Denny's breaks following upsizings and reverse flexes; R.H. Donnelley, Piedmont break

By Sara Rosenberg

New York, Aug. 26 - Denny's Corp. allocated and broke for trading Thursday after a few modifications were made to the deal including increasing the size and reducing pricing on both term loans. Also hitting the secondary was R.H. Donnelley Corp. and Piedmont Hawthorne (also known as Garrett Aviation Services).

Denny's increased the size of its five-year first-lien term loan (B2/B) to $225 million from $200 million and reduced pricing on the tranche to Libor plus 325 basis points from Libor plus 350 bps, according to a market source.

The company also increased the size of its second-lien term loan (B3/CCC+) to $120 million from $100 million and reduced pricing on the tranche to Libor plus 512.5 basis points from Libor plus 550 bps, the source said.

In connection with the upsizing of the term loans, Denny's is now contemplating an approximately $175 million bond deal as opposed to the originally anticipated size of $220 million, the source added. These new bonds, which haven't launched as of yet, would be used to refinance existing senior notes. The credit facility is not contingent on this bond deal.

Once the credit facility hit the secondary, the first-lien term loan was seen quoted around 101 bid and the second-lien term loan was bid right below that "but they both straddled 101," the source added.

The now $420 million credit facility also contains a $75 million four-year revolver (B2/B) with an interest rate of Libor plus 350 basis points. Size and pricing of the revolver were left unchanged.

Banc of America Securities LLC and UBS Securities LLC are joint lead arrangers on the deal, with Bank of America listed on the left.

Proceeds will be used to refinance the existing credit facility, refinance a portion of existing senior notes and be available for working capital, capital expenditures and other general corporate purposes.

Closing on the loan is expected to occur in September.

Denny's is a Spartanburg, S.C., full-service family restaurant chain.

R.H. Donnelley 101 bid

R.H. Donnelley's term loan B was quoted at 101 bid, 101½ since opening at those levels until close, with one trader seeing the paper trade quite actively during market hours and another trader not seeing much activity in the name at all.

The $1.718 billion term loan B is priced with an interest rate of Libor plus 225 basis points.

R.H. Donnelley's $2.5925 billion (Ba3/BB) also contains a $699.5 million term loan A with an interest rate of Libor plus 200 basis points and a $175 million revolver with an interest rate of Libor plus 200 basis points and an undrawn fee of 37.5 basis points. The revolver is expected to be undrawn at closing.

Originally, the term loan B was sized at $1.968 billion and the term loan A was sized at $499.5 million but the company opted to downsize the B by $250 million and upsize the A by $200 million to lower its cost of capital. The $50 million reduction in term debt following these changes was a result of the company not needing those funds.

JPMorgan and Bear Stearns are the lead banks on the equally underwritten deal, with JPMorgan listed on the left. Deutsche Bank is also a lead on the deal. Citigroup and Goldman Sachs are co-documentation agents.

Proceeds from the term loans will be used to fund the acquisition of SBC Communications Inc.'s directory publishing business in Illinois and Northwest Indiana for $1.42 billion in cash. The transaction is expected to close in the third quarter subject to regulatory approval and certain closing conditions.

Basically, through this transaction, the company is gaining about $1.4 billion in incremental bank debt, extending the maturity of the term loan A and the term loan B by one year each, decreasing pricing on the term loan A from Libor plus 225 basis points and removing the fixed charges covenant that is found in the existing credit agreement.

Following the acquisition, R.H. Donnelley expects to have pro forma 2004 consolidated adjusted revenue of about $1 billion and EBITDA of about $586 million, assuming a Jan. 1, 2004 close.

Total leverage immediately following the transaction will be about 5.8 times pro forma adjusted 2004 EBITDA.

R.H. Donnelley is a Cary, N.C., yellow pages publisher and directional media company.

Piedmont mid-to-high par bids

Piedmont Hawthorne (Garrett Aviation) allocated its $287 million credit facility on Thursday, with both the first- and second-lien term loans hitting the secondary at par plus to 101 levels.

More specifically, the $157 million first-lien term loan (B1/B+) was quoted at par ¾ bid, 101¼ offered and the $70 million second-lien term loan (B2/B-) was quoted at par ½ bid, 101 offered, with levels on both tranches remaining pretty steady throughout the day, according to a trader.

The first-lien term loan is priced with an interest rate of Libor plus 250 basis points with a step down to Libor plus 225 basis points if leverage falls below 3.5x. Originally, this tranche was launched with a size of $147 million and pricing of Libor plus 275 basis points but was increased and reverse flexed during syndication on strong demand.

The second-lien term loan is priced with an interest rate of Libor plus 525 basis points. Originally, the tranche was launched with a size of $80 million but was reduced in connection with the first-lien upsizing. Pricing remained unchanged since launch.

Both term loans were oversubscribed but the first-lien term loan was way oversubscribed and the second-lien term loan was only a bit oversubscribed, a market source previously explained to Prospect News.

Piedmont's facility also contains a $60 million revolver (B1/B+) with an interest rate of Libor plus 250 basis points.

Lehman Brothers and Citigroup are joint lead arrangers and joint bookrunners on the credit facility, with Lehman left lead and administrative agent.

Proceeds will be used to help fund The Carlyle Group's acquisition of Garrett Aviation from General Electric Co. Carlyle plans to combine Tempe, Ariz.-based Garrett with one of its existing portfolio companies, Piedmont Hawthorne, to create a general aviation aftermarket service provider offering a more comprehensive range of services.

The transaction is expected to close in the third quarter.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.