Duane Reade term loan breaks for trading, moving up to near call protection levels

By Sara Rosenberg

New York, July 26 - One of the main events in the secondary loan market on Monday was the entrance of Duane Reade Inc's. $155 million six-year term loan B (B1/B) at strong plus 101 levels only to move up by about a quarter of a point by day's end.

The term loan was quoted at 101 5/8 bid, 102 offered by late day, according to traders. However, it was quoted around 101 3/8 bid, 101¾ offered upon first breaking, a trader added.

The term loan is priced with an interest rate of Libor plus 325 basis points, after reverse flexing from Libor plus 400 basis points last week, and contains call protection of 102 in year one and 101 in year two. Originally, the tranche was expected to have call protection of 103 in year one, 102 in year two and 101 in year three, but that was also modified last week.

Bank of America and Credit Suisse First Boston are joint lead arrangers and joint bookrunners on the term loan.

The New York drugstore chain also just closed on a $250 million asset-based revolver (B+) via Bank of America.

Proceeds from the loan, combined with proceeds from a bond deal and an equity contribution, will be used to help fund the company's acquisition by an affiliate of Oak Hill Capital Partners LP.

On Monday at a special meeting, stockholders voted to approve the proposed acquisition of the company. The acquisition is expected to close on Friday.

Charter softer

Charter Communications Inc.'s bank debt was "a little softer" on Monday with the term loan B quoted at 98 7/8 bid, 99¼ offered, compared to a previous level of 99 bid, 99¼ offered. The term loan A was basically unchanged at 97 7/8 bid, 98 1/8 offered, according to a trader.

"The whole market was weaker," one trader said.

"Also, it's quiet so things will get softer," a second trader added.

The St. Louis communications company's paper had been under some pressure since last week on news of a term B auction and a negative equity report that was put out by UBS. On Thursday, there was an auction on the term loan B at which time about $8 million was sold off at around 99 to 991/4. On Wednesday, UBS put out an equity report cutting its rating on Charter's stock to "reduce" from "neutral."

Mitchell ups term loans

Mitchell International Inc. increased the size of its first- and second-lien term loans and lowered pricing on both tranches as the deal was met with overwhelming demand.

The first-lien term loan (B1/B+) is now sized at $100 million compared to initial sizing of $95 million and pricing is now expected at Libor plus 300 basis points compared to initial price talk of Libor plus 300 to 325 basis points, according to a market source.

The second-lien term loan (B2/B-) is now sized at $50 million compared to initial sizing of $45 million and pricing is now expected at Libor plus 625 basis points, a relatively large difference when compared to initial price talk in the Libor plus 700 basis points context.

Pricing on the two tranches is expected to be finalized later this week, the source added.

The book on the second-lien term loan had been shut down ahead of schedule on July 15, just two days after launch, since the tranche was too oversubscribed to keep the book open. At that time, the first-lien term loan was reported as being oversubscribed as well.

The now $165 million credit facility also contains a $15 million five-year first-lien revolver with an interest rate of Libor plus 300 basis points (B1/B+). Size and pricing on the revolver are unchanged since launch.

Goldman Sachs and Wachovia are the lead banks on the deal, with Goldman listed on the left.

Proceeds will be used to finance a cash dividend to existing shareholders, retire existing debt, fund a special employee bonus pool and provide working capital.

Mitchell is a San Diego provider of information products, software and e-business solutions for the auto insurance, collision repair, medical claims, and glass replacement industries.

Allied Security allocations near

Allied Security Inc. is expected to allocate Tuesday or Wednesday now that the deadline for accounts to recommit to the lower-priced term loan passed, according to a market source.

On Friday, the syndicate lowered pricing on the $210 million six-year term loan B to Libor plus 425 basis points from Libor plus 450 basis points and added a stepdown to Libor plus 400 basis points if total leverage falls below 31/2x.

The recommitment deadline was Monday and "nobody dropped out," the source said.

Allied Security's $260 million credit facility (B2/B+) also contains a $50 million five-year revolver with an interest rate of Libor plus 450 basis points, unchanged since launch.

Closing on the credit facility is expected to take place on Aug. 3.

Bear Stearns is the lead bank on the deal that will be used by the King of Prussia, Pa., private security company to help fund the acquisition of Barton Protective Services and repay debt.

Titan closes

Titan International Inc. closed on its new $100 million 36-month revolver with an interest rate of Libor plus 300 basis points. LaSalle Bank and General Electric Capital Corp. were the lead banks on the deal.

Security is a first priority interest in some assets of Titan's domestic subsidiaries.

The new revolver replaces the company's former $20 million revolver and term loan, both of which were terminated on Friday, according to a company news release.

Under the new facility, the company is allowed to redeem some of the 8.75% senior subordinated notes. If the notes are not redeemed by February 2007, the credit facility's termination date will be adjusted to a 30-month term.

"We are extremely pleased with the financing Titan has secured as this provides the flexibility to take advantage of business opportunities as they arise," said Maurice Taylor Jr., president and chief executive officer, in the release. "The company wishes to thank our agents LaSalle and GE for their continued support of Titan, an American manufacturing company. The new lower borrowing rates will reduce Titan's interest expense going forward, compared to the previous term loan's Libor plus 4.0-4.5% rates."

Titan is a Quincy, Ill., supplier of wheels, tires and assemblies for off-highway equipment.

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