Accuride, GM, Ford down with market; LCDX dips; Landry's, Herff float timing; Brocade tweaks deal

By Sara Rosenberg

New York, Sept. 23 - Accuride Corp.'s term loan headed lower after the company announced management changes, although the drop was more likely a function of the overall cash market being down than the actual company news, and with the rest of the market, General Motors Corp. and Ford Motor Co. were down, and LCDX 10 slid as well.

In other news, Landry's Restaurants Inc. came out with a targeted bank meeting date for its proposed credit facility, the launch of which was already postponed twice, and expected timing on Herff Jones' credit facility launch has moved once again, pushing the deal into next month's business.

Also in the primary market, Brocade Communications Systems Inc. upsized its term loan and downsized its bridge loan as a result of strong market reception for the bank deal, and call protection was added to the term loan tranche.

Accuride's term loan lost some ground during the trading session following news that the company's chief executive officer resigned, however, according to sources, the announcement was less of an event than the market in general being off.

The term loan was quoted at 90 bid, 92 offered, down from 90½ bid, 92½ offered, sources said.

On Tuesday morning, Accuride revealed that John R. Murphy, president and chief executive officer, resigned effective Sept. 22 and William M. Lasky was appointed interim president and chief executive officer.

Lasky has been an independent director of Accuride since October 2007 and will continue to serve as a director.

The company also announced a series of strategic restructuring initiatives to reduce expenses, increase competitiveness, strengthen customer relationships and enhance shareholder value.

These initiatives include a workforce reduction of about 11%, and pursuing reductions in overhead costs and improvements in asset use through the redeployment of equipment and rationalization of facilities.

It is expected that the restructuring will save the company an estimated $6 million in 2008 and generate annual cost savings of about $27.5 million thereafter.

Also on Tuesday, the company reaffirmed its 2008 adjusted EBITDA guidance at the lower end of its previously announced range of $85 million to $100 million.

Accuride went on to say that it is in full compliance with the financial covenants under its credit facility and anticipates compliance through the end of the year.

However, the company warned that depending on the strength of the commercial vehicle market and its results from operations, it is possible that it may not maintain compliance with certain financial covenants at the end of the first quarter of 2009.

"The company is monitoring this situation closely and we will continue to explore alternatives to address compliance concerns. In the meantime, we expect to have adequate liquidity from operating cash flow and our untapped revolver," said David Armstrong, senior vice president and chief financial officer, in the release.

Accuride is an Evansville, Ind.-based manufacturer and supplier of commercial vehicle components.

GM, Ford continue to fall

General Motors and Ford once again saw their term loans move down in trading as the cash market in general was softer by about one to two points on the day, according to a trader.

General Motors, a Detroit-based automotive company, saw its term loan quoted at 70 bid, 71 offered, down from Monday's levels of 71 bid, 72 offered and Friday's levels of 73 bid, 75 offered, the trader said.

And, Ford, a Dearborn, Mich.-based automotive company, saw its term loan quoted at 69¾ bid, 71¾ offered, down from Monday's levels of 73 bid, 74 offered, and from Friday's levels of around 75 bid, 76 offered, the trader added.

On Monday, General Motors' term loan fell as investors reacted to news that the company is drawing down the remaining $3.5 billion of its $4.5 billion secured revolving credit facility, and Ford was said to have dropped in sympathy.

General Motors said that the draw is being done to maintain a high level of financial flexibility for its ongoing restructuring during the current uncertain times in the capital markets.

LCDX declines

LCDX 10 was also weaker on the day as cash and equities were down, according to a trader.

The index was quoted at 94.40 bid, 94.60 offered, down from previous levels of 95 bid, 95.20 offered, the trader said.

As for stocks, Nasdaq was down 25.65 points, or 1.18%, Dow Jones Industrial Average was down 161.52 points, or 1.47%, S&P 500 was down 18.87 points, or 1.56%, and NYSE was down 133.34 points, or 1.68%.

Landry's eyes launch

Landry's Restaurants is getting closer to firming up timing on the launch of its proposed $300 million senior secured credit facility as the banks are targeting to hold a bank meeting on Oct. 2 for the deal, according to a market source.

Originally, Landry's had scheduled a bank meeting for Sept. 4 to launch the facility, but that ended up being delayed until Sept. 18. And then, the Sept. 18 bank meeting was pushed off primarily because of Hurricane Ike. Following the most recent postponement, sources said that the bank meeting was hoped to take place during the week of Sept. 29, but a specific target day had been unavailable.

Last week, the company disclosed that 14 of its Houston area restaurants remain closed as a result of the hurricane and will reopen as soon as power is restored to each of the units, and all of its Kemah and Galveston restaurants are closed.

Once power and water are restored in Galveston, the company anticipates that the majority of its Galveston restaurants will reopen, and that some of the restaurants at the Kemah Boardwalk may reopen within the next 45 to 60 days, with additional restaurants opening monthly thereafter.

The company said that it expects the majority of its property losses and cash flow to be covered by property and business interruption insurance.

Landry's credit facility consists of a $50 million five-year revolver and a $250 million five-year term loan A.

According to filings with the Securities and Exchange Commission, pricing on the revolver and the term loan A is expected to be Libor plus 400 basis points, with a 3.25% Libor floor, and the revolver has a 50 bps commitment fee.

There is no official talk on the deal as of yet.

Wells Fargo Foothill and Jefferies are the co-lead arrangers, co-bookrunners and co-syndication agents on the deal, with Well Fargo the administrative agent.

Proceeds will be used to help fund the buyout of the company by Fertitta Holdings Inc for $21 per share in cash. The total value of the deal is about $1.3 billion, including about $885 million of debt.

Fertitta is a newly formed entity wholly owned by the company's chairman, president, chief executive officer and original founder, Tilman J. Fertitta, who beneficially owns about 39% of the company's outstanding common shares.

Landry's is a Houston-based restaurant, hospitality and entertainment company.

Herff Jones may launch in two weeks

Herff Jones has changed the targeted retail launch date for its proposed $735 million senior secured credit facility (Ba3/BB+), this time moving it to Oct. 7, with this new date still labeled as fluid, according to a market source.

Earlier this week, it was said that the bank meeting was aimed for Sept. 30 but that date is no longer considered feasible as result of scheduling conflicts and the Rosh Hashanah holiday, the source explained.

Originally, the facility was scheduled to launch on Sept. 16, but the day before the bank meeting was set to take place, news surfaced that Bank of America is purchasing Merrill Lynch and Lehman Brothers filed for bankruptcy.

When the postponement of the bank meeting was announced last week, it was said that the launch would probably take place within two to three weeks of the original date.

Herff Jones' credit facility consists of a $100 million five-year revolver talked at Libor plus 325 bps, a $210 million five-year term loan A talked at Libor plus 325 bps and a $425 million seven-year term loan B talked in the Libor plus 350 bps to 375 bps area.

All tranches have a 3% Libor floor.

The revolver and the term loan A were already launched to commercial banks during the second week of August and, since then, have received a strong response from the banks, especially among agents, sources previously told Prospect News.

Initially, it was thought that the term loan B would be sized at $300 million and the term loan A would be sized at $335 million, but based on the amount of pro rata commitments already received, the banks decided to move some funds into the B loan prior to retail launch.

Although this structure is how the deal is being marketed, term loan A and term loan B sizes are not yet final.

Bank of America and Wachovia are the lead banks on the deal for the Indianapolis-based manufacturer and publisher of educational products, recognition awards and graduation-related items, with Bank of America the left lead.

Proceeds will be used to help fund the acquisition of American Achievement Group Holding Corp., an Austin, Texas-based provider of commemorative jewelry, class rings, yearbooks, letter jackets and other jewelry, from Fenway Partners.

Herff Jones is an Indianapolis-based manufacturer and publisher of educational products, recognition awards and graduation-related items.

Brocade ups term loan

Brocade raised the size of its term loan and downsized its bridge loan since the term loan was oversubscribed, and two years of call protection was added to the upsized loan, market sources told Prospect News on Tuesday.

The term loan is now sized at $1.1 billion, up from $1 billion, and while pricing remained at Libor plus 400 bps with a 3% Libor floor for 30 months and an original issue discount of 98, the tranche now carries call protection of 102 in year one and 101 in year two, sources said.

On the flip side, the bridge loan is now sized at $400 million, down from $500 million. According to filings with the SEC, the 12-month senior unsecured bridge loan is priced at Libor plus 700 bps with a 3% Libor floor for 30 months, and pricing 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 bridge loan will either be replaced by bonds or convertibles.

Brocade's now $1.225 billion, up from $1.125 billion, five-year senior secured credit facility (Ba2/BB+) also includes a $125 million revolver priced at Libor plus 400 bps with a 3% Libor floor for 30 months and a 50 bps commitment fee.

Last week, the company held a conference call, during which the credit facility and bridge loan were discussed.

"We met with large syndicated banks to create a large syndication environment. That has gone beyond our expectations, incredibly well," the company said in the call.

"After we got the syndicated banks done, then we went out to other more retail oriented banks and investors. And the reception there has been extremely positive. And why is that? Because right now there's not a lot of good tech deals out there. We're one. They really like the math, as they focus in on their modeling, what they're coming to is they're coming back to the tremendous cash flow strength that the combined entities have.

"That is going very well. The term loan is going very, very well, as I talked about and we're on track with the third component, the smaller component, which will either be a bond facility or a convert facility.

"So, we're extremely confident in our financing because it's fully committed and it's done. Again, all of the work that we're doing at this point now is just to take us from bridge financing out to the markets and frankly we could be more pleased with where we are," the company added in the call.

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 and the bridge loan 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.

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

A special meeting for Foundry's shareholders has been scheduled for Oct. 24.

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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