Apria upsizes series A-1 notes offer to $700 million, shifts $100 million from series A-2

By Paul A. Harris

St. Louis, May 13 - Apria Healthcare Group Inc. upsized to $700 million from $600 million its offering of senior secured notes, series A-1, due Nov. 1, 2014 (Ba2/BB+) late Wednesday, according to a high-yield mutual fund manager who agreed to speak on background.

Earlier in the day the series A-1 notes were talked at 11½% to 11¾%, with 2 to 3 points of original issue discount, according to an informed source.

However the upsizing of the A-1 piece is likely to push the yield out to 12%, sources said well after Wednesday's close.

Pricing is expected on Thursday.

Banc of America Securities LLC, Wachovia Securities LLC and Barclays Capital Inc. are joint bookrunners for the Rule 144A with registration rights notes offer. Scotia Capital is co-manager.

The notes become callable on Nov. 1, 2011. They have a change of control put at 101.

In upsizing the series A-1 offering, Apria shifted $100 million from the senior secured notes, series A-2, due 2014 (B1), downsizing that tranche to $310 million from $410 million.

The A-2 tranche could come to market soon after the series A-1 notes price, market sources say.

Whether the A-2 notes are offered depends upon demand, the sources add.

Reverse inquiry for the A-1 tranche is likely sufficient to bring more accounts into the A-2 deal, according to the fund manager.

There has likely been reverse inquiry into the A-2 tranche itself sufficient to get at least some of the remaining $310 million of it done, the source added.

The only deal likely to price on Thursday, however, is the A-1 tranche, the fund manager said.

Security for the A-1 notes is a first priority lien on substantially all tangible and intangible assets and capital stock and a second priority lien on the ABL collateral. The series A-1 notes will have priority over series A-2 debt in certain circumstances, including any acceleration of obligations in default or bankruptcy.

Proceeds will be used to refinance the bridge loan used to fund a leveraged buyout by the Blackstone Group. The loan was funded on Oct. 28, 2008

Apria is a Lake Forest, Calif., home health care services company.

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