Rite Aid dips on add-on loans; Reynolds floats talk; TNS readies opportunistic refinancing

By Sara Rosenberg

New York, Oct. 19 - Rite Aid Corp.'s term loans headed lower during Monday's trading session following the company's launch of add-ons to both its tranche-4 term loan and its revolver.

In other news, price talk on Reynolds' U.S. term loan and revolver started circulating throughout the market as the company is getting ready to launch its credit facility with a bank meeting on Tuesday morning.

Also on the new deal front, TNS Inc. is getting ready to launch a refinancing deal, and Allion Healthcare Inc. and Primary Energy Recycling Corp. are in the process of marketing new credit facilities, with Allion doing a buyout deal and Primary Energy doing a refinancing that is being attempted for a second time.

Rite Aid softens

Rite Aid's term loans lost some ground in trading as the company launched about $300 million of incremental bank debt on Monday comprised of a $125 million senior secured term loan add-on and a $175 million senior secured revolver add-on, according to a trader.

The tranche-4 term loan, which is being upsized through this transaction, was quoted at 103¾ bid, 104¾ offered, down from 104¼ bid, 105¼ offered, the trader said.

For a short period during the day, the tranche-4 term loan was as low as 103 bid, 104 offered, but it then moved back up.

Market chatter is that the add-on to the tranche-4 term loan may be issued at a premium of 103, which is why the existing traded down to that level for a short while. Official issue price on the add-on, however, has not yet been announced, the trader explained.

Also affected by the news was the company's old term loan, which was quoted at 87 bid, 88 offered, down from 87¼ bid, 88¼ offered.

The company's new term loan, however, was unfazed, holding steady at previous levels of 94¼ bid, 95¼ offered, the trader added.

Rite Aid add-on details

Both of Rite Aid's add-ons are priced in line with the existing bank debt - so the incremental term loan tranche-4 due June 2015 is priced at Libor plus 650 basis points with a 3% Libor floor and the incremental revolver is priced at Libor plus 450 bps with a 3% Libor floor.

Also, the term loan add-on, like the existing tranche-4 term loan debt, carries call protection of 105, 103, 101.

With the add-ons, the total tranche-4 term loan size will increase to $650 million and the revolver size will increase to $1.175 billion.

Rite Aid refinancing debt

Rite Aid plans on using proceeds from the additional term loan and borrowings under its upsized revolver to help repay and cancel its accounts receivable securitization facilities.

Other funds for the refinancing will come from a $270 million senior secured notes offering.

As of Oct. 16, there was $475 million outstanding under the securitization facilities.

Upon successful completion of the transactions, the company will have refinanced all of its September 2010 debt maturities.

Citigroup is the left lead bank and a bookrunner on the incremental bank debt, and Bank of America, Wells Fargo and Goldman Sachs are joint bookrunners as well.

Commitments towards the add-ons are due from lenders on Tuesday morning.

Rite Aid updates cost saving plans

In connection with the new financings, Rite Aid provided information in an 8-K filed with the Securities and Exchange Commission regarding estimated cost savings for fiscal 2010 under certain operating initiatives.

The company estimates that its previously announced segmentation initiatives, which apply tailored operating strategies to high- and low-volume stores, will result in cost savings of about $150 million in fiscal 2010.

Also, the previously announced "all-store" initiatives, which include a focus on growing prescription count, controlling labor costs, reducing shrink expense, reducing supply chain costs, increasing private brand penetration and reducing working capital, is expected to result in cost savings of about $200 million in fiscal 2010.

The company went on to say that it anticipates the positive impact of these savings to be offset by reductions in pharmacy gross margin, caused by reimbursement rate pressures, fewer new generics and the impact of recently implemented AWP cost adjustments on its Medicaid business, and increases in labor rates and benefit costs.

Rite Aid is a Camp Hill, Pa.-based drugstore chain.

Reynolds talk surfaces

Reynolds' price talk began floating through the market as the Tuesday bank meeting for the roughly $1.45 billion credit facility is fast approaching, according to a market source.

Both the $835 million term loan and the $120 million revolver are being guided at Libor plus 450 bps to 500 bps with a 2% Libor floor, the source said.

And, original issue discount on the term loan is being talked at 98, the source added.

The credit facility also includes an €80 million revolver and a €250 million term loan.

Credit Suisse is the lead bank on the deal.

Proceeds will be used to help fund the acquisition of Closure Systems International and Reynolds Consumer Products by Beverage Packaging Holdings.

Reynolds getting notes

Other funds for the Reynolds acquisition will come from $1.1 billion of senior secured notes, €450 million of senior secured notes, €116 million of existing cash and €500 million of equity.

In addition to helping fund the acquisition, the senior secured debt will repay existing bank borrowings at Beverage Packaging of around €485 million and repay existing Reynolds debt.

The total purchase price for the companies is $3.023 billion, or 7.7 times LTM adjusted pro forma EBITDA.

Pro forma for the transaction, net senior secured leverage will be 3.3 times and net total leverage will be 4.8 times.

The company said in a press release that it is committed to the rapid deleveraging of the combined company with free cash flow.

Closing on the acquisition is expected to take place in the fourth quarter and the combined entity will assume the Reynolds name.

Reynolds is a manufacturer of aluminum foil, wraps and bags. Closure Systems is a manufacturer of plastic caps and closures, primarily serving the beverage market. And, Beverage Packaging is a manufacturer of aseptic carton packaging systems.

TNS launching Thursday

TNS will be holding a bank meeting on Thursday to launch a new $400 million credit facility, consisting of a $75 million five-year revolver and a $325 million six-year term loan B, according to a market source.

The term loan is talked at Libor plus 400 bps with a step-down to Libor plus 350 bps if the company's corporate rating is upgraded to 4-B status and leverage is below 1.5 times.

There is also a 2% Libor floor on the term loan B and an original issue discount of 981/2.

Price talk on the revolver is Libor plus 400 bps with a 2% Libor floor.

TNS led by SunTrust

SunTrust is the lead bank on the TNS credit facility that will be used to refinance existing bank debt, including a term loan that was just obtained a few months ago.

Earlier this year, the company closed on a $230 million incremental term loan priced at Libor plus 600 bps with a 3.5% Libor floor and 101 soft call protection for one year. Investors were offered the loan at an original issue discount of 90.

The source explained that market conditions are much better now, with investors having a lot more cash to put to work and that is why the company is doing this opportunistic refinancing.

TNS is a Reston, Va.-based provider of business-critical, cost-effective data communications services for transaction-oriented applications.

Allion seeks buyout loan

Allion Healthcare is in market with a $110 million credit facility that will be used to help fund its buyout by H.I.G. Capital LLC in a transaction valued at about $278 million, including the assumption or repayment of about $79 million of debt, according to a market source.

The facility consists of a $15 million revolver and a $95 million term loan, with both tranches talked at Libor plus 600 bps with a 2% Libor floor, and the original issue discount on the term loan is being talked at 97 to 98, the source said.

Fifth Third Bank is the lead bank on the deal that was launched with a bank meeting last week, even though the buyout was first publicly announced on Monday.

Closing is expected in the first quarter of 2010, subject to customary conditions, including antitrust and regulatory approvals, and stockholder approval.

Allion is a Melville, N.Y.-based provider of specialty pharmacy and disease management services.

Primary Energy retries refinancing

Primary Energy Recycling is in market with a $105 million term loan (Ba1/BB+) that is being talked around Libor plus 450 bps with a 2% Libor floor and an original issue discount of 98, according to a market source.

Credit Suisse is the lead bank on the deal that will be used to refinance existing debt.

The company already attempted this refinancing this summer when it launched a $152.5 million senior secured term loan via Credit Suisse that was talked at Libor plus 850 bps with a 2.5% Libor floor and an original issue discount of 97.

That larger term loan was then put on hold.

Primary Energy is an Oak Brook, Ill.-based owner and operator of recycled energy projects and a pulverized coal facility.

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