Royalty Pharma breaks; Rite Aid down on numbers; Lear up with revised outlook; Superior pulls loan

By Sara Rosenberg

New York, Dec. 20 - Royalty Pharma's term loan B add-on allocated and freed for trading on Thursday, with levels quoted above the original issue discount price.

Also in trading, Rite Aid Corp.'s term loan softened after the company released disappointing third-quarter financials and lowered guidance for fiscal 2008, and Lear Corp.'s term loan B improved following an upward revision to its full-year 2007 guidance.

In other news, Superior Offshore International Inc. has terminated plans for a new term loan as the entity that committed to provide the debt has elected to pull out of the transaction.

Royalty Pharma's $700 million add-on to its term loan B (BBB-) hit the secondary market on Thursday, with levels quoted at 99¾ bid, par offered, according to a trader.

The add-on trades with the existing term loan B debt.

The term loan B add-on is priced at Libor plus 225 basis points and was sold to investors with an original issue discount of 99.

In connection with the add-on, the company increased pricing on its existing term loan B to Libor plus 225 bps from previous pricing of Libor plus 150 bps.

Bank of America is the lead bank on the deal that is being used for acquisition financing.

Royalty Pharma is a New York-based acquirer of revenue-producing intellectual property, principally royalty interests in marketed and late-stage biopharmaceutical products.

Rite Aid slides on financials

Rite Aid's term loan headed lower during market hours in reaction to the company's third-quarter results and revised fiscal 2008 guidance, according to a trader.

The term loan went out at 93½ bid, 94½ offered, down from 94 bid, 95 offered on Wednesday, the trader said.

On Thursday, Rite Aid announced third-quarter numbers that included a net loss of $84.8 million, or $0.12 per diluted share, compared to last year's third-quarter net income of $1.1 million, but loss of $0.01 per diluted share.

Revenues for the quarter were $6.52 billion, an increase of 51% from $4.32 billion in the prior year.

Adjusted EBITDA was $232.3 million, or 3.6% of revenues, for the third quarter compared to $160.8 million, or 3.7% of revenues, last year.

"Pharmacy same-store sales increases remained steady throughout the quarter, gross margin rate improved and our team once again did a good job of controlling expenses. But even though our front end sales started to turn positive in November, we are disappointed with our results," said Mary Sammons, chairman, president and chief executive officer, in a company news release. "Like the rest of the industry, our business has been negatively impacted by a slow start to the cough, cold and flu season and a more cautious consumer."

As for fiscal 2008, based on current trends, Rite Aid lowered guidance for sales, net loss and adjusted EBITDA.

The company said it expects sales to be between $24.3 billion and $24.6 billion, with same-store sales improving 1% to 2%, compared to previous guidance of $24.5 billion and $25.1 billion, with same-store sales improving 1.3% to 3.3%.

Net loss for fiscal 2008, including nine months of acquisition-related cost savings of about $200 million, is expected to be between $161 million and $192 million, or between $0.27 and $0.31 loss per diluted share, compared to previous guidance of net loss between $78 million and $161 million, or a loss per diluted share of $0.15 to $0.27.

Fiscal 2008 adjusted EBITDA is expected to be between $950 million and $1 billion, compared to previous guidance of between $1 billion and $1.1 billion.

Capital expenditures, including integration capital expenditures but excluding proceeds from sale and leaseback transactions, are expected to be between $790 million to $820 million, compared to $825 million to $875 million.

And, proceeds from sale and leaseback transactions are expected to be about $85 million, compared to $100 million.

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

Lear strengthens on guidance

In more trading news, Lear's term loan B gained some ground during the session after the company announced an improvement in its full-year 2007 financial outlook, according to a trader.

The term loan B closed the day at 97 bid, 98 offered, up from 96¾ bid, 97¼ offered, the trader said.

On Thursday, Lear said that it now expects core operating earnings this year of about $750 million, compared with its previous outlook of $680 million.

The increase reflects stronger-than-expected production schedules in North America in the fourth quarter, continuing strong operating performance and the benefits from restructuring actions as well as the timing and outcome of several commercial items.

Free cash flow for 2007, previously forecasted at about $350 million, is expected to benefit from the increased operating earnings, offset in part by higher cash restructuring costs.

In addition, based on current full-year industry production estimates, Lear reaffirmed its outlook for 2008 core operating earnings of about $680 million.

Furthermore, Lear said that it now expects to incur about $180 million in restructuring costs this year, an increase of $55 million from the previous estimate.

The increase in restructuring costs is primarily related to the pull-ahead of certain facility closure and severance actions in Canada and Western Europe that were planned for 2008 and 2009.

Lear is a Southfield, Mich.-based supplier of automotive seating systems, electrical distribution systems and electronics products.

Superior Offshore cancels new term loan

Moving to the primary, Superior Offshore's plan to get a new $80 million five-year term loan by Dec. 21 was stopped short as the provider of the loan commitment, AIG Equipment Finance Co., decided not to proceed with the deal.

Pricing on the proposed term loan was going to be Libor plus 400 bps, with a scheduled rate reduction upon the delivery of the Superior Achiever, the company's DP-III vessel that is under construction and is expected to go into service in the second half of 2008.

Proceeds from the term loan were going to be used to refinance the company's existing $55 million term loan with Fortis Capital Corp. and provide additional flexibility to fund future capital expenditures associated with the Superior Achiever.

However, the company still plans on repaying its term loan with Fortis as it has entered into a letter of intent with a strategic partner for the sale of the Superior Achiever vessel, which is expected to generate proceeds of more than $70 million.

As a result, Fortis has agreed to extend a waiver under the term loan until Jan. 21, 2008, the date by which the sale is expected to close.

Upon completion of the sale, the company expects to have no outstanding term loan debt and previously projected capital expenditures for 2008 are anticipated to be reduced by more than $30 million as a result of selling the Superior Achiever.

Superior Offshore is a Houston-based provider of subsea construction and commercial diving services to the offshore oil and gas industry.

Bosque ups spreads, OID

Bosque Power flexed pricing higher on its credit facility and widened the original issue discount on the term loan, according to a market source.

The $387.5 million seven-year term loan and the $25 million five-year revolver are now both priced at Libor plus 525 bps, up from original talk at launch of Libor plus 450 bps, the source said.

And, the original issue discount on the term loan was increased to 96 from most recent talk of 99 and from original talk of 991/2, the source added.

The revolver carries a 50 bps commitment fee.

Credit Suisse is the lead bank on the $412.5 million credit facility (B1/B+).

Proceeds will be used to help fund the acquisition of the Bosque power generation facility by Arcapita Inc. and Fulcrum Power Services LP from LS Power Group.

Located in Laguna Park, Texas, the Bosque facility began operations as a natural gas-fired power plant in 2000 and is undergoing conversion to a combined cycle facility with a capacity of more than 800 megawatts.

LyondellBasell closes

Basell AF and Lyondell Chemical Co. completed their merger, creating Netherlands-based LyondellBasell Industries, the world's third-largest independent chemical company, according to a news release.

Under the merger agreement, Basell acquired Lyondell for $48 per common share in an all-cash transaction with a total enterprise value of about $20 billion, including the assumption of debt.

To help fund the transaction, LyondellBasell got a new $14.6 billion senior secured credit facility consisting of a $1 billion cash flow revolver (Ba2/BB) priced at Libor plus 300 bps, with a 75 bps undrawn fee, a $2 billion U.S. and euro term loan A (Ba2/BB) priced at Libor plus 300 bps, a $9.45 billion U.S. and euro term loan B (Ba2/BB) priced at Libor plus 325 bps, a $1.15 billion ABL receivables purchase program facility priced at Libor plus 150 bps and a $1 billion ABL inventory-based facility priced at Libor plus 175 bps.

The two ABL facilities were launched to investors with a bank meeting on Nov. 29. For commitments of up to $50 million, investors were offered 30 bps upfront; for commitments of $50 million to $100 million, investors were offered 45 bps upfront; and for commitments of $100 million plus, investors were offered 60 bps upfront.

Senior managing agent rounds for the deal took place at the end of October in New York and London.

The cash flow revolver and term loan debt have yet to be launched to retail investors, and although a date hasn't been set, some are guessing that the bank meeting could happen early next year.

Citigroup, Goldman Sachs, Merrill Lynch, ABN Amro and UBS are the joint lead arrangers and joint bookrunners on the facility.

Covenants under the cash flow revolver, term loan A and term loan B include a first-lien senior secured leverage ratio of 3.75 times and a fixed-charge coverage ratio of 1.1 times.

TravelClick closes

Genstar Capital completed its acquisition of TravelClick from Bain Capital, according to a news release.

To help fund the transaction, TravelClick got a new $105 million credit facility (Ba3/B+) consisting of a $15 million revolver and a $90 million term loan B, with both tranches priced at Libor plus 400 bps.

The revolver was sold to investors with an original issue discount of 98, and the term loan B was sold at a discount of 99.

The revolver has a 50 bps unused fee.

Jefferies acted as the lead bank on the deal.

TravelClick is a Schaumburg, Ill., hotel e-marketing services provider.

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