Invitrogen tweaks tranche sizes, breaks; LCDX, cash strengthen; Fresenius, Brocade oversubscribed

By Sara Rosenberg

New York, Sept. 19 - Invitrogen Corp. moved some funds out of its term loan A and into its term loan B, allocated the facility and freed it up for trading during Friday's market hours, with the term loan B quoted above its original issue discount price.

Also in trading, LCDX 10 and the cash market in general both saw positive momentum as the Securities and Exchange Commission halted short selling in financial companies and people are remained hopeful about the recent rumors of a government bailout for banks.

In other news, Fresenius Kabi and Brocade Communications Systems Inc. have both received positive attention from investors, resulting in the books on both companies' credit facilities overfilling with orders.

Invitrogen came out with some last minute changes to its credit facility as a result of demand that included upsizing the term loan B and downsizing the term loan A, and then the deal proceeded to break for trading, according to sources.

Under the revisions, the seven-year term loan B was increased to $1 billion from $900 million and the five-year term loan A was decreased to $1.4 billion from $1.5 billion, sources said.

Pricing on the term loan B was left unchanged at Libor plus 300 basis points with a 3% Libor floor and an original issue discount of 98, and pricing on the term loan A also remained in line with initial talk at Libor plus 250 bps.

Following the size shifts, the credit facility hit the secondary market with the term loan B quoted by one trader at 99 7/8 bid, par 1/8 offered, and by a second trader at 99¾ bid, par ¼ offered.

The term loan A was quoted at 97½ bid, 98½ offered context following the break on Friday, another trader added.

Invitrogen's $2.65 billion senior secured deal (Baa3/BBB-/BBB-) also includes a $250 million five-year revolver priced at Libor plus 250 bps.

Syndication on the credit facility went smoothly with the deal substantially oversubscribed - no surprise really given that on the day of the Sept. 5 retail bank meeting sources heard that the term loan was already oversubscribed and the term loan A probably had somewhere in the area of $100 million to $200 million more to go before being fully syndicated.

The orders placed prior to the retail launch were the result of a senior managing agents round syndication that began back in July.

A few days ago, the company released a statement regarding the financing saying that it was pleased with the number and quality of lenders who participated in the credit facility and attributing the deal's success to investment-grade ratings and the generation of significant free cash flow.

Covenants under the facility include total leverage that opens at 4.25 times and steps down to 3.0 times, and a fixed-charge coverage ratio of 1.75 times.

Bank of America, UBS and Morgan Stanley are the joint lead arrangers and joint bookrunners on the deal, with Bank of America the left lead and administrative agent, and UBS and Morgan Stanley the co-syndication agents.

Proceeds will be used to help fund the acquisition of Applied Biosystems, help repay all of Invitrogen's debt, other than its convertible notes and certain other exceptions, and provide for ongoing working capital and general corporate purposes of the combined company.

Under the agreement, Invitrogen is buying Applied Biosystems from Applera Corp. in a cash and stock transaction valued at $6.7 billion.

The transaction is expected to close in the late October to early November timeframe, subject to approval by Invitrogen and Applera-Applied Biosystems shareholders and the satisfaction of customary closing conditions, completion of the previously filed and announced separation of Applera's Celera group, and regulatory approvals. It is not subject to financing.

On July 1, Applera announced that it completed the separation of its Celera business and that the remaining Applera business, which is what Invitrogen is purchasing, changed its name to Applied Biosystems.

Also, in July, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act expired.

The company is currently engaging with the European Commission and plans to file a formal notification before the end of September.

Following the close of the transaction, the combined company will be named Applied Biosystems, Inc. and will have its corporate headquarters in Carlsbad, Calif.

Invitrogen is a provider of life science technologies for disease research, drug discovery and commercial bioproduction. Applied Biosystems is a developer and marketer of instrument-based systems, consumables, software and services.

LCDX, cash bounce higher

LCDX 10 and the cash market in general got a boost on Friday, along with equities, as the SEC banned short selling in financial companies, and there was continued optimism over the possibility of a Resolution Trust Corp. type solution to the current liquidity problem, according to a trader.

The index was quoted at 95.65 bid, 95.75 offered, up from Thursday's levels of 94.40 bid, 94.60 offered, the trader said.

The cash market overall was definitely firmer as well, with names in general up somewhere around two points on the day, the trader added.

And, in stocks, Nasdaq closed up 74.80 points, or 3.4%, Down Jones Industrial Average closed up 368.75 points, or 3.35%, S&P 500 closed up 48.57 points, or 4.03%, and NYSE closed up 411.31 points, or 5.29%.

On Friday, the SEC took temporary emergency action to prohibit short selling in 799 financial companies to protect the integrity and quality of the securities market and strengthen investor confidence.

The order was effective immediately and expires on Oct. 2, unless extended.

"The Commission is committed to using every weapon in its arsenal to combat market manipulation that threatens investors and capital markets. The emergency order temporarily banning short selling of financial stocks will restore equilibrium to markets. This action, which would not be necessary in a well-functioning market, is temporary in nature and part of the comprehensive set of steps being taken by the Federal Reserve, the Treasury and the Congress," said Christopher Cox, chairman of the SEC, in a news release.

Also helping the markets was the continuation of Thursday's rumors that the government is considering something like a Resolution Trust Corp., where distressed items are bought up from banks, thereby freeing up liquidity.

Fresenius well received

Back in new deal happenings, Fresenius Kabi's $2.45 billion senior credit facility (Baa2/BBB-) has been met by a strong enough reception from both pro rata and institutional investors to oversubscribe the deal ahead of its Monday commitment deadline, according to a market source.

The facility, which was marketed to U.S. and European investors, consists of a $450 million five-year revolver talked at Libor plus 287.5 bps, a $1 billion five-year term loan A talked at Libor plus 287.5 bps and a $1 billion six-year term loan B talked at Libor plus 350 bps with a 3.25% Libor floor and an original issue discount of 99.

The revolver and the term loan A tranches were actually completely done from commitments that came in during the senior managing agents round that took place this summer. The retail syndication round didn't kick off until earlier this month.

In August, Fresenius said that during the senior managing agents phase of syndication, 20 of its key relationship banks from Europe, North America and Japan, acting as mandated lead arrangers and joint lead arrangers, provided strong commitments towards the deal, oversubscribing the target amount.

As a result of this strong demand that was received during the senior managing agents round, the structure on the facility had been revised prior to the start of the retail syndication round.

Under the original structure, the term loan A was expected to be sized at $900 million and the term loan B was expected to be sized at $850 million.

The additional term loan funds were taken out of the bridge loan commitment, which was revised to $1.3 billion from $1.65 billion. This bridge financing could be replaced by high-yield financing opportunities.

Deutsche Bank, Credit Suisse and JPMorgan are the senior mandated lead arrangers on the credit facility, with Deutsche Bank the global coordinator.

The revolver has $200 million of uncommitted availability. Of the revolver amount, $150 million will be made available to APP Pharmaceuticals Inc. and $300 million, along with the $200 million uncommitted, will be made available to a financing subsidiary of Fresenius.

Financial covenants under the facility include a consolidated leverage ratio, a consolidated fixed-charge coverage ratio, an interest expense coverage ratio and limits amounts spent on capital expenditure.

Proceeds from the facility, along with the bridge loan, are being used to help fund the recently completed acquisition of APP Pharmaceuticals, refinance APP's existing senior credit facility, and for general corporate and working capital purposes.

Under the agreement, Fresenius Kabi purchased APP for $23 per share and a registered and tradeable contingent value right that could deliver up to $6 per share, payable in 2011, if APP exceeds a cumulative adjusted EBITDA target for 2008 to 2010.

Fresenius Kabi is a Bad Homburg, Germany, infusion therapy and clinical nutrition company. APP is a Schaumburg, Ill., hospital-based injectable pharmaceutical company.

Brocade fills out

Brocade's $1.125 billion five-year senior secured credit facility (Ba2/BB+) is also heard to be oversubscribed, but in this case, the banks announced on Friday that they are leaving the books open on the deal until Monday as opposed to closing them this past Thursday as was previously expected, according to a buyside source.

The source guessed that the slight deadline extension was probably a result of "so much going on the past couple of days", such as the Lehman/Barclays news and the Bank of America/Merrill Lynch news. "I think people have been distracted," the source added.

Brocade's credit facility consists of a $125 million revolver talked at Libor plus 400 bps with a 50 bps commitment fee and a $1 billion term loan talked at Libor plus 400 bps with an original issue discount of 98.

Both the revolver and the term loan have a 3% Libor floor for 30 months.

Recent filings with the SEC revealed that the revolver is fully subscribed and, according to the buyside source, the term loan has "a little north of $1.2 billion" in the book.

Prior to the retail bank meeting that took place early this month, the company had already received orders for over 50% of the revolver and term loan just from the senior managing agents syndication.

Under the commitment letter, pricing on the revolver and the term loan would have been Libor plus 350 bps if the corporate family rating was Ba2/BB and Libor plus 400 bps if the corporate rating was lower than Ba2/BB.

Being that the corporate credit rating came out at Ba3/BB-, price talk on the deal ended up at the Libor plus 400 bps level.

Financial covenants include a maximum consolidated leverage ratio with an initial level of 4.25 times, stepping down to 2.5 times, a maximum consolidated senior secured leverage ratio with an initial level of 2.3 times, stepping down to 1.5 times, and a minimum consolidated fixed-charge coverage ratio with an initial level of 1.25 times, stepping up to 2.0 times.

Pro forma debt to EBITDA is 3.13 times and the company is targeting to have over $400 million of cash on the balance sheet post closing.

Bank of America and Morgan Stanley are the joint lead arrangers and joint bookrunners on the credit facility, with Bank of America the administrative agent and Morgan Stanley the syndication agent.

Proceeds from the credit facility will be used to help fund the acquisition of Foundry Networks Inc.

Brocade is purchasing the company for a combination of $18.50 of cash plus 0.0907 shares of common stock in exchange for each share of Foundry common stock. The transaction has an aggregate purchase price of about $3 billion on a fully diluted basis.

Other financing for the transaction will come from $500 million of senior unsecured notes and $1.4 billion in cash from the combined company.

The notes are backed by a commitment for a $500 million 12-month senior unsecured bridge loan for which Bank of America and Morgan Stanley are the joint lead arrangers and bookrunners.

Pricing on the bridge loan will be Libor plus 700 bps with a 3% Libor floor for 30 months, and will increase by an additional 50 bps at the end of each subsequent three-month period up until a pricing cap of 12.75%.

The acquisition is expected to close in the fourth quarter, subject to approval by Foundry's stockholders, regulatory approval and certain other conditions.

Hart Scott Rodino and German approval have already been received for the transaction.

Brocade is a San Jose, Calif., provider of data center networking services that help organizations connect, share and manage their information in the most efficient manner. Foundry is a Santa Clara, Calif., provider of high-performance enterprise and service provider switching, routing, security and web traffic management services.

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