Georgia-Pacific nets billions in orders; Vertafore near full; Deluxe oversubscribed; DRS ups revolver size

By Sara Rosenberg

New York, Jan. 10 - Georgia-Pacific Corp. (Koch Forest Products Inc.) launched its massive credit facility to a large audience of retail investors on Tuesday to be met with strong interest and quickly placed orders.

In other primary news, Vertafore Inc.'s credit facility is already close to done and seems to be heading in the direction of strong oversubscription, Deluxe Entertainment Services Group's credit facility has already reached oversubscription and DRS Technologies Inc. increased the size of its revolving credit facility tranche by $50 million.

Meanwhile, in trading, LifePoint Hospitals Inc. inched lower on disappointing 2006 financial guidance and HealthSouth Corp. inched a little higher as investors continued to be drawn to the name.

Georgia-Pacific has already received several billion dollars in investor commitments toward its $11 billion senior secured credit facility, which was just officially launched to retail investors via a bank meeting Tuesday, according to a market source.

"The bank meeting went exceptionally well," another source said. "It was a rather large turnout. They've seen very significant interest on the deal. The book is growing very strong."

The facility consists of a $2 billion five-year term loan A (Ba2) talked at Libor plus 225 basis points, a $1.5 billion five-year revolver (Ba2) talked at Libor plus 225 basis points, a $5 billion seven-year term loan B (Ba2) talked at Libor plus 225 basis points and a $2.5 billion eight-year second-lien term loan (Ba3) talked at Libor plus 350 basis points.

Citigroup is the administrative agent, joint bookrunner and joint lead arranger on the entire facility, Bank of America is syndication agent, joint bookrunner and joint lead arranger on the revolver and term loan A, Deutsche Bank is syndication agent, joint bookrunner and joint lead arranger on the term loan B, and JPMorgan is syndication agent, joint bookrunner and joint lead arranger on the second-lien loan.

Amortization on the term loan A is 5% in year one, 10% in year two and year three, 20% in year four and 55% in year five. Amortization on the term loan B is 27 equal quarterly installments of 0.25%, with the balance due at maturity.

Proceeds from the term loan A, term loan B and second-lien loan will be used to repay a $6.356 billion bridge loan that was used to fund Koch Forest Products Inc.'s tender offer for all of Georgia-Pacific's shares, to refinance, repurchase or redeem certain outstanding debt securities of Georgia-Pacific and its subsidiaries and to refinance Georgia-Pacific's existing credit facility.

Revolver borrowings will be available for general corporate purposes.

Under the merger agreement, Koch paid $48 per Georgia-Pacific share for an equity value of $13.2 billion and a total enterprise value of $21 billion, including all Georgia-Pacific debt. And, now that the tender offer was completed in December 2005, Georgia-Pacific is being operated as a privately held, wholly owned subsidiary of Koch Industries Inc.

Georgia-Pacific is an Atlanta-based manufacturer and marketer of tissue, packaging, paper, building products and related chemicals.

Vertafore filling up

Vertafore's credit facility has been filling up fast since launching late last week, leading some to believe that the deal will end up being a blow out.

"It's not subscribed yet but a lot of orders are coming in," a market source said. "Existing lenders haven't recommitted yet so when they do it will push it over the edge. It's expected to be significantly oversubscribed within the next four to five days."

The $335 million credit facility consists of a $30 million five-year revolver talked at Libor plus 275 basis points with a 50 basis point commitment fee, a $180 million six-year first-lien term loan B talked at Libor plus 275 basis points and a $125 million seven-year second-lien term loan talked at Libor plus 650 basis points.

The second-lien term loan contains call protection of 102 in year one and 101 in year two.

Credit Suisse First Boston and JPMorgan are joint lead arrangers and joint bookrunners on the deal, with CSFB also acting as administrative agent, JPMorgan acting as syndication agent and Wachovia acting as documentation agent.

Proceeds will be used for a dividend recapitalization.

Vertafore, a portfolio company of Hellman & Friedman LLC, is a Windsor, Conn., enterprise software and information services provider to the property and casualty insurance industry.

Deluxe overfills books

Deluxe Entertainment's $458 million five-year term loan B (B1), which just launched around mid-last week, is already oversubscribed, according to a market source, sparking the expectation by some that pricing will end up coming in at the tight end of talk, or, if this momentum continues throughout the bookbuilding process, maybe lower than that.

The term loan B is currently talked at Libor plus 400 to 425 basis points.

Deluxe's $150 million 51/2-year second-lien term loan (B3) is also oversubscribed at this point, but this second-lien tranche had been pre-sold to investors prior to the actual bank meeting, the market source said.

Pricing on the second-lien term loan is currently set at Libor plus 825 basis points. Based on the fact that this tranche was pre-sold, chances are that pricing will remain unchanged throughout the syndication process.

The $733 million credit facility also contains a $125 million five-year revolver (B1) that is talked at Libor plus 400 to 425 basis points with a 100 basis point commitment fee.

Credit Suisse First Boston and Bear Stearns are joint lead arrangers and joint bookrunners on the deal, with CSFB also acting as administrative agent and Bear Stearns acting as syndication agent.

Proceeds from the credit facility will be used to help fund MacAndrews & Forbes Holdings Inc.'s purchase of the Deluxe film processing and creative services business from The Rank Group plc for $750 million.

The transaction, which is expected to close in early 2006, is subject to obtaining certain regulatory approvals and the approval of Rank's shareholders.

Deluxe is a provider of products and services to the motion picture industry.

DRS upsizes revolver

DRS Technologies increased its revolver tranche to $400 million from $350 million, while at the same time opting to reduce the size of its bond offering by $50 million, according to market sources.

The revolver is priced with an initial interest rate of Libor plus 175 basis points.

The now $706.9 million amended and restated credit facility (Ba3/BB+) also contains a $356.9 million term loan B with an interest rate of Libor plus 175 basis points.

Wachovia and Bear Stearns are the lead banks on the deal.

Proceeds from the credit facility, high-yield bonds, convertible notes, cash on hand and the issuance of stock will be used to fund the company's acquisition of Engineered Support Systems Inc. (ESSI).

Under the acquisition agreement, DRS has agreed to purchase ESSI for $43.00 per share through a combination of $30.10 in cash and a portion of a share of DRS stock valued at $12.90, provided the average closing price of DRS' stock prior to closing is between $46.80 and $57.20.

Of the total proceeds from the various sources, $1.889 billion will be used to purchase ESSI shares, $88.3 million will be used to repay ESSI debt and $79.5 million will be used for fees and closing costs.

At closing, debt to pro forma EBITDA will be around 5.3 times, but that number is expected to drop to 4.3 times by the end of fiscal 2007 as strong cash flow will allow for deleveraging.

Debt to capitalization will be around 60.9% at close but is expected to drop to 57.3% by the end of fiscal 2007.

The transaction is expected to close by the end of DRS' fiscal year - March 2006. Completion of the purchase is subject to customary regulatory approvals and other closing conditions, including approval by both companies' stockholders.

DRS is a Parsippany, N.J.-based provider of technology products and services to defense, government intelligence and commercial customers. ESSI is a St. Louis-based diversified supplier of integrated military electronics, support equipment and technical services.

LifePoint dips on guidance outlook

LifePoint Hospitals' bank debt fell by about an eighth of a point during Tuesday's session on the heels of the company's release of 2006 guidance that fell short of expectations, according to a trader.

The bank debt closed out the session quoted at par 3/8 bid, par 7/8 offered, the traded said.

Late in the day Monday, LifePoint came out with 2006 estimates that included expectations of earnings per share for the first quarter of $0.50 to $0.55 on revenues of $579.4 million to $589.4 million, earnings per share for the second quarter of $0.50 to $0.54 on revenues of $571.6 million to $581.6 million, earnings per share for the third quarter of $0.57 to $0.61 on revenues of $576.4 million to $586.4 million and earnings per share for the fourth quarter of $0.61 to $0.65 on revenues of $586.5 million to $596.5 million.

For the year, the company estimates earnings per share of $2.18 to $2.35 on revenues of $2.31 billion to $2.35 billion.

LifePoint is a Brentwood, Tenn., operator of general and acute care hospitals in non-urban communities.

HealthSouth treads higher

HealthSouth's unsecured term loan gained a little more ground on Tuesday, moving up to 101½ bid, 102 offered from the prior day's closing levels of 101 3/8 bid, 101 7/8 offered, according to a trader.

The bank debt started last week quoted around par ¼ bid, par ¾ offered but has been pushing higher primarily driven by improved performance in the company's bonds, which was sparked by the expectation that current financials will be filed shortly.

And, as was reported last week, there is also a whisper out in the market that the company may attempt some sort of a global refinancing after the financials are completed, which would push the call protected bank debt to the 102 premium level.

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

Secondary momentum continues

Once again, the overall secondary loan market was stronger with bids moving up by about an eighth to a quarter of a point, according to a trader.

"The stock market was down most of the day and Treasuries were off so it really speaks to the resiliency of the loan market," the trader said.

This trend has been noticeable since last week as traders have continued to notice improvement in general levels amidst good trading flow.

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