MEG Energy sets ticking fee; Gainey cuts spread, adds step down; Resorts up on rumors of spread bumps

By Sara Rosenberg

New York, March 1 - MEG Energy Corp. released information about the delayed-draw unused fee that investors had been curious about as the deal was launched with a well-attended bank meeting on Wednesday.

Also in the primary, Gainey Corp. reverse flexed pricing on its term loan and added a step down to the tranche on strong demand.

Over to the secondary, Resorts International Holdings LLC saw its first- and second-lien term loan head higher in trading as speculation started circling around the marketplace that the company may end up increasing interest rates in connection with covenant negotiations.

MEG Energy announced at its Wednesday bank meeting the ticking fee on the delayed-draw term loan B piece contained in its credit facility, which was definitely of interest to some investors as the presence of this particular tranche raised some questions about whether it was possible for the company to get as attractive a rate or as large of an audience.

And, it seems as if some of those previous concerns were washed away as talk is that the deal in its entirety was met with a good reception and significant early interest, according to various sources.

MEG launched its $350 million two-year delayed-draw, seven-year final maturity, term loan B tranche with a ticking fee of 75 basis points that will step up over time, one market source said.

As was previously disclosed, the delayed-draw term loan B carries opening price talk of Libor plus 225 basis points.

Investors had been keeping an eye out for details on the delayed draw as that piece of the capital structure had some concerned, being that the component makes the deal tough to do for most CLOs, which are 70% of demand, although not impossible.

In addition, sources have said that although it's hard to price that high a percentage of delayed draw at an attractive blended rate, the feel for oil sands collateral value is very high, making this deal, and in particular, the delayed draw, one to watch.

MEG Energy's $750 million credit facility (Ba3/BB) also contains $350 million of funded seven-year term loan B debt talked at Libor plus 225 basis points and a $50 million three-year revolver talked at Libor plus 225 basis points with a 50 basis point undrawn fee.

The funded and delayed-draw term loan B tranches are being sold to investors as a strip.

Lehman and Credit Suisse are the lead banks on the credit facility, with Lehman the left lead.

Proceeds will be used to develop a SAGD (Steam Assisted Gravity Drainage) project. SAGD involves drilling pairs of horizontal wells. The upper wells are the steam injection wells and the lower wells are equipped as the bitumen production wells. Steam is continuously injected through the upper well bores to create steam chambers, which heat the formation. The heated bitumen, under the influence of gravity, then drains to the lower horizontal wells and is produced to the surface.

MEG Energy is an oil and gas company involved in oil sands development in northeast Alberta, Canada.

Gainey trims pricing

Gainey lowered pricing on its $210 million term loan by 25 basis points and added a step down provision based on leverage as the deal was met with good reception, according to a market source.

The term loan is now priced with an interest rate of Libor plus 275 basis points, down from initial price talk at launch of Libor plus 300 basis points, the source said.

Furthermore, a step down in spread to Libor plus 250 basis points was added to the term loan effective once the company's leverage drops below 23/4x, the source added.

Gainey's $260 million credit facility (B2/BB-) also contains a $50 million revolver.

Wachovia is the lead bank on the deal.

Gainey is a Grand Rapids, Mich., provider of freight transportation.

Resorts trades up on pricing murmurs

In trading, Resorts International's first-lien term loan and second-lien term loan strengthened during market hours as rumors began to circulate that the company's covenant negotiations may result in higher spreads for lenders, according to a trader.

The first-lien term loan closed the day quoted at par bid, par ¾ offered, up from previous levels of 99½ bid, par offered, the trader said.

And, the second-lien term loan closed the day quoted at 96½ bid, 98 offered, up from a previous trading level of around 96, the trader continued.

"There are rumors that they're bumping up the coupon, particularly on the second but people think it might happen on the first also," the trader explained. "They've been in negotiations for about a week now with the bank group about covenants. They were in violation once before, around a month ago, and pricing got bumped when they resolved it. They got downgraded when that happened. I think they might be close again [to non-compliance]."

Early on in February, Resorts International's first-lien term loan and revolver were downgraded to Caa1 from B2 and the second-lien term loan to Caa2 from B3 by Moody's Investors Service, with a negative outlook, because of the company's inability to comply with certain quarterly leverage covenants.

The non-compliance, which was based on the company's Dec. 31, 2005 results, came on the heels of bank loan amendments in late 2005 that addressed previous covenant violations, Moody's had said.

Furthermore, on Jan. 20, Resorts International was downgraded by Standard & Poor's, at which time the revolver and first-lien term loan were dropped to CCC+ from B and the second-lien term loan was cut to CCC- from CCC+. S&P also assigned a negative outlook to the ratings.

At the time of the downgrade, S&P attributed the move to the deterioration of operating performance based on publicly available information through December at the company's Atlantic City, N.J.-based property and through November at its Indiana-based property, which signifies management's continued inability to stabilize the business since it took over operations in April.

Resorts International is an owner and operator of casinos in Atlantic City, N.J., the Chicagoland gaming market and Tunica, Miss.

Dunkin' closes

A consortium of global private equity firms consisting of Bain Capital Partners LLC, The Carlyle Group and Thomas H. Lee Partners LP completed the acquisition of Dunkin' Brands Inc. from Pernod Ricard SA for $2.425 billion in cash on Wednesday, according to a news release.

To help fund the LBO, Dunkin' Brands got a new $1 billion credit facility (B2/B+) consisting of a $150 million revolver with an interest rate of Libor plus 250 basis points and an $850 million term loan B with an interest rate of Libor plus 250 basis points.

During syndication, pricing on both the revolver and the term loan was reverse flexed from Libor plus 275 basis points, and the term loan was upsized from $700 million.

To compensate for the increased amount of term loan B funds, the company decreased the size of its funded bridge loan.

JPMorgan and Lehman acted as the lead banks on the credit facility, with JPMorgan the left lead.

Dunkin' Brands is a Canton, Mass., quick-service restaurant franchisor.

Panolam closes

Panolam Industries International Inc. completed its acquisition of Nevamar Holdco LLC, the parent of Nevamar Co. LLC, a leading manufacturer of decorative surface products, according to a company news release.

To help fund the purchase, Panolam got $90 million of incremental bank debt (B2/B+), consisting of a $10 million five-year revolver add-on at Libor plus 275 basis points with a 50 basis point commitment fee and an $80 million seven-year term loan B add-on at Libor plus 275 basis points.

Credit Suisse acted as the lead arranger on the deal.

Panolam is a Shelton, Conn., provider of decorative surfaces for commercial and residential interiors, store and store fixtures and furniture.

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