LifePoint, DirecTV upsize to avoid high-yield offerings, cut institutional spreads on strong demand

By Sara Rosenberg

New York, April 5 - LifePoint Hospitals Inc. and DirecTV Group Inc. have decided to upsize their in-market credit facilities instead of going to the high-yield bond market for debt financing as demand in the loan market has proved to be strong enough to eat up the extra paper and allow both companies to reduce pricing on their institutional tranches.

LifePoint upsized its seven-year term loan B to $1.25 billion from $1.1 billion on Tuesday as the company decided not to approach the high-yield market with a $200 million floating-rate senior subordinated notes issue but rather to use all senior debt to finance the acquisition of Province Healthcare Co., according to a market source.

The term loan B was only increased by $150 million as opposed to $200 million - the size of the previously planned bond offering - because the company generated free cash flow and no longer needs as much debt financing, the source explained.

In addition to increasing the size, LifePoint reverse flexed pricing on the term loan B to Libor plus 162.5 basis points from original price talk of Libor plus 175 basis points, the source added. The tranche is being offered to investors at par.

As was always the case, the term loan B has a roughly $200 million carve out for delayed draw.

LifePoint's $300 million five-year revolver was left unchanged in terms of size and spread, with the tranche priced at Libor plus 175 basis points.

Ratings of Ba3/BB on the now $1.55 billion credit facility are not expected to be affected by these changes.

Recommitments are due from lenders on Friday. The original commitment deadline was this past Monday.

Citigroup is the sole lead bank on the deal that, in addition to funding the Province purchase, will be used to refinance Province's existing debt, refinance LifePoint's credit facility and provide for the ongoing working capital and general corporate needs of LifePoint Hospitals.

Under the acquisition agreement, LifePoint will purchase Province for about $1.7 billion in cash, stock and the assumption of debt. The businesses of LifePoint and Province will be combined under a newly formed company.

LifePoint is a Brentwood, Tenn., operator of hospitals. Province is a Brentwood, Tenn., owner, leaser and manager of hospitals.

DirecTV ups size, cuts spread

DirecTV increased the size of its six-year term loan A and eight-year term loan B by adding $250 million to each tranche, bringing the term loan A size up to $500 million from $250 million and bringing the term loan B size up to $1.50 billion from $1.25 billion, according to a market source.

Like LifePoint, it appears as if DirecTV opted to go with all bank debt instead of potentially approaching the high-yield bond market with a $500 million unsecured senior notes offering to help fund its refinancing transaction.

"I think there had been talk of a bond but it seems like they'll be doing all bank debt for now," the source said. "The bond market has been a little backed up recently."

In addition to the size modifications, DirecTV reverse flexed pricing on its term loan B to Libor plus 150 basis points from Libor plus 175 basis points, the source added.

Pricing on the term loan A and the $500 million six-year revolver - size unchanged - remained at Libor plus 150 basis points.

Bank of America and JPMorgan are the lead banks on the deal, with Bank of America the left lead.

Security is substantially all assets.

Proceeds from the term loans will be used to repay and terminate the company's existing $1.26 billion senior secured credit facility and to repay an unsecured promissory note in a total principal amount of $875 million, with remaining proceeds to be available for working capital or other purposes.

The revolver is expected to be undrawn at closing.

DirecTV is an El Segundo, Calif., broadcast satellite provider.

American Wholesale ups 2nd-lien pricing

American Wholesale Insurance Group Inc. flexed pricing higher on its 61/2-year second-lien term loan to Libor plus 850 basis points from Libor plus 700 basis points and reduced the size of the tranche to $40 million from $50 million, according to a syndicate document.

On the flip side, the company's six-year term loan B was increased to $110 million from $100 million, so as the total deal size remained unchanged at $150 million.

The term loan B is talked at Libor plus 350 basis points.

Credit Suisse First Boston is the sole lead arranger on the deal that will be used to help fund the acquisition of Stewart Smith Group from Willis Group Holdings.

American Wholesale Insurance is a Charlotte, N.C.-based wholesale insurance organization. Stewart Smith is a New York-based wholesale insurance broker.

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