Penn National buyout deal fades away, term loan B slides; Broadlane postpones launch

By Sara Rosenberg

New York, July 3 - News emerged on Thursday that Penn National Gaming Inc.'s proposed leveraged buyout has been terminated, removing a couple of billion dollars of debt from the upcoming calendar, and in response to the news, the company's existing term loan B headed lower in trading.

In other news, Broadlane moved the launch of its proposed credit facility out by a week as a way to fix some scheduling conflicts.

The buyout of Penn National Gaming by Fortress Investment Group LLC and Centerbridge Partners LP was canceled, with the parties pointing to litigation and the lack of desire to renegotiate a reduced purchase price as the reasons behind the move, according to a news release.

Following this news, Penn National's existing term loan B - expected to be repaid in connection with the transaction - dropped in trading, traders said.

The term loan B saw "prints" anywhere between 94 to 96½ early on in the day and by late morning, the loan was quoted at 94½ bid, 95½ offered, one trader remarked, with a second trader agreeing on the final 94½ bid, 95½ offered levels for the day.

However, a third trader said that he had the term loan B quoted at 95 bid, 96 offered all day.

All of the traders agreed that on Wednesday, the loan was being quoted at 96½ bid, 97½ offered.

Under the buyout agreement, which was first announced in June of last year, Fortress and Centerbridge were going to purchase the company for $67.00 in cash per share. The all-cash transaction was valued at $8.9 billion, including the planned repayment of $2.8 billion of Penn National's outstanding debt.

The original financing commitment for the deal called for Penn National getting $7.1 billion in new debt comprised of a $4.6 billion senior secured seven-year term loan, a $500 million senior secured 61/2-year revolver and a $2 billion eight-year unsecured term loan.

Deutsche Bank and Wachovia were going to act as the lead banks on the debt, with Wachovia the left lead on the senior secured credit facility and Deutsche the left lead on the unsecured term loan.

Other LBO financing was going to come from up to $3.061 billion in equity.

Penn National said on Thursday that it concluded that the likelihood of successfully navigating the remaining regulatory approvals for the buyout, credit facility conditions for funding and likely litigation required to complete these tasks was highly uncertain.

As a result, the company, in consultation with external legal and financial advisors, determined that terminating the agreement brings the most certain value to its shareholders given current economic conditions, the state of the capital markets and the gaming industry outlook.

In connection with the termination of the agreement, Penn National will receive $1.475 billion, which will consist of a $225 million cash termination fee and the purchase of $1.25 billion of Penn National's redeemable preferred equity due 2015 by Fortress, Centerbridge, Wachovia and Deutsche Bank.

The company will receive the $1.475 billion termination payment as follows: $700 million as a non-refundable deposit to be wired on Thursday and $775 million to the escrow agent by July 18, with funds released upon the issuance of the series B redeemable preferred.

The company plans to use the net proceeds from the investment and the after tax proceeds from the termination fee to repay existing debt, to acquire or develop pari-mutuel and gaming facilities and for such other uses as may be authorized from time to time by the board of directors, including repurchases of its common stock.

"We are extremely disappointed that the company's shareholders will not receive the $67 per share merger consideration. Our decision to enter into the agreements announced today follows a thorough evaluation of a wide range of alternatives for consummating the transaction. The prospect of employing litigation to enforce performance of the merger agreement would inherently expose the company to the significant risk related to a protracted legal process. We may be in the gaming business, but we would never gamble the company's future and our shareholders' best interest in this or any other circumstance," said Peter M. Carlino, chief executive officer, in the release.

"This transaction represents the company's best alternative to the uncertainty of litigation and delivers immediate tangible and material value to our stockholders. Importantly, we are confident that we can very effectively deploy this capital to generate significant value for our stockholders based on our well established track record of delivering long-term growth through a focus on return on investment and disciplined financial and risk management," Carlino added in the release.

Also on Thursday, the company initiated guidance for 2008 EBITDA of $682.3 million, for net revenues of $2.5388 billion and for income from operations of $487.2 million.

By comparison, in fiscal year 2007, EBITDA was $672.7 million, net revenues were $2.4368 billion and income from operations was $497.8 million.

Penn National is a Wyomissing, Pa., owner and operator of casino and horse racing facilities.

Broadlane resets timing

Broadlane revised the timing on its proposed credit facility as it now expects to hold a bank sometime during the week of July 14 as opposed to only July 10 as was previously announced, according to a market source.

Jefferies is the lead bank on the credit facility.

The structure and price talk on the deal are not yet available being that the launch is still a little ways off, the source remarked.

Proceeds will be used to help fund TowerBrook Capital Partners LP's acquisition of the company from Tenet Healthcare Corp. for about $155 million in cash.

Broadlane's senior management team will continue to retain a significant ownership interest in the company.

Closing on the transaction is expected to occur in the third quarter, subject to approval by regulatory authorities and other conditions.

Broadlane is a Dallas-based technology-oriented health care services company.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.