Novelis breaks; Movie Gallery levels tighten, rise as market digests news; ServiceMaster firms OID

By Sara Rosenberg

New York, July 3 - Novelis Inc.'s credit facility freed up for trading on Tuesday morning, with levels on the term loan quoted in the low par region.

Also in trading, Movie Gallery Inc.'s term loan B saw quotes move closer together and higher now that investors have had some time to think about the company's recent announcement regarding covenants and strategic alternatives.

Meanwhile, in the primary, the ServiceMaster Co. firmed up the original issue discount on its term loan B tranche.

Novelis' credit facility freed up for trading early on in the session, with the $960 million term loan (Ba2/BB) quoted at par bid, par ¼ offered, according to a trader.

The term loan is priced at Libor plus 200 basis points.

During syndication, the term loan was upsized from $860 million.

Novelis' $1.86 billion credit facility also includes a $900 million ABL revolver.

ABN Amro and UBS are the lead banks on the deal, with ABN the left lead on the ABL revolver and UBS the left lead on the term loan.

Proceeds will be used to refinance existing bank debt.

Novelis is an Atlanta-based aluminum rolled products and aluminum can recycling company.

Movie Gallery quotes narrow

Movie Gallery's term loan B saw its levels move higher and a little close together as market players have gotten over the initial shock and confusion that came with Monday's news of covenant non-compliance and evaluation of company alternatives, according to traders.

According to one trader, the term loan B was quoted at 87 bid, 89 offered, compared with the previous day's really wide levels of 80 bid, 90 offered.

But a second trader disagreed. This trader had levels going out at 88 bid, 92 offered, up from 85 bid, 90 offered on Monday.

As for the second-lien term loan, that was quoted at 50 bid, 60 offered, unchanged from previous levels, the second trader added.

Late Monday, Movie Gallery announced that it was not able to meet the financial covenants contained in its senior facility for the fiscal quarter ended July 1 due to significantly softer-than-expected second-quarter results.

The company is currently in talks with its lenders regarding the non-compliance and plans to develop a plan to remedy the defaults, which may include seeking a waiver, amendment, forbearance or similar agreement.

Movie Gallery has fully drawn the remaining availability under its revolver and currently has liquidity consisting of approximately $50 million of cash on hand.

Goldman Sachs is the agent on the credit facility.

The Dothan, Ala.-based video rental company also said that it is considering a number of strategic alternatives, including asset divestitures, recapitalizations, alliances with strategic partners and a sale to or merger with a third party.

To that end, Bill Kosturos, a managing director at restructuring and corporate advisory firm Alvarez & Marsal, has resumed his role at the company as chief restructuring officer. In addition, Lazard Freres & Co. LLC was hired on Sunday as an independent financial adviser.

Alvarez & Marsal was retained by Movie Gallery in 2006 to bolster its accounting and finance functions and to assist in improving its overall operating performance and is also helping to evaluate available strategic and restructuring alternatives.

Lastly, the company said that it will continue to take actions to conserve cash and improve profitability, including accelerating the closure of unprofitable stores, consolidating stores in certain markets, realigning its cost structure to better reflect its reduced size and seeking a more competitive capital structure.

ServiceMaster sets OID

ServiceMaster finalized the original issue discount on its $2.85 billion seven-year covenant-light term loan B at 98, compared with previous talk of 98 to 981/4, according to a market source.

The term loan B is priced at Libor plus 300 bps, with a step up to Libor plus 325 bps when senior secured leverage is greater that 6.5 times, and carries 101 soft call protection for one year.

During syndication, the term loan B was upsized from $2.65 billion after a $200 million pre-funded synthetic letter-of-credit facility was removed from the capital structure, pricing on the term loan B was flexed up from initial talk of Libor plus 225 bps with the addition of the step, and the original issue discount and call premium were added.

ServiceMaster's $3.35 billion senior secured credit facility (B1/B+) also includes a $500 million six-year covenant-light revolver that is priced at Libor plus 300 bps.

During syndication, pricing on the revolver was also flexed up from initial talk of Libor plus 225 bps.

Other changes made to the credit agreement during syndication included the removal of the $400 million accordion feature and the company's Landcare business was made a restricted subsidiary.

Citigroup, JPMorgan, Bank of America, Goldman Sachs and Morgan Stanley are the lead banks on the deal.

Proceeds will be used to help fund the leveraged buyout of the company by Clayton, Dubilier & Rice, Inc. for $15.625 in cash per share. The total enterprise value is $5.5 billion, including the assumption of existing ServiceMaster debt.

Senior secured leverage is around 5.7 times.

ServiceMaster is a Downers Grove, Ill., provider of services to residential and commercial customers, including lawn care and landscape maintenance, termite and pest control, home warranties, disaster response and reconstruction, cleaning and disaster restoration, house cleaning, furniture repair and home inspection.

BNY ConvergEx closes

BNY ConvergEx Group LLC completed its acquisition of LiquidPoint LLC, according to a company news release.

To help fund the transaction, the company got $257 million of incremental term loan debt comprised of a $132 million term loan B add-on priced at Libor plus 300 bps, in line with existing term loan B pricing, and a $125 million delayed-draw term loan priced at Libor plus 300 bps.

Proceeds from the delayed-draw term loan will be available for acquisition purposes.

Merrill Lynch, Morgan Stanley and Goldman Sachs acted as the lead banks on the deal.

BNY ConvergEx is a provider of agency brokerage and investment technology services. LiquidPoint is a Chicago-based equity options execution and trading technology firm.

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