Penn National breaks strong then retreats; Meridian pulls DIP; Coleto Creek softens repricing

By Sara Rosenberg

New York, May 26 - Penn National Gaming Inc.'s multi-billion dollar credit facility allocated and freed up for trading on Thursday, with the institutional term loan trading up throughout the session before settling down at slightly lower levels than those seen on the open.

In primary news, Meridian Automotive Systems Inc.'s debtor-in-possession financing facility was pulled from the market - causing pre-restructuring bank debt to fall even lower in trading. Also, Coleto Creek WLE LP modified the repricing request on its first-lien debt and HealthSouth Corp.'s unsecured term loan had some early orders heading into the book as the deal was launched via a conference call.

Penn National's rather large $1.65 billion seven-year term loan B opened for trading around 101 bid, 101½ offered on Thursday, proceeded to trade up to as high as 1011/2, and then came back in to close out the session at par ¾ bid, 101¼ offered, according to one trader.

According to a second trader, the term loan B opened around par ¾ bid, 101 offered, traded up and then sold off to par ½ bid, 101 offered by the end of the day.

The company's $325 million six-year term loan A opened around par ¼ bid, par ½ offered and then also sold off by a quarter of point before close to par bid, par ¼ offered, the second trader said.

"Broke 101+. Softened a little throughout the day but still bid 100¾ - 101 context," a sellside source said about the term loan B. The "deal was fairly well oversubscribed, which accounts for the strong secondary market activity."

Both the term loan B and the term loan A are priced with an interest rate of Libor plus 200 basis points.

"It's a L+200 asset with no call protection, so [it] probably shouldn't trade at too high a premium," the second trader added in explanation of why the paper ended up falling from opening levels.

Penn National's $2.725 billion senior secured credit facility (Ba3/BB-) also contains a $750 million five-year revolver priced at Libor plus 200 basis points.

However, the revolver and term loan A tranches do contain pricing grids, unlike the term loan B.

Deutsche Bank, Goldman Sachs and Lehman Brothers are the lead banks on the deal, with Deutsche the left lead.

Proceeds will be used to help fund the acquisition of Argosy Gaming Co. for a price of $2.7478 billion consisting of a $1.4104 billion equity purchase, $805.3 million Argosy debt to be retired, $319.9 million Penn National debt to be retired and $212.2 million in fees and expenses.

Penn National is a Wyomissing, Pa., owner and operator of gaming properties. Argosy Gaming is an Alton, Ill., owner and operator of casinos.

Meridian DIP cancelled

Meridian Automotive Systems' $375 million DIP financing facility was pulled from the market Thursday, according to various market sources, although the story wasn't completely clear as some had heard that lead bank JPMorgan cancelled its DIP commitment for the company in its entirety while others heard that the deal was postponed for now since syndication seemed to be falling apart.

"The company missed numbers and has a reputation for doing that so guys were very unhappy and that deal fell apart," one source added.

In the evening, Meridian put out a news release saying that it has received approval from the U.S. Bankruptcy Court for the District of Delaware to extend interim access to $30 million of its DIP through June 30.

The company said that its request to extend the interim access was the result of ongoing discussions with its lending group regarding revisions to its 2005 operating forecasts. These revisions were driven by recent reductions in production volumes by original equipment manufacturers.

The DIP, which launched about two weeks ago, consisted of a $175 million revolving tranche A with an interest rate of Libor plus 250 basis points and a $200 million term loan B with an interest rate of Libor plus 350 basis points.

Maturity was going to be the earliest of 18 months from the date of filing, 45 days after the entry of the interim DIP if the final DIP order has not been made, confirmation of a plan of reorganization or the acceleration of the loans in accordance with the DIP agreement.

And, proceeds were going to be used to repay the company's first-lien debt.

On Thursday, Meridian's pre-Chapter 11 bank debt slid lower, with the first-lien bank debt quoted at 87 bid, 90 offered and the second-lien bank debt quoted around 64, according to a trader.

Earlier this week, the first-lien paper was quoted at 98 bid, par offered and the second-lien was quoted around 74, but the two tranches fell considerably in Wednesday's session on negative buzz to 92 bid, 95 offered on the first and 65 bid, 70 offered on the second, the trader added.

This drop in levels continued during Thursday's session as news that the DIP was pulled was heard all around the marketplace.

Calls to the company about this matter were not returned prior to press time.

Meridian is a Dearborn, Mich., supplier of front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers.

Coleto changes proposal

Coleto Creek has changed its repricing request as the company is now seeking to lower interest rates on its first-lien term loan B (NA/BB/BB) and letter-of-credit facility to Libor plus 200 basis points, instead of to Libor plus 175 basis points as was originally proposed, according to a market source. Currently the tranches are priced at Libor plus 225 basis points.

The company's request to lower pricing on its existing $150 million second-lien term loan C (NA/BB-/BB-) to Libor plus 325 basis points from Libor plus 350 basis points was left unchanged. There is 101 soft call protection for one year contained in the proposal.

In addition to the repricings, the company is also looking to upsize its term loan B to $228 million from $193 million and letter-of-credit facility to $57 million from $47 million with proceeds from the additional debt going toward a $50 million dividend payment to sponsors.

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

Coleto Creek is a Goliad County, Texas-based coal-fired power plant.

HealthSouth nets early orders

HealthSouth's $150 million senior unsecured term loan had gotten in some early commitments from investors by Thursday afternoon - the day during which the tranche was launched via a conference call, according to a market source.

Both new and existing lenders are being approached on the new term loan, which is being offered at par.

The unsecured term loan was launched with opening pricing of Libor plus 550 basis points, is non-callable for one year and then callable at 102 in year two and 101 in year three.

Commitments are due June 6.

J.P. Morgan Securities Inc. and Citigroup Global Markets Inc. are joint lead arrangers and joint bookrunners on the deal, with J.P. Morgan the left lead.

Proceeds from the term loan will be used to partially refinance the company's $245 million 6.875% senior notes due June 15.

In March, HealthSouth closed on a new $715 million credit facility consisting of a $315 million term loan B priced at Libor plus 250 basis points, an $85 million synthetic letter-of-credit facility priced at Libor plus 250 basis points, a $250 million revolver priced at Libor plus 275 basis points and a $65 million letter-of-credit facility priced at Libor plus 275 basis points. Proceeds from that amended and restated credit facility were used to refinance debt and beef up liquidity.

HealthSouth is a Birmingham, Ala.-based provider of outpatient surgery, diagnostic imaging and rehabilitative healthcare services.

Calpine stays strong

Calpine Corp.'s second-lien bank debt was up a touch on Thursday with levels closing out the day at 74 bid, 76 offered, compared to Wednesday's closing levels of 73½ bid, 75½ offered, according to a trader.

On Wednesday, the bank debt moved up by at least two points after the San Jose, Calif.-based energy company announced that it is accelerating its debt paydown strategy by targeting a reduction of more than $3 billion by the end of 2005 as opposed to by the end of 2006 as was previously planned.

The company went on to say that it's aiming to sell certain power and gas assets to reduce debt, lower annual interest cost and increase cash flow. In addition to previously announced potential asset sales, the company is targeting the sale of up to eight plants.

And, Calpine is looking to decrease operating and maintenance costs and lower fuel costs to improve the operating performance of power plants, significantly boosting operating cash flow and liquidity.

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