Federal-Mogul, Michaels Stores better in positive secondary; Flexera Software plans surface

By Sara Rosenberg

New York, Aug. 31 - Federal-Mogul Corp.'s strip of term loan B and term loan C and Michaels Stores Inc.'s term loan B-1 headed noticeably higher on Wednesday as the secondary market felt stronger in general.

In other loan happenings, Steak 'n Shake's credit facility is expected to break for trading early on Thursday, and Flexera Software revealed that it is getting ready to bring a new buyout financing deal to market shortly after the Labor Day holiday weekend.

Secondary up as buyers emerge

Federal-Mogul and Michaels Stores were two names that saw considerable gains during Wednesday's trading session as the market felt "very strong" as there was a good amount of "buying interest across the board," a trader told Prospect News.

The trader said that the credit market outperformed stocks, although equities were up, too. Nasdaq gained 3.35 points, or 0.13%, NYSE gained 64.39 points, or 0.86%, S&P 500 gained 5.97 points, 0.49% and Dow Jones Industrial Average gained 53.58 points, or 0.46%.

"Higher beta names were up about two points and higher quality, higher dollar names were probably up a point," the trader remarked regarding the loan market.

Federal-Mogul, Michaels levels

Federal-Mogul's strip of term loan B and term loan C were quoted by the trader at 91 bid, 92 offered, up from 88 bid, 89 offered, with the debt labeled as falling into the category of the higher beta names.

And, Michaels Stores, another higher beta name, saw its term loan B-1 quoted by the trader at 95¼ bid, 96¼ offered, up from 93¼ bid, 94¼ offered. A second trader, however, had this debt at 94¾ bid, 95¾ offered, versus levels on the open on Wednesday morning of 94 bid, 95 offered.

Federal-Mogul is a Southfield, Mich.-based supplier of powertrain, chassis and safety technologies for the original equipment manufacturers of automotive, light commercial, heavy-duty, agricultural, marine, rail, off-road and industrial vehicles, as well as the aftermarket.

Michaels Stores is an Irving, Texas-based retailer of arts, crafts, framing, floral, wall decor and seasonal merchandise for the hobbyist and do-it-yourself home decorator.

Steak 'n Shake readies break

In more loan news, Steak 'n Shake's credit facility is anticipated to make its way into the secondary market on Thursday morning, according to a market source.

The company's $130 million credit facility (B1) includes a $110 million four-year term loan and a $20 million three-year revolver.

Pricing on the term loan is Libor plus 450 bps with a 1% Libor floor, and it was sold at an original issue discount of 99. There is 10% amortization per annum.

During syndication, the term loan was downsized from $140 million, while pricing was left unchanged.

Steak 'n Shake dividend recap

Proceeds from Steak 'n Shake's credit facility will be used to refinance existing debt and fund a return of capital to the parent. As a result of the term loan downsizing, the amount of the dividend payment was reduced by about $30 million.

Jefferies & Co. is the lead bank on the deal.

Senior leverage is 3.0 times. This is down from 3.2 times originally as a result of the change to the term loan amount.

Steak 'n Shake is a quick-service restaurant chain founded in Normal, Ill.

Flexera coming soon

Moving to upcoming deals, Flexera Software has set a bank meeting for Sept. 7 to launch a proposed $355 million credit facility that is being led by BMO Capital Markets Corp., according to a market source.

The facility consists of a $25 million revolver (B), a $230 million first-lien term loan (B) and a $100 million second-lien term loan (CCC+), the source said.

Proceeds will be used to help fund the purchase of a majority interest in the company by Teachers' Private Capital from Thoma Bravo LLC, with closing on the buyout expected to occur in late September.

Flexera is a Schaumburg, Ill.-based provider of strategic application usage management services for application producers and their enterprise customers.

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