Harrah's tweaks deal, breaks for trading; American Airlines up with paydown; US Airways rises

By Sara Rosenberg

New York, Sept. 23 - Harrah's Operating Co. Inc. upsized its incremental term loan on Wednesday, finalized the original issue discount, allocated and then freed the deal up for trading, with levels quoted above the discount price at which it was sold.

Also in the secondary market, American Airlines Inc.'s term loan was stronger as the company announced plans for a repayment, US Airways Group Inc.'s term loan gained ground on the back of news of a common stock offering and MGM Studios slid lower with a lender call.

In other news, Laureate Education Inc. increased its term loan and set the original issue discount, and Warner Chilcott plc currently expects to leave the size of its proposed term loans alone, but reduce its bond deal using proceeds from a newly announced purchase agreement with LEO Pharma.

Harrah's upsizes, sets OID

Harrah's increased the size of its incremental term loan (Caa1/B-) to $1 billion from $750 million, a move that was not totally unexpected as the loan was launched with the disclaimer that it could grow from the original amount, according to a market source.

In addition, the original issue discount on the loan finalized at 971/2, smack in the middle of initial talk that was in the 97 to 98 context, the source remarked.

Pricing on the loan stayed the same throughout the quick syndication process at Libor plus 750 basis points with a 2% Libor floor.

Bank of America and Citigroup are the joint lead arrangers and joint bookrunners on the deal that was launched with a conference call on Tuesday, and JPMorgan, Credit Suisse and Deutsche Bank are also bookrunners.

Harrah's loan has call protection

Harrah's incremental loan has call protection against optional redemptions. The deal is non-callable for two years, then at 105 in year three, 103 in year four and par thereafter.

The loan, due in October 2016, is being obtained under the accordion feature of the company's existing credit facility.

Proceeds will be used to refinance existing debt and to provide additional liquidity. Also, a portion of the net proceeds will be used to fund note tender offers.

Harrah's announced on Tuesday that it is tendering for up to $175 million of its 5.5% senior notes, 7.875% senior subordinated notes, 8% senior notes and 8.125% senior subordinated notes.

The tender offers will expire on Oct. 21.

Harrah's breaks

After firming up the size and pricing details, Harrah's incremental term loan allocated and then hit the secondary market, the source continued.

The loan was quoted at 97¾ bid, 98¼ offered on the break, the source said.

As the day went on, the loan steadily ticked up until it reached 99 bid, 99½ offered, where it seemed to stabilize, the source added.

Meanwhile, a second source was quoting the loan a little higher by the end of the day at 99¼ bid, 99¾ offered.

Harrah's is a Las Vegas-based provider of branded casino entertainment.

American Airlines strengthens

American Airlines' term loan headed higher during Wednesday's trading session following news that the company would be refinancing its $432 million secured term loan, according to a trader.

The term loan was quoted at 99 bid, par offered, up from 98½ bid, 99½ offered, the trader said.

Funds for the repayment will come from a $450 million private offering of senior secured notes.

American Airlines is a Fort Worth, Texas-based scheduled passenger airline company.

US Airways trades up

US Airways' term loan posted some gains in the secondary market as the company revealed plans to sell about 26 million shares of its common stock to Citi, according to a trader.

The term loan was quoted at 66 bid, 68 offered, up from 62½ bid, 64 offered, the trader said.

Proceeds from the stock sale will be used for general corporate purposes.

The sale is expected to close on Sept. 28.

US Airways said in a 424B5 filed with the Securities and Exchange Commission that the offering is intended to help it comply with the liquidity covenant in its credit facility.

The company is required to maintain consolidated unrestricted cash and cash equivalents of not less than $850 million, with not less than $750 million of that amount held in accounts subject to control agreements.

US Airways is a Tempe, Ariz.-based provider of air transportation for passengers and cargo.

MGM Studios softens

In more trading happenings, MGM Studios term loan weakened as the company held a private lender call, according to a trader.

The term loan was quoted at 58¾ bid, 60¼ offered, down from 61¼ bid, 62 offered, the trader said.

Details on what was discussed on the lender call were unavailable prior to press time.

MGM Studios is a Los Angeles-based motion picture, television, home video and theatrical production and distribution company.

Laureate tweaks deal

Over in the primary market, Laureate Education upsized its term loan add-on (B) to $280 million from $200 million, according to a market source.

Pricing on the loan is Libor plus 500 bps with a 2% Libor floor, and it was sold at an original issue discount of 98. Discount guidance during the brief syndication period was 97 to 98.

There is call protection of 102 in year one and 101 in year two.

Goldman Sachs and Bank of America are the joint lead arrangers on the deal that will be used to repay revolver borrowings.

The loan had been launched with a conference call on Tuesday and books closed on Wednesday.

Laureate is a Baltimore-based provider of higher educational services.

Warner Chilcott may cut bonds

Warner Chilcott is mulling over downsizing its proposed senior unsecured notes offering as a result of the sale of exclusive product licensing rights in the United States for its topical psoriasis treatments Taclonex, Taclonex Scalp, Dovonex to LEO Pharma for $1 billion, company officials said in a conference call on Wednesday.

The company anticipates leaving the size of its proposed credit facility unchanged, officials continued.

LEO Pharma is paying $1 billion in cash for the assets and Warner Chilcott expects its net cash proceeds from the sale to be around $980 million.

Warner Chilcott plans on using $950 million of the net proceeds to repay the $480 million balance outstanding under its existing credit facility in full and help fund the acquisition of Procter & Gamble Co.'s pharmaceuticals business.

As a result, the proposed $1.4 billion senior unsecured notes offering may be downsized to $450 million, officials remarked in the call.

The senior unsecured notes are backed by a commitment for a $1.4 billion one-year bridge loan priced at Libor plus 800 basis points with a 2.5% Libor floor. The spread increases by 50 bps after each three-month period.

Warner Chilcott loan going well

As was previously reported, Warner Chilcott is currently out to some larger institutions looking for big tickets towards its up to $2.75 billion senior secured credit facility.

Market chatter is that the early syndication process has seen a lot of good momentum and that by the time the retail launch - for which a date has yet to be set - rolls around, a good portion of the term loan B may already be syndicated.

"Final structure remains to be seen based on how the syndication process goes," officials said in the call regarding the final breakdown of bonds to loan.

"Process is going well. We're hopeful that we can conclude the process with a good solid execution, which means a capital structure that works for our company and hopefully minimizes out interest cost over the duration of the deal. That's our objective. We'll see how the market reacts to our offering," officials added in the call.

Bank of America and Credit Suisse are the co-lead arrangers on the deal. Bookrunners are Bank of America, Credit Suisse, Barclays, Citigroup, JPMorgan and Morgan Stanley. Credit Suisse is the administrative agent.

Warner Chilcott details

Warner Chilcott's credit facility, as outlined by a commitment letter filed with the SEC, consists of a $250 million five-year revolver priced at Libor plus 350 bps, a $1 billion five-year term loan A priced at Libor plus 350 bps and a $1.5 billion 51/2-year term loan B priced at Libor plus 375 bps.

All tranches carry a 2.5% Libor floor.

Up to $350 million of the term loan A and/or the term loan B can be available as a 180-day delayed-draw loan. If the delayed-draw is not needed, the company expects to raise a total of $2.15 billion of term loan A and term loan B debt, as opposed to $2.5 billion.

The revolver has a 75 bps commitment fee and the delayed-draw term loan commitment fee will be half of the drawn spread.

According to the commitment letter, the term loan A and term loan B are expected to be offered to lenders at an original issue discount of 98. Market rumor, however, is that the original issue discount on the term loan B may be talked at 981/2.

During the call, officials said that it is possible that the acquisition will close by the end of October. Closing is subject to regulatory approvals, the receipt of proceeds of the financing, the delivery of audited financial statements for the pharmaceuticals business and other customary conditions.

Warner Chilcott is a Rockaway, N.J.-based specialty pharmaceutical company.

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