Asset Acceptance frees up; Caesars rollercoasters with numbers; Dynegy rises on bankruptcy

By Sara Rosenberg

New York, Nov. 8 - Asset Acceptance Capital Corp.'s credit facility emerged in the secondary market on Tuesday afternoon, with levels on the term loan quoted above its original issue discount price.

Also in trading, Caesars Entertainment Operating Co. Inc.'s term loans bounced around on Tuesday, with guys opening the debt lower on the back of earnings news, but then pushing it back up as the market in general had a positive tone.

Furthermore, Dynegy Inc.'s GasCo and CoalCo term loans were stronger as the company announced that Dynegy Holdings LLC filed for bankruptcy, and Community Health Systems Inc.'s loans were better following the launch of a bond tender offer.

Moving to the primary, Pharmaceutical Product Development Inc.'s credit facility is heard to be well oversubscribed, with a large amount of orders coming in from the early syndication round, and the general launch went as expected during the session.

Asset Acceptance tops OID

Asset Acceptance Capital's credit facility broke for trading on Tuesday, with the $175 million six-year term loan B quoted at 94 bid, 95 offered, according to a trader.

Pricing on the loan is Libor plus 725 basis points with a 1.5% Libor floor, and it was sold at an original issue discount of 931/2. There is soft call protection of 102 in year one and 101 in year two.

During syndication, pricing on the term loan firmed at the low end of initial talk of Libor plus 725 bps to Libor plus 750 bps, and the discount tightened from 93.

The company's $275 million credit facility also includes a $100 million five-year revolver.

J.P. Morgan Securities LLC is the lead bank on the deal.

Asset Acceptance repaying debt

Proceeds from Asset Acceptance's credit facility will be used to refinance an existing senior secured credit facility that consists of a $100 million revolver due June 5, 2012 and a term loan due June 5, 2013. As of June 30, there was $132.6 million outstanding under the term loan and $38.5 million drawn on the revolver.

A refinancing deal was already tried by the company earlier this year, but in May, the decision was made to pull that transaction due to market conditions.

The withdrawn facility consisted of a $175 million six-year term loan B talked at Libor plus 400 bps to 425 bps with a 1.5% Libor floor, an original issue discount of 99 and 101 soft call protection in year one and a $100 million five-year revolver.

Asset Acceptance is a Warren, Mich.-based purchaser and collector of defaulted or charged-off accounts receivable portfolios from consumer credit originators.

Caesars loans seesaw

Caesars Entertainment Operating's term loans saw some volatility during the session, with levels down first thing in the morning on disappointing numbers and up in the afternoon on overall secondary strength, according to traders.

One trader had the term loans B-1, B-2 and B-3 quoted at 85½ bid, 86½ offered on the open, versus Monday's close of 86¼ bid, 87¼ offered. By early afternoon, though, the trader saw the debt rebound to 86½ bid, 87½ offered.

As for the term loan B-4, the trader had it opening at 99 bid, par offered, down from 99¼ bid, par ¼ offered, but up in the afternoon to par bid, par ½ offered, and he had the term loan B-5 at 81 bid, 82 offered, flat on the day, but up on the bid side from opening levels of 80 bid, 82 offered.

A second trader, meanwhile, had the B-1, B-2 and B-3 at 86½ bid, 87¼ offered versus 86½ bid, 87¼ offered at Monday's close and 85¾ bid, 86¾ offered first thing in the morning, the B-4 at par bid, 101 offered, unchanged on the day, but up from opening levels of 99¼ bid, par ¼ offered, and the B-5 at 83 bid, 84 offered, up from 82½ bid, 83½ offered on Monday and 82¼ bid, 83¼ offered on the open.

Caesars earnings results

For the third quarter, Caesars Entertainment Operating reported a net loss of $179.8 million versus a net loss of $188.7 million in the 2010 quarter, and its parent company, Caesars Entertainment Corp., had a net loss of $164 million, compared to a net loss of $164.8 million in the previous year.

Income from operations at Caesars Entertainment Operating was $152.3 million, compared to $144.4 million last year, while at the parent it was up 12.8% at $198.2 million, versus $175.7 million.

Revenues for the quarter at Caesars Entertainment Operating were $1.734 billion, down 3% from $1.786 billion in the prior year, and at the parent they were $2.254 billion, down 1.5% from $2.289 billion in the third quarter of 2010.

Lastly, adjusted EBITDA at Caesars Entertainment Operating was $372.3 million, down 4.4% from $389.4 million in 2010, and at the parent it was $482.5 million, down 1.5% from $489.8 million in the prior year.

Caesars is a Las Vegas-based diversified casino-entertainment company.

Dynegy trades up

Dynegy's GasCo and CoalCo term loans rallied a bit in the secondary market as the company disclosed late Monday that its wholly owned subsidiary, Dynegy Holdings, and four of Dynegy Holdings' wholly owned subsidiaries - Dynegy Northeast Generation Inc., Hudson Power LLC, Dynegy Danskammer LLC and Dynegy Roseton LLC - filed for Chapter, according to traders.

The GasCo term loan was quoted by one trader at 101 bid, 102 offered, up from 99¾ bid, par ¾ offered, and by a second trader at par ½ bid, 101½ offered, up from 98½ bid, par ½ offered.

And, the CoalCo term loan was quoted by the first trader at par bid, 101 offered, up from 98¼ bid, 99¼ offered, and by the second trader at par bid, 101 offered, up from 98 bid, par offered.

The company said that the issuers of the GasCo and CoalCo term loans are not included in the bankruptcy filing, and will operate their businesses in the ordinary course without any impact from the restructuring.

Dynegy to lower debt

In Dynegy's bankruptcy announcement, it was revealed that an agreement has been reached with a group of investors holding over $1.4 billion of senior notes for a consensual restructuring of over $4 billion of obligations, and that if completed, the restructuring will significantly reduce the amount of debt on its consolidated balance sheet.

Under the restructuring support agreement, all unsecured obligations of Dynegy Holdings, including $3.4 billion of senior notes, $200 million of subordinated notes, about $130 million of accrued interest and the payments associated with the Roseton and Danskammer leases will be exchanged for a $400 million cash payment, $1 billion of new seven-year 11% secured notes and $2.1 billion of new convertible PIK notes maturing on Dec. 31, 2015.

Dynegy is a Houston-based producer and seller of electric energy, capacity and ancillary services.

Community Health strengthens

Community Health Systems' term loans gained ground in trading on Tuesday as investors were pleased to see that the company launched a bond tender offer to address some upcoming maturities, and the general market tone helped as well, a trader told Prospect News.

The company's extended term loan was quoted at 97¾ bid, 98¾ offered, up from 97 bid, 98 offered, and its non-extended term loan was quoted at 97¾ bid, 98¼ offered, up from 97 bid, 98 offered, the trader remarked.

Late Monday evening, the company announced a cash tender offer for up to $1 billion of its roughly $2.8 billion 8 7/8% senior notes due 2015.

The tender offer, which will expire on Dec. 6, will be funded with issuance of $1 billion of new debt and cash on hand.

Community Health is a Franklin, Tenn.-based hospital company.

Pharmaceutical Product launch

Switching to the primary, Pharmaceutical Product Development held its bank meeting on Tuesday morning to launch its $1.5 billion senior secured credit facility into general syndication, and chatter is that the deal is already oversubscribed, according to a buyside source.

"Hearing it's north of $2 billion in orders through early looks and then reverse inquiry of accounts wanting to get in book," the source remarked about Pharmaceutical Product Development's $1.325 billion seven-year term loan B.

As was previously reported, the deal was shown to senior managing agents and some institutional lenders in an early round effort, and there was already talk last week that guys were very receptive to the transaction.

"This seems to be new normal, at least for large LBO deals where leverage is getting taken up significantly, and they are successful given very attractive pricing and 101 soft call," the source added.

Pharmaceutical Product talk

Last week, when Pharmaceutical Product Development's bank meeting date was announced, price talk emerged on the B loan at Libor plus 550 bps with a 1.25% Libor floor and an original issue discount of 97 - and this talk was reconfirmed at the morning launch. As mentioned above, the tranche also includes 101 soft call protection for one year.

Official guidance came out tighter than what some market participants had initially been expecting. When the early round syndication was taking place, there were rumors that the term loan B was unofficially guided in the area of Libor plus 575 bps with a 1.5% Libor floor.

In addition to the term loan B, the company's credit facility provides for a $175 million revolver.

Commitments are due on Nov. 16.

Pharmaceutical lead banks

Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC, Goldman Sachs & Co. and UBS Securities Inc. are the lead banks on Pharmaceutical Product Development's credit facility.

Proceeds, along with $700 million of senior unsecured notes backed by a senior unsecured bridge loan commitment, $1.76 billion of equity and cash on hand, will be used to fund the purchase of the company by Carlyle Group and Hellman & Friedman for $33.25 per share. The all-cash deal is valued at $3.9 billion.

Closing is expected in the fourth quarter, subject to shareholder approval, which will be sought at a meeting on Nov. 29, and regulatory approval.

Pharmaceutical Product Development is a Wilmington, N.C.-based product development and management services provider to the pharmaceutical research industry.

Neustar wraps deal

In other news, Neustar Inc. completed its acquisition of Targus Information Corp. for about $650 million in cash, including repayment of outstanding debt, according to a news release.

For the transaction, Neustar got a new $700 million senior secured credit facility (Ba2/BB+) consisting of a $100 million five-year revolver priced at Libor plus 350 bps and a $600 million seven-year term loan B priced at Libor plus 375 bps with a 1.25% Libor floor. The revolver was sold at 99, and the B loan was sold at an original issue discount of 98½ and has 101 soft call protection for one year.

During syndication, pricing on the revolver was flexed down from talk of Libor plus 400 bps to 425 bps, and pricing on the term B was reduced from talk of Libor plus 425 bps to 450 bps, the discount tightened from 98 and the call protection was added.

Morgan Stanley Senior Funding Inc. led the deal for the Sterling, Va.-based provider of solutions and directory services that enable communication across networks, applications and enterprises. Targus is a Vienna, Va.-based provider of real-time, on-demand information and analytics services.

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