NBTY allocates, trades higher; PQ Corp tightens talk; McGraw-Hill accelerates timing

By Paul A. Harris

Portland, Ore., April 26 – The “hot market” signals are lighting up in the leveraged loan space, a sellside source said, shortly after Tuesday’s close.

Spreads are flexing tighter, discounts are being cut, and timing is being accelerated, the source said, pointing to recent transactions from NBTY Inc., PQ Corp. and McGraw-Hill Global Education Holdings LLC, all of which generated news on Tuesday.

Issuers that are in the leverage markets with simultaneous loan and bond financings are realizing considerable benefits from the synergies, the source observed.

NBTY allocates, trades higher

NBTY priced $1.33 billion and £350 million of covenant-light term loans B (B1/B+) on Tuesday, according to a market source.

The $1.33 billion dollar tranche came with a Libor plus 400 basis points spread at 99.5. The spread came on top of final spread talk; earlier talk was 425 to 450 bps. The reoffer price came on top of final discount talk. Earlier talk was 98.5 to 99.

The £350 million tranche came with a 525 bps spread at 99.

The dollar-denominated paper traded to par bid, 100 3/8 offered on the break.

The dollar tranche was downsized to $1.33 billion from $1.4 billion, while the sterling tranche was upsized to £350 million from £300 million.

Both tranches have 101 soft call protection for six months.

Bank of America Merrill Lynch and Barclays were the lead banks.

Proceeds will be used to help fund the redemption of all of the outstanding 7.75%/8.5% contingent cash pay senior notes due 2017 issued by NBTY’s parent company, Alphabet Holding Co. Inc., to redeem all of NBTY’s 9% senior notes due 2018 and to repay all outstanding borrowings under NBTY’s existing senior secured credit facilities.

Other funds for the refinancing are expected to come from borrowings under a new $400 million asset-based credit facility, $1,075,000,000 of senior notes and cash on hand.

NBTY is a Ronkonkoma, N.Y.-based manufacturer, marketer, distributor and retailer of vitamins and nutritional supplements.

PQ tightens spread talk again

PQ further tightened spread talk on $1.2 billion equivalent of 6.5-year senior secured covenant-light term loans (B2/B+), a market source said on Tuesday.

New talk has the package – $900 million of dollar-denominated paper and $300 million equivalent of euro-denominated paper – coming at 475 bps spreads to Libor and Euribor.

That shaves 25 bps from earlier talk of 500 bps, which was itself a revision from still earlier talk of 550 bps.

Commitments were due at the Tuesday close, New York time, and the deal is set to allocate on Wednesday.

The spreads will float atop 1% Libor and Euribor floors.

The discount remains at 99. Earlier in the week it was revised by one dollar from the rich end of the previous 97.5 to 98 discount talk.

The 101 soft call protection from repricing, which was cut earlier in the week to six months from a year, remains unchanged in the Tuesday revision.

Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Morgan Stanley Senior Funding Inc., J.P. Morgan Securities LLC, Jefferies Finance LLC, Goldman Sachs Bank USA, Deutsche Bank Securities Inc. and Keybanc Capital Markets are the joint lead arrangers on the deal, with Citigroup the left lead and Credit Suisse the administrative agent.

The term loan has a springing maturity six months inside the existing notes at Eco Services Operations LLC if the notes have not been refinanced.

Amortization on the term loan is 1% per annum.

Mandatory prepayments are from 50% of excess cash flow with leverage-based step-downs, 100% of asset sale proceeds subject to reinvestment rights and certain other exceptions, and 100% of debt issuance subject to permitted debt, the source continued.

Proceeds will be used to refinance credit facilities at PQ and Eco Services and PQ’s second-lien notes concurrent with the merger of the two companies.

Closing is expected in early May.

PQ is a Malvern, Pa.-based producer of specialty inorganic performance chemicals and catalysts. Eco Services is a Woodlands, Texas-based producer of sulfuric acid.

McGraw-Hill accelerates timing

McGraw-Hill Global Education moved up the deadline for its $1,305,000,000 six-year first-lien covenant-light term loan (Ba3/BB-), a market source said on Tuesday.

Commitments are now due at noon ET on Wednesday. The prior deadline had the books remaining open until Thursday.

As reported, price talk on the term loan is Libor plus 475 bps with a 1% Libor floor and an original issue discount of 99, the source said.

Credit Suisse Securities (USA) LLC is the left lead bank on the deal.

The $1,655,000,000 credit facility also includes a $350 million five-year revolver.

Proceeds will be used to refinance existing debt, merge McGraw-Hill School Education into the McGraw-Hill Global Education credit group and fund a dividend, the source added.

McGraw-Hill is a New York-based provider of education materials.

Verisk for May

Verisk Analytics Inc. is expected to be in the leverage markets in May with $455 million of debt financing backing Veritas Capital’s acquisition of Verisk’s health care services business for $820 million, according to a market source.

UBS Investment Bank will be the sole bookrunner for the deal that is expected to syndicate in May, with closing expected in June.

Upon closing, Verisk Health will be renamed and will operate as an independent company at its current headquarters in Waltham, Mass.

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