Penn National tweaks amendment; Reader's Digest steady with plan support; LCDX rises

By Sara Rosenberg

New York, Aug. 20 - Penn National Gaming Inc. came out with some changes to its amendment proposal on Thursday, revising certain covenant conditions regarding new projects and terms on incremental bank borrowings.

In other news, Reader's Digest Association Inc.'s term loan B held firm in a very quiet trading session following news that a large portion of its senior secured lenders have signed on to support the restructuring agreement that will be done through a bankruptcy filing, and the LCDX 12 index was stronger.

Penn National modifies amendment

Penn National Gaming went out to lenders with some revisions to its proposed credit facility amendment on terms involving new projects and the incremental basket, according to a market source.

Specifically, the company dropped the proposed covenant carve-outs related to $600 million of new projects and replaced them with straight covenant room of 0.75 times, versus the 1.0 times cushion implied by the carve-outs, the source said.

In addition, the Most-Favored-Nation protection was reinstated on the $700 million incremental basket, the source continued.

Penn National wants revolver extension

As was previously reported, Penn National Gaming is also looking to extend the maturity of its revolving credit facility to July 2012 from October 2010 through this amendment.

In connection with the extension, the company expects that the size of its revolver may increase to up to $1 billion from $750 million.

Pricing on the extended revolver will be Libor plus 275 basis points.

Revolver borrowings would be allowed to be used to repay term loan A borrowings.

The company is also asking for permission to extend maturities on its term loan debt in return for higher pricing, but an actual term loan extension is not out at this time, the source added.

Penn National changing covenants

Another aspect of Penn National Gaming's amendment proposal is that the company wants to eliminate its senior leverage ratio and instead have to comply with a senior secured leverage ratio.

Furthermore, the amendment would allow for the repurchase of term loans at a discount.

Lenders are being offered a 10 bps fee to approve the amendment, although revolver lenders who also agree to a maturity extension will receive an additional 90 bps.

Consents are due on Tuesday.

Deutsche Bank is the lead bank on the amendment.

Penn National is a Wyomissing, Pa.-based owner and operator of gaming and pari-mutuel properties.

Reader's Digest firm

Over in the secondary market, Reader's Digest's term loan B held steady as the company revealed that nearly 80% of its senior secured lenders have signed on to the agreement in principle for a restructuring plan that significantly reduces debt and strengthens the company financially, according to a trader.

The term loan B was quoted at 40½ bid, 42 offered, pretty much in line with Wednesday's levels, the trader said.

Under the restructuring agreement, senior secured lenders will exchange a substantial portion of the company's $1.6 billion in senior secured debt for equity and will reduce the company's total debt by 75%, from roughly $2.2 billion to $550 million. Ownership of the company will be transferred to the lender group.

The agreement in principle includes a commitment from certain members of the senior lender group to provide a $150 million new money debtor-in-possession term loan that is being led by JPMorgan.

The DIP, which is convertible into a three-year exit facility, has a term of nine months, with one three-month extension, and is priced at Libor plus 1,000 bps with a 3.5% Libor floor. If the extension option is exercised, pricing will move to Libor plus 1,100 bps. There is also a 200 bps unused commitment fee.

Reader's Digest is a Pleasantville, N.Y.-based media and marketing company.

LCDX gains ground

Also in trading, the LCDX 12 index was better on the day as were stocks, according to a trader.

The index was quoted at 92.8125 bid, 93.0625 offered, up about 0.5625 on the day, the trader said.

As for equities, Nasdaq closed up 19.98 points, or 1.01%, Dow Jones Industrial Average closed up 70.89 points, or 0.76%, S&P 500 closed up 10.91 points, or 1.09%, and NYSE closed up 74.12 points, or 1.14%.

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