Avis up on exit from Dollar Thrifty race; Hertz rises; Go Daddy, Drug Royalty set talk

By Sara Rosenberg

New York, Sept. 14 - Avis Budget Group Inc.'s extended term loan headed higher in trading on Wednesday as the company disclosed that it is dropping its bid for Dollar Thrifty Automotive Group Inc. due to market conditions.

Meanwhile, Hertz Global Holdings Inc., the other bidder for Dollar Thrifty, saw its term loan strengthen, and Burlington Coat Factory Investments Holdings Inc.'s term loan was better on the back of favorable earnings results.

Switching to the primary, Go Daddy Group Inc. and Drug Royalty II LP1 released price talk on their term loans as both companies launched their transactions to lenders during market hours, and Endurance International Group surfaced with new deal plans.

Avis debt better

Avis' extended term loan was stronger on Wednesday following news that the company has decided not to pursue a purchase of Dollar Thrifty, according to traders.

One trader had the loan at 98 bid, 99½ offered, versus 97½ bid, 99½ offered, and a second trader was seeing it at 99 bid, compared to 97 bid, 99 offered on Monday. The second trader had not seen any levels on the debt on Tuesday.

In September 2010, Avis announced an offer to purchase Dollar Thrifty, a Tulsa, Okla.-based renter and leaser of vehicles, for a combination of $45.79 in cash and 0.6543 shares of common stock per share, or $1.5 billion total. Then, Hertz emerged with its own bid for Dollar Thrifty of $57.60 in cash and 0.8546 shares per Dollar Thrifty share.

Dollar Thrifty gave the two companies until Oct. 10 to submit their best and final offers. Avis, however, said in an 8-K filed with the Securities and Exchange Commission that it is opting to drop out of the bidding war "in light of current market conditions."

Avis marketing loan

Avis, a Parsippany, N.J.-based vehicle rental company, has already been in the news this week as it came out with revisions to the financing that will be used to help fund its acquisition of Avis Europe plc.

On Tuesday, the company held a lender call, at which time it was announced that its term loan B was upsized to $420 million from $400 million, and price talk was sweetened to Libor plus 525 basis points with a 1.5% Libor floor and an original issue discount of 97 to 98.

When the deal first launched in early August before the large market sell-off, the loan was talked at Libor plus 350 bps with a 1.25% Libor floor and an original issue discount of 99, but there had been chatter that pricing would have to increase to better reflect current market conditions.

As before, the term loan B has 101 soft call protection for one year.

Morgan Stanley & Co., Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., Scotia Capital (USA) Inc. and RBS Securities Inc. are the lead banks on the deal and are seeking commitments by Sept. 22.

Avis plans notes

In addition to the term loan B, Avis expects to issue $250 million of senior notes for the Avis Europe acquisition and has entered into an agreement for a $20 million tranche A term loan and a $200 million revolver add-on - with pricing on both of these loan tranches ranging from Libor plus 275 bps to 325 bps based on ratings.

The company also plans to use cash of $955 million, borrow an additional $140 million under certain of its existing fleet debt financing arrangements, assume Avis Europe's existing vehicle finance leases of roughly $440 million, assume about $50 million of existing Avis Europe corporate debt and enter into a financing arrangement secured by certain of Avis Europe's vehicle assets.

Under the agreement, Avis Europe, a Bracknell, England-based vehicle rental company, is being acquired for £3.15 in cash per share. The transaction is valued at £635 million, or about $1 billion.

Closing is expected to take place in October, subject to Avis Europe shareholder approval, court approval and regulatory clearances.

Hertz gains ground

In more secondary happenings, Hertz, the remaining bidder for Dollar Thrifty, saw its term loan head to 94¾ bid, 95¾ offered from 94½ bid, 95½ offered with the news that Avis dropped out of the bidding race, according to a trader.

If successful, Hertz plans to use borrowings under credit facilities and/or the issuance of debt securities, as well as cash on hand, to fund the acquisition.

The estimated total amount of cash needed for the transaction is around $1.9 billion.

Barclays Capital, Lazard, Bank of America Merrill Lynch and Deutsche Bank Securities are acting as financial advisors to Hertz.

Hertz is a Park Ridge, N.J.-based auto and equipment rental company. Dollar Thrifty is.

Burlington up with numbers

Burlington Coat Factory's term loan strengthened as the company released positive fiscal second-quarter numbers, with one trader quoting it at 96¼ bid, 97¼ offered, up from 95¼ bid, 96¼ offered on Tuesday and a second trader quoting it at 96½ bid, 97½ offered, versus 95¾ bid, 97 offered on the open on Wednesday.

Late Tuesday, the Burlington, N.J.-based retailer, said that it had a net loss for the quarter of $33 million versus a net loss of $40 million in the previous year.

Revenues for the quarter were $800 million, up from $736 million in the second quarter of fiscal 2010.

And, adjusted EBITDA for the quarter was $23 million, up 196.2% from $8 million in the prior year.

Go Daddy guidance emerges

Over in the primary, Go Daddy held a bank meeting on Wednesday morning to kick off the general syndication round on its credit facility, and in connection with the event, price talk on the term loan was released, according to a market source.

The $750 million term loan is being talked at Libor plus 550 basis points to 575 bps with a 1.25% Libor floor and an original issue discount of 96, and has 101 soft call protection for one year, the source said.

The company's $825 million credit facility (Ba3) also provides for a $75 million revolver that will be undrawn at close.

Commitments are due on Sept. 22.

Go Daddy lead banks

Barclays Capital Inc., Deutsche Bank Securities, Inc., RBC Capital Markets LLC and KKR Capital Markets are the leads on Go Daddy's credit facility.

Proceeds will be used to help fund a strategic investment and partnership with KKR, Silver Lake and Technology Crossover Ventures.

Other funds for the transaction will come from $300 million of unsecured notes that have already been placed and $1.3 billion of equity.

Go Daddy is a Scottsdale, Ariz.-based provider of web hosting and domain names.

Drug Royalty reveals talk

Another company to hold a bank meeting and come out with pricing guidance was Drug Royalty II LP1, as it launched a $155 million term loan (Ba2/BB+) to investors, according to a market source.

The term loan is being talked in the Libor plus 450 bps area with a 1.25% Libor floor and an original issue discount of 99 to 991/2, the source remarked. The only call protection is change of control at 101.

Macquarie Capital (USA) Inc. is leading the deal that will be used to refinance existing debt.

Commitments are due on Sept. 29.

Drug Royalty II LP1 is a specialty pharmaceutical royalty acquisition company that is managed by DRI Capital.

Endurance readies launch

In other news, Endurance International has set a bank meeting for 10:30 a.m. ET on Friday to launch a proposed $340 million credit facility that is being led by Morgan Stanley & Co. LLC, according to a market source.

The facility consists of a $35 million three-year revolver and a $305 million six-year first-lien term loan, the source said, adding that price talk is not yet available.

Proceeds will be used to refinance existing debt and for general corporate purposes.

Endurance International is a Burlington, Mass.-based provider of online services to small- and medium-sized businesses.

BJ's sees interest

Syndication of BJ's Wholesale Club Inc.'s proposed $2.225 billion senior secured credit facility is heard to be going "pretty well" as the deal has been "getting great buzz from [the] market" since launching this past Monday, a market source told Prospect News.

The facility consists of an $850 million ABL revolver, a $50 million last-out ABL term loan, a $1.125 billion seven-year covenant-light first-lien term loan (B+) and a $200 million 71/2-year covenant-light second-lien term loan (B-).

Shortly before launch, the facility structure had been described as a $900 million asset-based facility and about $1.3 billion of first- and second-lien term loans, with specific tranche sizes unavailable.

And, before that, the company had said in filings with the SEC that it would be getting a $900 million ABL facility, a $1.25 billion first-lien term loan and a $425 million second-lien term loan.

However, the decision was made to reduce the amount of term loan borrowings by $350 million as a result of sale and leaseback proceeds that are expected to come at closing.

BJ's price talk

BJ's ABL revolver is talked at Libor plus 200 bps, subject to a grid, the last-out ABL term loan is talked at Libor plus 350 bps, the first-lien term loan is talked in the Libor plus 525 bps area and the second-lien term loan is talked at Libor plus 850 bps to 875 bps.

The first- and second-lien term loans have a 1.25% Libor floor.

Additionally, the first-lien loan is offered at an original issue discount of 97½ and has 101 soft call protection for one year, and the second-lien loan is offered at 97 and has call protection of 103 in year one, 102 on year two and 101 in year three, sources added.

Deutsche Bank Securities Inc., Citigroup Global Markets Inc., Barclays Capital Inc., Jefferies & Co., GE Capital Markets and Wells Fargo Securities LLC are the lead banks on the deal.

BJ's funding buyout

Proceeds from BJ's credit facility, along with a little over $600 million in equity, will be used to fund the acquisition of the company by Leonard Green & Partners LP and CVC Capital Partners for $51.25 per share in cash. The all-cash transaction is valued at $2.8 billion.

Closing is expected on or about Sept. 30, subject to approval of BJ's shareholders, customary conditions and regulatory approvals.

Shareholder approval was obtained on Friday, at which time about 72% of shareholders voted in favor of the buyout and about 0.4% voted against the transaction.

BJ's is a Westborough, Mass.-based operator of warehouse clubs.

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