored by The Resolute Fund LP, which is a private equity fund managed by The Jordan Co. LP. The metering business being acquired is a Raleigh, N.C. provider of advanced metering and communications solutions for the worldwide utility industry.

In the secondary, Levi Strauss & Co.'s fixed- and floating-rate bank debt were quoted at 102 bid, 102¾ offered on Tuesday, unchanged from previous levels despite a rating downgrade by Standard & Poor's, according to a trader. The trader added that since the downgrade was revealed at the end of the day, if there is going to be any response by the market to the news, it would happen on Wednesday.

S&P lowered its long-term corporate credit and senior unsecured debt ratings on Levi Strauss to CCC from B, its bank loan rating on the company's $650 million asset-based revolver due 2007 to B from BB and its rating on the $500 million term loan due 2006 to B- from BB-.

The outlook is developing. But, the ratings were removed from CreditWatch, where they were placed Nov. 13, following the company's announcement that it was revising its revenues and operating expectations downward.

"The rating actions follow Standard & Poor's operational review and Levi Strauss' announcement that it has hired Alvarez & Marsal (A&M) to accelerate the company's turnaround plan after a period of lackluster sales and poor performance," said S&P credit analyst Susan Ding, in the rating release.

"At the same time, the company announced the departure of its chief financial officer. A&M is expected to advise Levi's on strategies to reduce debt and costs. With the management changes and the retention of A&M, the company's business direction is uncertain," the rating release said.

"Furthermore, operating results and financial measures will be weaker than Standard & Poor's expectations in light of the revised revenue and earnings figures. Standard & Poor's remains concerned about the company's ability to revitalize sales and margins given the current soft retail environment."

Levi Strauss is a San Francisco apparel company.

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