Intelsat softens as Guggenheim engaged; XO rises on asset sale; GCA Services tweaks deal

By Sara Rosenberg

New York, Feb. 22 – Intelsat SA’s term loan B was noticeably weaker in trading on Monday as the company revealed that it has retained Guggenheim Securities LLC to help with its balance sheet, and XO Communications’ term loan was stronger with news of the sale of its fiber-optic network business.

Moving to the primary market, GCA Services Group Inc. extended the soft call protection on its first-lien term loan and made some changes to the incremental allowance and restricted payments basket.

In addition, KAR Auction Services Inc. and Armstrong World Industries Inc. joined this week’s new issue calendar.

Intelsat retreats

Intelsat’s term loan B dropped in the secondary market on Monday after the company said in a press release that it recently engaged Guggenheim Securities to assist with various financing and balance sheet initiatives, including, among other things, evaluating the level of secured debt and balance sheet management opportunities, according to a trader.

The company went on to say that there can be no assurance that its retention of Guggenheim will result in the pursuit or completion of any specific transaction.

Post news, Intelsat’s term loan B was quoted at 90 bid, 92 offered, down from 94½ bid, 95½ offered, the trader said.

Intelsat reveals earnings

Also during the session, Intelsat came out with preliminary fourth quarter numbers, including expected revenue of about $571 million, versus about $619 million in the prior year.

Preliminary net income for the quarter, prior to the effect of any impairments, is expected to be $49.1 million, or $0.42 per diluted common share, compared to net income of $16.2 million, or $0.14 per diluted common share for the same period in 2014.

And, adjusted EBITDA is expected to be $452.6 million for the quarter, compared to $477.1 million in the 2014 quarter.

The company said in the earnings release that it anticipates incurring a non-cash impairment charge resulting in a substantial reduction of its $6.8 billion goodwill and other intangible assets. The charges primarily reflect a reduction to the goodwill value established as a result of the acquisition of Intelsat in 2008.

Intelsat is a Luxembourg-based provider of satellite services.

XO trades up

Also in trading, XO Communications’ term loan gained to 99 bid, par offered from 98 bid, 99 offered as the company announced that it is selling its fiber-optic network business to Verizon Communications Inc. for around $1.8 billion, a trader remarked.

Closing is expected in the first half of 2017, subject to regulatory approval from various governmental agencies.

XO Communications is a Herndon, Va.-based communications service provider.

GCA Services revised

Over in the primary market, GCA Services Group pushed out the 101 soft call protection on its $515 million seven-year covenant-light first-lien term loan (B1/B) to one year from six months, according to a market source.

Furthermore, the free and clear allowance under the incremental was reduced to $75 million from $110 million, the MFN sunset was terminated and the restricted payments basket was modified, the source said.

Pricing on the first-lien term loan is still Libor plus 475 basis points with a 1% Libor floor and an original issue discount of 98.

As previously reported, the issue price firmed last week at the wide end of the 98 to 98.5 talk.

The company’s $795 million credit facility also includes a $100 million five-year revolver (B1/B) and a $180 million pre-placed eight-year second-lien term loan (Caa1/CCC+).

GCA lead banks

Goldman Sachs Bank USA, Barclays, UBS AG, ING and Macquarie Capital (USA) Inc. are leading GCA’s credit facility.

Commitments were due at 2 p.m. ET on Monday, the source added.

Proceeds will be used to help fund the buyout of the company by the Merchant Banking Division of Goldman Sachs and Thomas H. Lee Partners LP from Blackstone.

Closing is expected this quarter, subject to customary conditions.

GCA is a Cleveland-based provider of facility services, including janitorial/custodial services, contamination control for cleanroom manufacturing, facilities operations and maintenance services, grounds and athletic field management services, and diversified staffing.

KAR on deck

KAR Auction Services emerged with plans to hold a lender call at 1 p.m. ET on Tuesday to launch $1.45 billion in bank debt, a market source said.

The debt consists of a $300 million five-year revolver, and a $1.15 billion seven-year term loan B-3 talked at Libor plus 375 bps to 400 bps with a 0.75% Libor floor, an original issue discount of 98.5 to 99 and 101 soft call protection for one year, the source continued.

J.P. Morgan Securities LLC is leading the deal that will be used to refinance a term loan B-1 due March 2017, term out revolver drawings and for general corporate purposes.

KAR is a Carmel, Ind.-based provider of vehicle auction services and a provider of floorplan financing to independent and franchise used vehicle dealers.

Armstrong coming soon

Armstrong World Industries scheduled a lender call for 1 p.m. ET on Tuesday to launch a $250 million seven-year term loan B, according to a market source.

The company’s $1.05 billion credit facility (B1/BB+) also includes a $200 million revolver and a $600 million term loan A, the source said.

Bank of America Merrill Lynch is the left lead on the deal that will be used to refinance an existing credit facility in connection with the planned separation of the company’s flooring business, Armstrong Flooring Inc.

Armstrong is a Lancaster, Pa.-based designer and manufacturer of floors and ceiling systems. Armstrong Flooring is a Lancaster, Pa.-based producer of flooring products.

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