R.H. Donnelley breaks; Calpine head ups; Constellation pulls loan as buyout offer expires

By Sara Rosenberg

New York, Dec. 9 - R.H. Donnelley Corp.'s new term loan debt allocated and freed for trading on Friday, with levels seen quoted right atop par throughout the session. And, Calpine Corp.'s second-lien bank debt headed higher as investors reacted to the news that bondholders have agreed to hold off on accelerating the second-lien debt.

In primary happenings, Constellation Brands Inc. pulled its $1.2 billion acquisition financing credit facility (Ba2/BB) from the market as the buyout offer for Vincor International Inc. proved to be unsuccessful.

R.H. Donnelley's $803 million of term loan debt also allocated and freed for trading on Friday, with both the term loan A and the term loan B add-on quoted at par bid, par ½ offered - pretty much in line with where the existing term loan debt had been trading, according to traders.

The $503 million of term loan B add-on debt (Ba2/BB) under the Dex West facility is priced with an interest rate of Libor plus 175 basis points (consistent with existing term loan B pricing), and the $300 million term loan A (Ba3/BB) at Donnelley is priced with an interest rate of Libor plus 150 basis points.

JPMorgan, Deutsche (joint lead on Donnelley), Wachovia (joint lead on Dex West), Bear Stearns, Credit Suisse First Boston, Goldman Sachs and UBS are the lead banks on the deals.

Proceeds will be used to help fund the acquisition of Dex Media.

Under the terms of the agreement, each Dex share will be exchanged for $12.30 in cash and 0.24154 R.H. Donnelley share. Current Dex shareholders will receive about $1.85 billion in cash and 36.4 million R.H. Donnelley shares, for total equity consideration of about $4.2 billion. R.H. Donnelley will also assume Dex's net debt outstanding, expected to be about $5.3 billion at year-end 2005.

The transaction is expected to be completed during the first quarter of 2006.

Cary, N.C.-based R.H. Donnelley is a Yellow Pages publisher and directional media company. Englewood, Colo.-based Dex provides print directories and internet-based local search services.

Calpine up on non-acceleration accord

Calpine Corp.'s second-lien bank debt reversed direction on Friday, moving up by about a point or so, in reaction to second-lien note trustees having agreed to not accelerate the debt, according to a trader.

The San Jose, Calif.-based power company's second-lien bank debt was quoted at 75 bid, 77 offered, up from Thursday's closing level of 74 bid, 75 offered, the trader said.

Calpine's second-lien bank debt has been in somewhat of a freefall since around mid-week after news surfaced that Wilmington Trust Co., trustee for bondholders, notified the company that it could default on $3 billion in second-lien secured debt unless it immediately repaid the approximately $312 million that was ruled to be improperly spent on asset purchases, to the Bank of New York collateral account.

But, under the recent court ruling, Calpine had been given until Jan. 22, 2006 to repay the funds.

Calpine had filed a temporary restraining order against bond trustees from accelerating the repayment of second-lien notes on or before Jan. 22; however, late Thursday news emerged that this restraining order was withdrawn because an agreement was reached with the second-lien note trustees.

At the start of the week, before the legal wrangling with bondholders had gained so much momentum, Calpine's second-lien bank debt was being quoted in the 77½ bid, 80 offered type of range.

Constellation pulls deal

Constellation Brands pulled its $1.2 billion credit facility from market now that the offer to purchase all of the common shares of Vincor expired at midnight on Dec. 8 and no new offer is being put on the table, according to a market source.

The facility that was going to be used to fund the Vincor takeover consisted of a $300 million term loan A talked at Libor plus 150 basis points and a $900 million term loan C talked at Libor plus 175 basis points.

JPMorgan and Citigroup were acting as the lead banks on the deal, with JPMorgan the left lead.

The takeover of Vincor has been on shaky round since day one. On Oct. 20, Constellation began the cash takeover bid for Vincor at C$31 per share. In early November, it was announced that the board of directors of Vincor unanimously recommended that shareholders reject Constellation's C$31 per share takeover bid, saying, among other things, that the offer undervalues the company, does not provide shareholders with an appropriate change-of-control premium and is disadvantageous to shareholders. Following this rejection, Constellation upped its offer to C$33 per share, which was the final offer that just expired.

"It is unfortunate for Vincor shareholders that the Vincor board chose not to pursue the alternative that would maximize value for its shareholders, despite the board's failure to identify any other alternatives. The Vincor board refused to engage in any dialogue with us regarding our C$35 per share cash proposal," said Richard Sands, Constellation Brands chairman and chief executive officer, in a company news release.

"Constellation could not let this process continue indefinitely. In these circumstances, we will move on to other priorities and we will continue to build upon our outstanding track record of delivering growth and value to our shareholders," Sands added in the release.

Constellation is a Fairport, N.Y., producer and marketer of beverage alcohol brands. Vincor is a Mississauga, Ont., wine company.

Recycled Paper tweaks again

Recycled Paper Greetings Inc. made another round of changes to its $217 million credit facility, upsizing the first- and second-lien term loans, removing the mezzanine tranche that was added during syndication, and increasing pricing on the second-lien, according to a syndicate document.

The six-year term loan B (B2/B) was upsized to $120 million from $110 million, the document said. Pricing on the term loan is set at Libor plus 350 basis points, where it was moved to in late-November after flexing up from original price talk at launch of Libor plus 300 basis points.

The seven-year second-lien term loan (Caa1/CCC+) was increased to $77 million from $72 million and pricing was flexed up to Libor plus 800 basis points plus 100 basis points pay-in-kind, from Libor plus 750 basis points, the document said. Pricing on the second-lien loan had already been flexed up once during syndication from Libor plus 700 basis points.

In late-November, the second-lien tranche had been downsized from $87 million, which is when the $15 million mezzanine junior term loan, that was just removed, was added to the deal. The proposed 71/2- to eight-year mezzanine junior term loan was priced at 12% plus 6% PIK.

The second-lien term loan contains call protection of 103 in year one, 102 in year two and 101 in year three, which was changed in late-November from originally proposed call protection of 102 in year one and 101 in year two.

Furthermore, a 100 basis point original issue discount was added to the second-lien term loan in late-November as opposed to the original par offer price.

Recycled Paper's credit facility also contains a $20 million five-year revolver (B2/B) with an interest rate of Libor plus 350 basis points and a 50 basis point commitment fee. Pricing on this tranche had also been increased last month from Libor plus 300 basis points.

Credit Suisse First Boston is the lead arranger on the leveraged buyout financing deal.

Recycled Paper Greetings is a Chicago-based greeting card company.

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