Cengage softens on earnings; Meritas breaks; Stackpole revises deal; Ocwen moves deadline

By Sara Rosenberg

New York, July 29 - Cengage Learning's term loan B bounced around in trading on Friday and weakened from previous levels as the company announced quarterly results that showed a year-over-year decline in revenue and adjusted EBITDA.

Meanwhile, Calpine Corp. reported positive earnings, but found its term loan B trending lower anyway, likely because of market technicals, and Meritas' credit facility freed up for trading right around its original issue discount price.

Over in the primary, Stackpole International made some changes to its term loan, including increasing pricing, widening the original issue discount and adding call protection, and Ocwen Financial Corp. accelerated the commitment deadline on its term loan due to strong demand.

Furthermore, Unifrax I LLC released price talk on its term loan add-on in preparation for its upcoming launch, and Immucor Inc. firmed up the bank meeting date for its new deal.

Cengage down with numbers

Cengage's term loan B saw a bunch of activity and volatility on Friday following the release of results for the fourth quarter of fiscal year 2011, according to traders.

The term loan B was quoted at 87½ bid, 87¾ offered, down from Thursday's levels of around 90 bid, 90½ offered, traders said. On Friday morning, the bid on the term loan B got as low as 86 5/8, traders added.

For the three months ended June 30, the company reported revenue of $472.9 million, down 14.5% from $553.4 million in the previous year.

Additionally, adjusted EBITDA for the quarter was $201.5 million, down 13.9% from $234 million in the fourth quarter of fiscal 2010.

Cengage reduces debt

As of the end of the fourth fiscal quarter, Cengage's cash and cash equivalents were $34.2 million versus $27 million last year, and availability under the revolver was $273.4 million, compared to $227.7 million in the prior year.

Term loan/incremental term loan borrowings totaled $3.91 billion at June 30, compared to $3.948 billion at June 30, 2010, and net debt was $5.656 billion versus $5.739 billion at the end of the 2010 quarter.

Despite debt being down, the company's leverage ratio moved to 4.76 times from 4.58 times last year, and its total leverage ratio moved to 7.0 times from 6.61 times. The credit agreement threshold is 7.75 times.

Cengage is a Stamford, Conn.-based provider of teaching, learning and research services for the academic, professional and library markets.

Calpine B loan slides

Calpine's term loan B weakened as second-quarter numbers came out, with one trader seeing the debt at 98¾ bid, 99¼ offered versus 99 bid, 99¾ offered in the previous session, and a second trader quoting it at 98 7/8 bid, 99 3/8 offered, down from 99 bid, 99½ offered.

The second trader explained that the quarterly numbers were good, but the market just felt overwhelmed on Friday with all of the volatility in equities.

For the quarter, the Houston-based power company reported a net loss of $70 million, or $0.14 per diluted share, compared to a net loss of $115 million, or $0.24 per diluted share, last year.

Operating revenues were $1.633 billion, up from $1.43 billion in the 2010 quarter.

Adjusted EBITDA for the quarter was $406 million, compared to $381 million in the prior year.

And, adjusted recurring free cash flow was $41 million, versus $131 million last year.

Meritas starts trading

Meritas' credit facility made its way into the secondary market on Friday, with the $125 million six-year first-lien term loan (B) quoted at 99 bid, 99½ offered, and the $65 million 61/2-year second-lien term loan (B-) quoted at 98½ bid, 99 offered, according to a trader.

Pricing on the first-lien term loan is Libor plus 600 basis points with a 1.5% Libor floor, and it was sold at an original issue discount of 99. There is 101 soft call protection for one year that was added during syndication.

The second-lien term loan is priced at Libor plus 1,000 bps with a 1.5% floor, and it was sold at a discount of 981/2. There is call protection of 103 in year one, 102 in year two and 101 in year three.

Credit Suisse Securities (USA) LLC is the lead bank on the deal that will be used to refinance existing debt and for general corporate purposes.

Meritas is a Northbrook, Ill.-based operator of college-preparatory schools.

Stackpole flexes up

Moving to the primary, Stackpole raised the spread on its $140 million six-year term loan to Libor plus 600 basis points from talk of Libor plus 475 bps to 500 bps, moved the original issue discount to 98 from 99 and added 101 soft call protection for one year, according to a market source. The 1.5% Libor floor was left unchanged.

RBC Capital Markets LLC, BNP Paribas Securities Corp. and UBS Securities LLC are the joint bookrunners on the $165 million senior secured deal, which also includes a $25 million five-year revolver.

With the changes, the deal has filled out, making way for allocations to go out on Monday.

Proceeds, along with a $45 million seven-year subordinated mezzanine facility, will be used to fund the buyout of the company by the Sterling Group.

Pro forma senior leverage is 2.8 times and total leverage is 3.7 times.

Stackpole is a supplier of highly engineered engine and transmission oil pumps and powdered metal components to automotive and original equipment manufacturers.

Ocwen changes deadline

Ocwen Financial revised the commitment deadline on its $575 million five-year senior secured term loan (B1/B) to Monday from Aug. 5 as the deal has been met with a lot on investor interest, according to a market source.

Price talk on the term loan was left unchanged at Libor plus 575 bps with a 1.5% Libor floor and an original issue discount of 98, and there is 101 soft call protection for one year.

Barclays Capital Inc. is the lead bank on the deal that has 10% amortization and covenants that include a maximum corporate debt to EBITDA ratio, a maximum total consolidated debt to tangible net worth ratio, a minimum interest coverage ratio and a maximum loan to value ratio.

Pro forma for the transaction, corporate debt to run rate adjusted EBITDA is 1.7 times and total debt to total equity is 4.5 times.

Ocwen buying Litton

Proceeds from Ocwen's term loan will be used to help fund the acquisition of Litton Loan Servicing LP, a provider of servicing and subservicing of primarily non-prime residential mortgage loans, from Goldman Sachs Group Inc. for a base purchase price of $263.7 million in cash.

In addition, subject to adjustments based on outstanding servicer advances at closing, Ocwen will pay $337.4 million to retire a portion of the outstanding debt on an existing advance facility at Litton that was provided by Goldman.

Closing is expected on Sept. 1, subject to the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other conditions.

Ocwen is an Atlanta-based provider of residential and commercial loan servicing, special servicing and asset management services.

Unifrax reveals talk

Also on the new deal front, Unifrax started circulating price talk on its $150 million term loan add-on as the deal is gearing up to launch with a bank meeting on Monday afternoon, according to a market source.

The add-on is talked at Libor plus 450 bps with a 1.5% Libor floor and an original issue discount of 99½ the source said, adding that the company's existing term loan will be repriced to match that of the add-on.

Wells Fargo Securities LLC is the lead bank on the deal that will be used to fund the acquisition of Super Saffil Ltd. and Saffil America Inc. from Dyson Group plc.

Closing is expected in the third quarter, subject to anti-trust approvals.

Unifrax is a Niagara Falls, N.Y.-based supplier of high temperature insulation products. Saffil is a Widnes, U.K.-based developer, manufacturer and seller of high-temperature polycrystalline wool materials.

Immucor nails down timing

Immucor was tentatively scheduled to hold a bank meeting in New York on Tuesday for its $700 million senior secured credit facility, and now that date has officially firmed up with the launch having a 10 a.m. start time, according to a market source.

The facility consists of a $100 million five-year revolver and a $600 million seven-year term loan B.

Official price talk is not yet available, the source remarked. The company, however, recently said in a filing with the Securities and Exchange Commission that it expects the deal to be priced at Libor plus 475 bps, with the term loan having a 1.5% Libor floor and the revolver having a 50 bps unused fee.

Citigroup Global Markets Inc. and J.P. Morgan Securities LLC are the joint lead arrangers on the deal and bookrunners, and UBS Securities LLC is a bookrunner as well.

Immucor being acquired

Proceeds from Immucor's credit facility, notes, which are backed by a commitment for a $400 million senior unsecured bridge loan that has already been syndicated, and up to $691 million in equity, will be used to fund the buyout of the company by TPG Capital for $27.00 per share in cash. The transaction has a fully diluted equity value of $1.973 billion.

TPG is in the process of tendering for Immucor's common stock shares, and that tender expires on Aug. 18. If the minimum tender condition of 84% is not met, the parties have agreed to complete the transaction through a one-step merger after receipt of shareholder approval.

Closing on the buyout is expected in the second half of the year, subject to approval under the Hart-Scott-Rodino Antitrust Improvements Act, the receipt of any applicable consents or approvals under German antitrust or merger control laws and other customary conditions.

Immucor is a Norcross, Ga.-based provider of automated instrument-reagent systems to the blood transfusion industry.

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