Emdeon firms pricing; Bank loan fund outflows moderate; LCDX 17 flat to slightly softer

By Paul A. Harris

Portland, Ore., Oct. 13 - A quiet Thursday in the bank loan market saw Emdeon Inc. firm pricing on its slightly upsized $1.224 billion seven-year term loan. The spread firmed at the tight end of guidance, and the original issue discount firmed at the rich end of guidance.

The secondary market remained extremely quiet, according to a New York-based trader, who said that the LCDX 17 bank loan index was flat to slightly softer on the session, at 91 bid, 92 offered, down 1/8 point, heading into the mid-afternoon.

However, the index was much improved from last week when it finished at 89 bid at last Friday's close, the trader remarked.

Indications of the cash being allocated to bank loans remained moderately negative.

Bank loan mutual funds saw $146 million of outflows for the week to Wednesday's close, according to an investment banker, who referred to a late Thursday report from Lipper-AMG.

Meanwhile EPFR Global reported a $141 million outflow from floating-rate funds.

"Outflows have not been big," commented a bank loan mutual fund manager. "Companies are doing pretty well. Maturities are few. And defaults are low."

This manager does not look for the U.S. economy to slip back into recession.

"If it does it will probably be a low-default recession, which doesn't generate a lot of selling," the investor said.

Emdeon firms pricing

Emdeon slightly upsized its seven-year term loan B to $1.224 billion from $1.2 billion, while firming up the spread at the tight end of guidance and the original issue discount at the rich end of guidance on Thursday.

The deal features a Libor plus 550 basis points spread, with a 25 bps step down to Libor plus 525 bps when leverage is 5.75 times or less. Spread talk was Libor plus 550 bps to 575 bps.

There is a 1.25% Libor floor.

The term loan is set to price with an original issue discount of 97, which is the rich end of the 96 to 97 price talk.

The deal comes with 101 soft call protection for one year.

Allocations are expected in the middle part of the week ahead.

The credit facility (Ba3), which is upsized to $1.349 billion from $1.325 billion, also features a $125 million revolver.

Covenants include a maximum first-lien net leverage ratio and a minimum consolidated cash interest coverage ratio.

Bank of America, Citigroup and Barclays are the joint lead arrangers and bookrunners on the deal, with Bank of America the left lead. Goldman Sachs & Co. is also a bookrunner.

Proceeds will be used to help fund the buyout of the company by Blackstone Capital Partners VI LP for $19.00 per share in cash. The transaction is valued at about $3 billion.

Other funds for the transaction will come from $375 million of senior notes, and the company has already placed $375 million of notes with a single investor. As a result, the company reduced the size of its bridge loan commitment to $375 million.

Meanwhile Emdeon moved up timing and set price talk on its remaining $375 million of senior notes.

Talk on the notes is 11% to 11¼%. The bond deal, which had been expected to have a roadshow on the West Coast of the United States early in the week ahead, is now expected to price on Friday.

RegionalCare sets meeting

RegionalCare Hospital Partners will host a lender meeting on Monday for a senior secured financing, according to an informed source.

The size and structure of the deal have not been announced, the source added.

Citigroup Global Markets, Morgan Stanley & Co. and Deutsche Bank Securities Inc. are the leads.

Proceeds will be used to help finance the purchase of Essent Healthcare from Vestar Capital Partners and Cressey & Co., according to market sources.

RegionalCare is a Brentwood, Tenn.-based owner and operator of four non-urban hospitals. Essent is a Nashville-based owner and operator of three non-urban acute care hospitals.

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