MECS sets OID; PCI, Nasdaq, Calpine talk emerges; Delta up on merger buzz; Cash, LCDX seesaw

By Sara Rosenberg

New York, Jan. 10 - MECS Inc. came out with the original issue discount on its credit facility as the deal was launched with a bank meeting, and PCI Gaming Authority released price talk on its new deal as it too was presented to potential lenders during the session.

Also in the primary, Nasdaq Stock Market Inc. came out with price talk on its all pro rata deal that was launched to investors earlier in the week, and Calpine Corp. revealed the pricing being offered on its exit facility in connection with an amendment.

Moving to the secondary, Delta Air Lines Inc.'s second-lien term loan was stronger as rumors resurfaced that the company is looking to merge with another airline, and the cash market in general and LCDX bounced all over the place on remarks by Federal Reserve chairman Ben S. Bernanke.

MECS held a bank meeting on Thursday to kick off syndication on its $190 million credit facility, and in conjunction with the launch, an original issue discount level was announced, according to a market source.

Both the $40 million revolver and the $150 million term loan are being offered to investors at a discount of 99, the source said.

As was previously reported, price talk on the two tranches is Libor plus 400 basis points.

GE Capital is the lead bank on the deal that will be used to help fund the buyout of the company by American Securities Capital Partners.

MECS is a Chesterfield, Mo., provider of engineering, procurement, and construction management services to processing plants that use sulfuric acid in their processes.

PCI Gaming guidance surfaces

Also launching with a bank meeting during market hours was PCI Gaming's $185 million senior secured credit facility (B1/BB-), at which time price talk on the transaction was revealed, according to a market source.

Both the $50 million five-year delayed-draw term loan A and the $135 million six-year term loan B were launched with talk of Libor plus 475 bps, the source said.

The term loan B is being offered to institutional investors with an original issue discount of 99 and carries 101 hard call protection for one year.

The term loan A is delayed draw for 12 months and has a 75 bps undrawn fee. This tranche is already circled with banks, although a handful of new banks are looking at it, the source added.

Merrill Lynch and CIT are the lead banks on the deal that will be used to help fund the development and construction of the Wind Creek Atmore Casino and Hotel.

PCI Gaming is an Atmore, Ala.-based casino operator.

Nasdaq price talk

Nasdaq posted the pricing grid on its $1.575 billion senior secured credit facility (Ba1/BBB-) on Intralinks on Thursday, with initial pricing on the entire deal talked at Libor plus 200 bps, according to a market source.

Tranching on the facility is comprised of a $1.5 billion term loan A and a $75 million revolver.

The deal was launched to U.S. investors with a bank meeting that took place this past Monday and to European investors with a bank meeting that took place this past Tuesday.

Bank of America and JPMorgan are the lead banks on the financing that will be used to help fund the acquisitions of OMX AB, the Philadelphia Stock Exchange and the Boston Stock Exchange.

Nasdaq is a New York-based provider of securities listing, trading and information products and services.

Calpine sets talk, fees

Calpine announced that it is offering lenders pricing of Libor plus 287.5 bps on its exit financing credit facility in connection with the amendment that would allow for $2.6 billion in incremental term loan debt, according to a market source.

The pricing came out on the heels of ratings being announced. Corporate ratings for Calpine are B2 from Moody's Investors Service and B from Standard & Poor's, and the exit facility is rated B2 by Moody's and B+ by S&P.

In addition, amendment fees were released, with lenders are being offered 50 bps for responses by Monday and 25 bps for responses by the official consent deadline of Jan. 18, the source said.

Under the current exit facility, pricing was going to be determined by ratings. If corporate ratings were Ba3/BB-, then pricing would have been Libor plus 200 bps, if ratings were B1/B+, then pricing would have been Libor plus 225 bps, if ratings were B2/B, then pricing would have been Libor plus 275 bps and if ratings were below B2/B, then pricing would have been Libor plus 350 bps.

Based on the corporate ratings, pricing on all tranches under the exit facility would have been Libor plus 275 bps, so with this amendment lenders are being offered 12.5 bps more than what was originally agreed upon.

The existing exit financing, which is being done through the rollover of the company's debtor-in-possession financing facility, is comprised of a $4 billion first-lien term loan due March 29, 2014 and a $1 billion revolver due March 29, 2014.

The incremental term loan debt that the company is seeking permission to obtain consists of a $2.3 billion first-lien term loan add-on due March 29, 2014 and a $300 million 366-day first-lien bridge loan that is expected to be repaid with proceeds from the sale of certain non-strategic assets and tax refunds.

This incremental debt is not being syndicated right now but may be sold off when market conditions are appropriate.

Another incentive that investors are being offered to approve this amendment is the addition of call premiums of 102 in year one and 101 in year two to the first-lien term loan debt, which includes the incremental first-lien term loan.

Goldman Sachs, Credit Suisse, Deutsche Bank and Morgan Stanley are the lead banks on the deal.

Proceeds from the incremental term loans will be used primarily to repay the company's existing second-lien debt, while proceeds from the other exit financing bank debt will be used to fund distributions under the plan of reorganization, and for working capital and general corporate purposes.

Closing on the San Jose, Calif., power company's amendment and funding of the incremental term loan debt is scheduled for Jan. 31.

Delta higher on merger rumors

Switching to trading news, Delta's second-lien term loan gained some ground on Thursday after the Wall Street Journal reported that the company is looking to merge with either UAL Corp. or Northwest Airlines Corp., according to a trader.

Delta's second-lien term loan was quoted at 94¾ bid, 95¾ offered, up from 94 bid, 95 offered, the trader said.

UAL's term loan B was pretty unchanged on the buzz, with levels quoted at 92½ bid, 93½ offered, compared to 92¾ bid, 93½ offered, the trader added.

According to the news report, Delta, an Atlanta-based airline, is planning to ask its board on Friday for permission to begin formal merger talks with the two other airlines.

This is not the first time that consolidation speculation has surrounded Delta. In November 2007, a rumor surfaced that Delta and Chicago-based UAL were in talks about a possible merger. Delta, however, quickly came out and denied the rumor.

What the company has previously publicly disclosed is that a special committee is working with management to review strategic options, including potential consolidation transactions. The committee also retained financial and legal advisers to assist in the review.

Cash, LCDX fluctuate

The overall cash market and LCDX were very volatile on Thursday as Bernanke spoke on the financial markets and the economic outlook, according to traders.

"[Cash] was up, it was down, it was up and I think we're down now an eighth to a quarter of a point," one trader remarked.

A second trader, however, disagreed with the final result, saying that after seesawing all over the place, cash ended the day unchanged to maybe down an eighth of a point.

As for LCDX, one trader said that it ended the day unchanged at 95.80 bid, 96 offered but was seen as low as 95.55 bid and as high as 96.10 bid, 96.20 offered during the session.

A second trader had the index going out at 95.95 bid, 96.05 offered, up slightly from Wednesday's closing levels of 95.80 bid, 96 offered. This trader saw the index get as low as 95.55 bid and as high as 96.05 bid.

One aspect of the speech that people seemed to focus on was Bernanke's indication that there may be a further rate cut, reassuring market expectations that a 50 bps rate cut will be coming soon.

"Monetary policy has responded proactively to evolving conditions," Bernanke said. "As you know, the Committee cut its target for the federal funds rate by 50 basis points at its September meeting and by 25 basis points each at the October and December meetings.

"In total, therefore, we have brought the funds rate down by a percentage point from its level just before financial strains emerged. The Federal Reserve took these actions to help offset the restraint imposed by the tightening of credit conditions and the weakening of the housing market.

"However, in light of recent changes in the outlook for and the risks to growth, additional policy easing may well be necessary.

"The Committee will, of course, be carefully evaluating incoming information bearing on the economic outlook. Based on that evaluation, and consistent with our dual mandate, we stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks," Bernanke added.

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