Del Monte softens with earnings news; NewPage term loan talk comes tighter than expected

By Sara Rosenberg

New York, Sept. 9 - Del Monte Corp.'s term loan took a turn for the worse in the secondary market on Friday after the company released first-quarter results for fiscal 2012 that showed year-over-year declines in earnings, sales and EBITDA.

Shifting to the primary market, NewPage Corp. released official price talk on its debtor-in-possession financing facility with its launch, and the term loan was presented with a coupon that is lower than the pre-launch guidance that was circulating.

Additionally, pricing on GE SeaCo's in-market term loan surfaced, Metropolitan Health Networks Inc. set a relaunch for its credit facility, Drug Royalty II LP1, Dial Global and PODS Enterprises Inc. revealed that they will be coming to market shortly, and Go Daddy Group Inc. firmed up timing on the launch of its deal.

Del Monte slides

Del Monte's term loan weakened in trading on Friday as the company came out with disappointing quarterly numbers, according to traders.

The term loan was quoted by one trader at 94 bid, 95 offered post-numbers, compared to 95½ bid, 96½ offered on the open Friday and 95¾ bid, 96¾ offered on Thursday.

Meanwhile, a second trader was quoting the loan at 94½ bid, 95½ offered, down from 95½ bid, 96½ offered.

For the three months ended July 31, the company reported a net loss of $27.6 million, compared to net income of $59.4 million in the first quarter of fiscal 2011.

Net sales for the quarter were $776.2 million, down 3.5% from $804.6 million last year.

And operating income was $49.3 million, down 58.7% from $119.4 million in the fiscal 2011 quarter.

Del Monte EBITDA results

Also on Friday, Del Monte said that its EBITDA for the quarter was $49.3 million versus $137.8 million last year, and its adjusted EBITDA was $101.2 million, down 31.5% from $147.8 million in the prior year.

"Despite the challenging first-quarter results, my initial assessment of the company is that our portfolio of brands is strong and well-positioned in on-trend categories," Dave West, who became chief executive officer of Del Monte Foods on Aug. 15, said in a news release.

"While we took pricing actions to mitigate input cost inflation, the historical lag of price realization was exacerbated by the heavy competitive promotional activity in the quarter. In the short-term, we expect the marketplace will continue to reflect high input cost inflation, a challenging consumer sentiment, a price-seeking consumer and heightened manufacturer promotional activity. Longer-term, we expect to benefit as we neutralize input cost inflation with price realization and productivity savings as well as through the benefit of new product introductions," West added.

Del Monte liquidity

As for liquidity, at July 31, Del Monte had total debt of $4.004 billion and cash and cash equivalents of $246.4 million. There were no amounts outstanding under the company's ABL credit facility.

Free cash flow for the three-month period was $8.5 million, a 73% drop from $31.3 million in first-quarter fiscal 2011.

The company attributed the free cash flow decline to lower adjusted EBITDA, higher cash interest payments and higher capital expenditures, which totaled $22.7 million for the quarter.

Del Monte is a San Francisco-based distributor and marketer of branded pet products and food products.

NewPage sets official talk

Moving to new deal happenings, NewPage held a bank meeting at 10:30 a.m. ET on Friday to launch its proposed $600 million 18-month debtor-in-possession financing facility, and shortly before the meeting took place, official price talk hit the market, according to a market source.

The $250 million second-out term loan was presented to lenders with talk of Libor plus 700 basis points with a 1.5% Libor floor and an original issue discount of 99, the source said. This compares to earlier guidance that was circulating at Libor plus 750 bps with a 1.5% Libor floor and an original issue discount that was still to be determined.

Meanwhile, the $350 million first-out ABL revolver was launched in line with prior talk at Libor plus 325 bps with no Libor floor.

J.P. Morgan Securities LLC is the lead bank on the deal.

NewPage taking out debt

Proceeds from NewPage's debtor-in-possession deal will be used to repay outstanding revolver debt and for general corporate purposes during the company's Chapter 11 process.

The company announced its bankruptcy filing a few days ago, saying that the goal is to facilitate a debt restructuring and position the overall business for long-term success.

Investors weren't exactly shocked by the bankruptcy news since the company had already warned that this step may have to be taken back in mid-August. At that time, it was revealed in a filing with the Securities and Exchange that there are issues with the maturity of the company's revolver due to its floating-rate and 10% second-lien senior secured notes not being refinanced.

NewPage is a Miamisburg, Ohio-based producer of printing and specialty papers.

GE SeaCo guidance emerges

Continuing on the topic of price talk, GE SeaCo's $1 billion term loan is being shopped to lenders at Libor plus 300 bps with a step-up to Libor plus 400 bps after two years and to Libor plus 600 bps at year six, according to a market source.

In addition to the term loan, the company is getting a $300 million variable funding note revolver with a $200 million accordion feature, the source said.

Deutsche Bank Securities Inc. and ING are the lead banks on the deal that launched with a bank meeting on Thursday and will be used, along with equity, to fund the buyout of the company by HNA Group Co. Ltd. and Bravia Capital from General Electric Capital Corp. and Sea Containers Ltd.

GE SeaCo is a Singapore-based marine container leasing company.

Metropolitan relaunching deal

In more primary news, Metropolitan Health Networks is relaunching its $355 million credit facility on Monday with a slightly revised structure that includes a $40 million revolver, a $240 million first-lien term loan and a $75 million second-lien term loan, according to a market source.

By comparison, the revolver was initially sized at $25 million and the second-lien term loan was sized at $90 million. The first-lien was the same at $240 million.

Under the original structure, the revolver and first-lien term loan were talked at Libor plus 475 bps with a 1.5% Libor floor, and the second-lien term loan was talked at Libor plus 900 bps with a 1.75% floor. The first-lien term loan was offered at an original issue discount of 99, while the second-lien was offered at 98. And, the second-lien had call protection of 103 in year one, 102 in year two and 101 in year three.

Price talk on the revised deal has yet to come out, the source added.

Metropolitan acquisition

Proceeds from Metropolitan Health Networks' credit facility, along with cash and investments, will be used to fund the acquisition of Continucare Corp. for $6.25 in cash and 0.0414 of a share of Metropolitan common stock per share. The transaction is valued at about $416 million.

GE Capital Markets Inc. and SunTrust Robinson Humphrey Inc. are the lead banks on the deal.

The deal was first launched with a bank meeting on Aug. 3, but, the source explained, it got lost in the all the volatility that was experienced during the month.

Closing is expected on or around the end of this month.

Metropolitan Health is a Boca Raton, Fla.-based health care organization that provides health care services for Medicare Advantage members and other patients in Florida. Continucare is a Miami-based provider of primary care physician services on an outpatient basis.

Drug Royalty coming soon

Meanwhile, a new deal for Drug Royalty was announced on Friday, as the company set a bank meeting for Wednesday to launch a proposed $155 million term loan, according to sources, who said that price talk is not yet available.

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

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

Dial Global readies deal

Another deal that emerged is Dial Global with a bank meeting set for Tuesday to launch a $265 million credit facility that consists of a $25 million revolver, a $175 million first-lien term loan and a $65 million second-lien term loan, according to a market source.

GE Capital Markets and ING are the lead banks on the revolver and first-lien term loan, and Macquarie Capital (USA) Inc. is leading the second-lien term loan.

Proceeds will be used to help fund the company's merger with Westwood One Inc. in a stock-for-stock transaction, at which time Oaktree Capital Management LP, Dial Global's current sponsor, will become the majority shareholder of the combined company, and to refinance existing debt.

Closing is expected in the fourth quarter, subject to customary conditions and Hart-Scott-Rodino.

Dial Global is Los Angeles-based provider of advertising sales representation and syndication services to radio companies. Westwood One is a New York-based provider of network radio programming.

PODS plans facility

Also, PODS Enterprises scheduled a bank meeting for Thursday to launch a proposed $223 million credit facility that is being led by GE Capital Markets, according to a market source.

The facility consists of a $25 million revolver and a $198 million term loan, the source said. The term loan will include a delayed-draw tranche.

Proceeds will be used for acquisition funding and to refinance existing debt.

PODS is a Clearwater, Fla.-based provider of portable on demand storage and moving products and services.

Go Daddy schedules meeting

Go Daddy Group nailed down timing on its $825 million credit facility with the setting of a bank meeting for Wednesday, according to a market source. The deal has already been shown to some accounts in an early look round.

As was previously reported, the facility consists of a $75 million revolver that will be undrawn at close and a $750 million term loan. Price talk is not yet available.

Barclays Capital Inc., Deutsche Bank Securities, Inc., RBC Capital Markets LLC and KKR Capital Markets are the leads on the deal that will be used, along with $300 million of unsecured notes that has already been placed and $1.3 billion of equity, to fund a strategic investment and partnership with KKR, Silver Lake and Technology Crossover Ventures.

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

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