Rent-A-Center closes books on Monday with all three tranches oversubscribed

By Sara Rosenberg

New York, May 19 - Rent-A-Center Inc.'s $600 million credit facility is close to completion, as commitments for the deal were due on Monday, allocations are anticipated to take place mid-to-late week and closing is expected to occur on May 28, according to a syndicate source. The deal was so successful during its syndication process that not only did the term loan B reach oversubscription but so did the revolver and the letter of credit facility.

The facility consists of a $400 million six-year term loan B with price talk of Libor plus 250 to 275 basis points, a $120 million five-year revolver with an interest rate of Libor plus 225 basis points and an $80 million five-year letter of credit facility with an interest rate of Libor plus 225 basis points.

The term loan B is being offered at par. For the revolver, a $15 million commitment gets 5/8 on allocation and a $20 million commitment gets 75 basis points on allocation.

Banks were asked to commit on a three to one basis with regards to the letter of credit facility and the revolver. For every $3 committed to the letter of credit facility, banks are required to commit $1 to the revolver.

Some reasons for the smooth syndication process include: the market is familiar with the company, there is a large existing lender base, the company has a history of deleveraging and performing well, pricing is more beneficial to existing investors, and both Moody's Investors Service and Standard & Poor's upped the company's rating outlook prior to the new deal - Moody's to stable from negative and S&P to positive from stable.

The facility was originally expected to be sized at $650 million, but was reduced by $50 million after the company's bond offering was upsized by $50 million.

Lehman Brothers and JPMorgan are the lead banks on the deal, which will be used to refinance the company's existing senior debt.

Rent-A-Center is a Plano, Tex. operator of company-owned stores in the rent-to-own industry.

Meanwhile, Pacer International Inc.'s $330 million credit facility, which is scheduled to launch on Wednesday, has already received some interest from a couple of funds looking at the deal, leading some to believe that the syndication process is going to go well, a source close to the deal told Prospect News on Monday. Deutsche Bank is the lead bank on the deal.

The loan consists of a $75 million five-year revolver with an interest rate of Libor plus 325 basis points and a $255 million seven-year term loan B with an interest rate of Libor plus 325 basis points, the syndicate source said.

Proceeds will be used to refinance the Concord, Calif. logistics provider's existing credit facility and will redeem or repurchase all of its existing 11¾% senior subordinated notes. Assuming consummation of the refinancing and redemption of the notes given the current market environment, the company expects 2004 diluted earnings per share to be approximately $0.10 per share greater than if the planned transactions had not occurred.

As for the secondary, loan trading continued to be better bid last week, in reaction to strong high-yield bond mutual fund inflows and a relatively light high-yield loan forward calendar. And, the trend is expected to continue this week as well with few deals launching and repayments looking to jump due to increased high yield bond issuance, according to a Banc of America Securities research report.

High-yield bond mutual funds inflows continued for the 12th consecutive week last week, at $331.3 million. Year-to-date weekly inflows total $13.7 billion, while year-to-date monthly inflows total $5.2 billion, bringing the aggregate to $18.9 billion, an increase of 139% over the $7.9 billion at this time last year, according to the report.

For May so far, high-yield bond volume was $11 billion as of the end of last week, surpassing April's total of $9.4 billion. "With the second half of the month still ahead of us continued high yield bond mutual fund inflows and a growing high yield bond forward calendar suggest May could hit $16-17 billion in bond volume. If issuance continues at this pace, or even slows moderately, May could shape up to be the largest volume month for the high yield bond market since May 1998 ($17.8 billion)," the report said.

In follow up news, Pinnacle Entertainment Inc. closed on its $235 million credit facility (B1/B+). Bank of America and Bear Stearns were the lead banks on the deal.

Originally the loan was set at an amount of $225 million, but was increased due to oversubscription.

The Las Vegas diversified gaming company's new facility consists of a $110 million four-year revolver and a $125 million five-year term loan.

This facility replaces the facility that was scheduled to expire in December 2003.

Proceeds will be used to help finance the construction of the Lake Charles, La. project and the new hotel guestroom tower at Belterra Casino Resort, as well as be available for general corporate purposes.

"We are pleased to announce our amended credit facility, which is the major financing vehicle for our exciting project in Lake Charles," said Steve H. Capp, executive vice president and chief financial officer, in a news release. "We're making rapid progress on regulatory and local approvals, and expect to break ground on our newest destination resort shortly.

"Our amended credit facility will be an important source of liquidity to help finance our Lake Charles project," Capp continued. "Both the Belterra expansion and the Lake Charles project, as well as the maintenance of our existing properties, will be funded by our surplus cash, cash flow from operations, proceeds of land sales, and the amended credit facility."

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