Targa upsizes term loan, downsizes bonds; Workflow Management sets price talk; Refco rallies

By Sara Rosenberg

New York, Oct. 17 - Targa Resources Inc. increased the size of its already massive term loan B and, in return, decreased the size of its high-yield bond offering - proving that there was some truth to the market rumors heard as early as last week.

In other primary news, Workflow Management Inc. came out with price talk on its proposed credit facility as the deal was launched into syndication on Monday.

As for the secondary, Refco Inc.'s bank debt took a nice leap forward gaining something like 20 points on the day as news surfaced that the company is close to selling its futures business.

Targa Resources shifted $100 million of funds into its seven-year term loan B and out of its bond offering, egged on by demand for the institutional loan paper being incredibly strong and recent choppiness in the high-yield market.

The term loan B is now sized at $1.25 billion as compared to an original size of $1.15 billion, according to a market source. Price talk on the tranche remained at Libor plus 250 basis points.

Meanwhile, the bond offering is now sized at $250 million as compared to an original size of $350 million and will now be comprised of all fixed-rate debt as opposed to containing both a fixed-rate and a floating-rate tranche. The syndicate went out to investors with price talk in the 8.5% area on the bond offering, the source said.

Last week, there were already rumors swirling around the loan and bond markets about a potential shift of funds. Talk was that the company was considering financing its acquisition solely as a loan transaction, as opposed to using the bond component as well, because the credit facility was so well received, making it easily increasable. There was also speculation that if the company didn't cancel its bond offering completely, it would at least move some money out the high-yield market and into its institutional term loan.

Targa's $2.4 billion credit facility (Ba3/B+) also contains a $250 million six-year revolver talked at Libor plus 225 basis points, a $300 million six-year synthetic letter-of-credit facility talked at Libor plus 225 basis points and a $700 million two-year asset sale term loan talked at Libor plus 225 basis points.

Credit Suisse First Boston, Merrill Lynch and Goldman Sachs are the lead banks on the deal, with CSFB the left lead.

Proceeds from the loan and the bonds will be used to help fund Targa's acquisition of Dynegy Inc.'s Midstream natural gas business for $2.35 billion.

The Midstream business, once acquired, will continue to be based in Houston and will be combined with Targa's Louisiana and Texas assets.

Completion of the acquisition, which is expected to take place in the fourth quarter, is conditioned on the expiration or termination of the Hart-Scott-Rodino waiting period and the fulfillment of other customary closing conditions.

Targa is an independent midstream energy company formed in 2003 by management and the global private equity firm Warburg Pincus.

Workflow Management price talk

Opening spreads on Workflow Management's proposed $455 million credit facility surfaced on Monday as the deal was launched to investors via a bank meeting.

Both the $40 million five-year revolver (B2/BB-) and the $300 million five-year first-lien term loan B (B2/BB-) went out with opening price talk of Libor plus 300 basis points, according to a market source.

Meanwhile, the $115 million seven-year second-lien term loan (B3/B) went out with opening price talk of Libor plus 700 basis points, the source added.

The revolver contains a commitment fee of 50 basis points.

Credit Suisse First Boston, National City Bank and Royal Bank of Canada are joint lead arrangers on the deal.

Proceeds from the credit facility will be used to fund the acquisition of Relizon Co., a North American supplier of business process solutions for document outsourcing, billing and marketing.

Workflow, a portfolio company of Perseus LLC, is a New York-based full-service print and promotional products provider.

Refco rebounds

Refco's bank debt rallied into the 80s when, after a surge of negative news, a positive surfaced - the company is close to selling its futures brokerage business, according to market sources.

The bank paper was quoted at 81 bid, 83 offered in the late afternoon and as high as 86 bid, 88 offered in the morning, sources said. These levels are dramatically higher than Friday's closing quotes of 64 bid, 68 offered.

On Monday, Refco said that it is in advanced negotiations with a group of investors led by J.C. Flowers & Co. for the sale of its futures brokerage business conducted through Refco LLC, Refco Overseas Ltd., Refco Singapore Pte. Ltd., and certain related subsidiaries and other assets.

The company went on to say that it expects to reach a memorandum of understanding with J.C. Flowers shortly and will execute definitive agreements soon thereafter.

All last week, Refco's bank debt was seen seesawing all over the place, with levels swaying anywhere between the 50s and the 80s after the scandal broke that Phillip R. Bennett, now ex-chief executive officer and chairman of the board of directors, owed the company an approximately $430 million receivable.

Bennett was said to have repaid the receivable in cash, including all accrued interest. However, the impact is still being felt as problems with previous and upcoming financial statements resulted from the fraud, multiple rating downgrades were announced, a 15-day moratorium on all activities of Refco Capital Markets LLC was imposed because of liquidity issues and the company's regulated Broker Dealer, Refco Securities LLC, initiated the process of unwinding proprietary and client positions.

Refco has retained as special advisers to its board of directors Arthur Levitt, formerly chairman of the Securities and Exchange Commission and chairman of the American Stock Exchange, and Eugene A. Ludwig, formerly U.S. Comptroller of the Currency and currently chief executive officer of Promontory Financial Group LLC and Promontory Financial Group LLC.

Goldman, Sachs & Co. has been retained as the company's financial adviser.

Refco is a New York-based diversified financial services organization.

Boston Generating completes restructuring

Boston Generating LLC completed a recapitalization of $1.2 billion in debt and equity that was arranged by Credit Suisse First Boston, which also underwrote $130 million of new credit facilities, according to a company news release.

The new bank debt was presented to the company's existing lender group, which had the opportunity to roll their positions into this new deal.

Furthermore, as part of the recapitalization, K Road Power acquired a 10% equity interest in Boston Generating.

K Road Power is a New York-based private company that targets acquisitions and investments in the U.S. power industry.

Affinion closes

Cendant Corp. completed the sale of its Marketing Services Division to Affinity Acquisition Holdings LLC, an affiliate of Apollo Management LP, for about $1.8 billion of total consideration, of which about $1.7 billion was in cash and the balance was in preferred stock and warrants, according to a company news release.

To help fund the transaction, Affinion Group got a new $985 million credit facility (B1/B+) consisting of a $125 million six-year revolver with an interest rate of Libor plus 275 basis points and an $860 million seven-year term loan B with an interest rate of Libor plus 275 basis points and 101 soft call protection for one year.

The term loan was increased during syndication to $860 million from $760 million after the company decided to drastically reduce its bond offering. At the time of the term loan upsizing, pricing on the tranche was increased from the Libor plus 225 to 250 basis points range and the soft call protection for one year was added.

Pricing on the revolver was also flexed up from the Libor plus 225 to 250 basis points range during syndication.

Credit Suisse First Boston and Deutsche acted as joint lead arrangers on the credit facility, with CSFB the left lead.

Affinion Group is a Norwalk, Conn., direct marketer of membership clubs and insurance products.

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