BJ's frees up; Microsemi reveals guidance; KapStone timing surfaces; Endurance tweaks deal

By Sara Rosenberg

New York, Sept. 27 - BJ's Wholesale Club Inc.'s credit facility made its way into the secondary market on Tuesday, with both the first- and second-lien term loans quoted above their original issue discount prices.

Meanwhile, over in the primary market, Microsemi Corp. released price talk on its term loan B as the deal was presented to lenders early on in the session, and KapStone Paper and Packaging Corp. came out with timing on the launch of its pro rata transaction.

Additionally, Endurance International Group revised its term loan B, focusing the coupon on the wide end of initial guidance and widening original issue discount talk, while also shortening the maturity.

BJ's starts trading

BJ's Wholesale Club's credit facility broke on Tuesday afternoon, with the $1.075 billion covenant-light seven-year first-lien term loan quoted by one source at 95¾ bid, 96¼ offered on the open and then he saw it move up to 96½ bid, 97 offered. A second source was seeing the loan at 96¼ bid, 97¼ offered.

Pricing on the first-lien term loan is Libor plus 575 basis points with a 1.25% Libor floor, and it was sold at a discount of 95. There is 101 soft call protection for one year.

The loan had been downsized from $1.125 billion during syndication as a result of additional cash generated from operations, pricing was flexed up from talk in the Libor plus 525 bps area and the discount moved to 96 from 971/2, before settling at its final price.

BJ's second-lien levels

In addition to the first-lien term loan, BJ's is getting a $200 million 71/2-year covenant-light second-lien term loan that was seen by one guy at 95½ bid, 96½ offered on the break, and then he saw it gain to 96 bid, 97 offered. Another source was quoting the debt a little higher at 96½ bid, 97½ offered.

The second-lien loan is priced at Libor plus 875 bps with a 1.25% Libor floor and was sold at an original issue discount of 95, and the debt is non-callable for one year, then at 102 in year two and 101 in year three.

This tranche also went through changes during syndication, including firming pricing at the high end of the Libor plus 850 bps to 875 bps talk, widening the discount from 97 and sweetening call premiums from 103 in year one, 102 in year two and 101 in year three.

BJ's ABL details

BJ's $2.175 billion senior secured credit facility also includes an $850 million five-year ABL revolver priced at Libor plus 200 bps, subject to a grid, and a $50 million last-out ABL term loan priced at Libor plus 350 bps.

Originally, the company had said in filings with the Securities and Exchange Commission 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.

But shortly before the bank meeting, the decision was made to reduce the amount of term loan borrowings as a result of sale and leaseback proceeds that are expected to come at closing.

BJ's being acquired

Proceeds from BJ's credit facility, along with a little over $600 million of equity, will be used to fund the its buyout 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, which was already obtained, customary conditions and regulatory approvals.

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 credit facility.

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

Microsemi talk emerges

Moving to the primary, Microsemi held a bank meeting on Tuesday morning to kick off syndication on its proposed $800 million senior term loan B due Feb. 2, 2018, and with the event, price talk was announced, according to a market source.

The B loan was launched at Libor plus 425 bps to 450 bps with a 1.25% Libor floor and an original issue discount of 97 to 98, and includes 101 soft call protection for one year, the source remarked.

With this deal, the company is basically amending, restating and extending its existing $375 million term loan B that was obtained a few months ago at pricing of Libor plus 300 bps with a 1% Libor floor, and sold at par, and getting $425 million of new term loan B borrowings.

Morgan Stanley Senior Funding Inc., the lead arranger and bookrunner on the deal, is seeking commitments from lenders by Oct. 11.

Microsemi buying Zarlink

Proceeds from Microsemi's term loan B will be used to help fund the acquisition of Zarlink Semiconductor Inc. for C$3.98 in cash per share and about C$1.6 in cash per 6% unsecured subordinated convertible debenture, for a total transaction value of roughly $525 million, net of Zarlink's cash which is currently $107 million.

A tender offer for Zarlink's shares and debentures expires on Oct. 12, and closing is subject to customary conditions, including the tender of 66 2/3% of the outstanding shares.

At close, debt to EBITDA will be about 3.0 times.

Microsemi is an Aliso Viejo, Calif.-based provider of semiconductor services. Zarlink is an Ottawa, Canada-based designer of mixed-signal semiconductor products for communications and medical applications.

KapStone schedules call

Also on the topic of new deals, KapStone Paper and Packaging nailed down timing on its proposed $525 million five-year senior credit facility as a conference call has been set for Wednesday afternoon to launch the deal to investors, according to a market source.

The facility consists of a $150 million revolver that will be undrawn at close and a $375 million term loan, with official price talk not yet out, the source said.

Previously, the company said in a presentation that the initial interest rate on the credit facility should be about 2.25%.

Bank of America Merrill Lynch and Barclays Capital Inc. are the lead banks on the deal.

KapStone funding acquisition

Proceeds from KapStone's credit facility, along with $75 million of cash, will be used to fund the acquisition of U.S. Corrugated Inc. for $330 million in cash, subject to certain post-closing adjustments, and refinance an existing $101 million term loan.

Leverage will be less than two times.

Closing is expected in late October, subject to customary conditions, including regulatory review and receipt of financing.

KapStone is a Northbrook, Ill.-based producer of unbleached kraft paper products and linerboard. U.S. Corrugated is a Newark. N.J.-based operator of a recycled containerboard paper mill and converting facilities.

Endurance updates guidance

Lenders were told Tuesday that Endurance International Group changed price talk on its $305 million first-lien term loan B to Libor plus 650 bps with a 1.5% Libor floor and an original issue discount of 95½ to 96, from initial talk at launch of Libor plus 625 bps to 650 bps with a 1.5% Libor floor and a discount of 96, according to a market source.

Furthermore, as part of the revisions, the maturity on the B loan was shortened to five years from six years, the source continued.

Morgan Stanley & Co. LLC is the lead bank on the $340 million credit facility (B2), which also includes a $35 million three-year revolver and 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.

Renaissance buyout price up

In other news, the purchase of Renaissance Learning Inc. by Permira Funds has been increased to compete with a recent offer by Plato Learning Inc., and Permira has committed more equity to come up with the additional funds needed, according to a market source.

Under the new agreement, Permira is buying all of the outstanding shares of Renaissance Learning held by co-founders Terrance and Judith Paul, together with affiliates and members of their family, for $15 per share in cash, and all other outstanding shares of the company for $16.60 per share in cash, for an aggregate purchase price of approximately $455 million.

Previously, Permira was offering $14.85 per share in cash, or roughly $440 million, and the Plato Learning buyout proposal was for $15.50 per share in cash.

In connection with raising the purchase price, Permira has increased the equity component of the transaction to $215.8 million from $196.7 million.

Renaissance facility unchanged

Renaissance Learning already launched with a bank meeting on Sept. 21 a $270 million credit facility to help fund the Permira buyout - consisting of a $20 million revolver (B1/BB-), a $175 million first-lien term loan (B1/BB-) and a $75 million second-lien term loan - and the structure remained intact with the purchase price change, the source remarked.

Talk on the first-lien term loan is Libor plus 600 bps to 625 bps with a 1.5% floor, an original issue discount of 96 to 97 and 101 soft call protection for one year. Second-lien talk has yet to emerge.

RBC Capital Markets LLC and BMO Capital Markets Corp. are leading the deal.

Closing is expected in the fourth quarter, subject to shareholder approval, which will be requested at a special meeting on Oct. 17.

Renaissance Learning is a Wisconsin Rapids, Wis.-based provider of technology-based school improvement and student assessment programs for K-12 schools.

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