Rite Aid oversubscribed at lower spread, but with OID and floor; Freescale bounces around on numbers

By Sara Rosenberg

New York, Jan. 30 - Rite Aid Corp.'s second-lien accounts receivable securitization term loan is fully circled in terms of syndication, and the deal even ended up with a lower-than-expected spread with the addition of an original issue discount.

Over in the secondary market, Freescale Semiconductor Inc.'s term loan B seesawed with the company's recent release of quarterly results.

Rite Aid sees strong demand

Rite Aid's $200 million second-lien accounts receivable securitization term loan due Sept. 14, 2010, which never experienced a formal launch, is already "nicely oversubscribed" after a quiet marketing period, according to a market source.

"Had demand for well more than $200 million," the source remarked, adding that the investor group includes high-yield mutual funds, loan accounts and distressed accounts.

And, the deal was so well received that the spread came out below previous expectations, although an original issue discount was included to somewhat make up for the change.

Pricing on the term loan is Libor plus 1,200 basis points with a 3% Libor floor, and it was issued to investors at an original issue discount of 97.

Based on an 8-K that was recently filed with the Securities and Exchange Commission, it was anticipated that the loan would carry a spread of Libor plus 1,400 bps.

Rite Aid call protection still being worked on

Rite Aid's accounts receivable securitization term loan is expected to carry some sort of call protection, but details on that are still to be determined, the source remarked.

According to the 8-K filing, the original plan was for the loan to have 101 call protection against all optional and mandatory prepayments.

Final terms on the deal should be out early during the week of Feb. 2 and allocations are expected to go out that week as well, the source said.

Security for the loan is second-priority liens on eligible third-party pharmaceutical receivables securing an existing facility.

Proceeds will be used to provide funding for the acquisition of receivables and/or participation interests therein.

Citigroup is the lead arranger and bookrunner on the deal. Initially, the bank committed to provide $100 million of the loan, with the remaining $100 million to be syndicated on a best-efforts basis through the earlier of closing and Feb. 20.

Rite Aid loan compensating for downsized deal

As was previously reported, on Jan. 22, Rite Aid amended its existing receivables financing agreement, which resulted in borrowing availability to be reduced by about $100 million and with an additional roughly $100 million step-down on Feb. 20.

The new second-lien accounts receivable securitization term loan is being obtained by the company to replace this loss of borrowing availability under the existing receivables deal.

The amendment to the existing receivables facility also extended the commitment for 364 days until Jan. 21, 2010.

Citi, JPMorgan and Wachovia are the investor agents on the existing deal.

Rite Aid is a Camp Hill, Pa.-based operator of a chain of retail drugstores.

Freescale B loan rollercoasters

Switching to trading news, Freescale Semiconductor's term loan B started off the day at lower levels on the back of the company's earnings announcement, but then levels ticked back up to end basically unchanged, according to traders.

The term loan B was quoted by one trader late in the day at 51½ bid, 53 offered, up from the morning's opening levels of 48 bid, 50 offered, but not much different than Thursday's levels of 51 bid, 53 offered.

A second trader had the term loan B quoted at 52 bid, 53 offered late in the day, up from a morning bid of 49. This trader said that prior to numbers coming out, the loan was seen at 52½ bid, 54½ offered, but by Thursday night, after numbers were released, the debt had moved to 50½ bid, 52½ offered.

The first trader explained that the initial weakening in term loan B levels was likely caused by the company's not very good earnings, but being that investors were assured that Freescale has plenty of liquidity, the loan regained its footing.

Freescale net loss reaches $4 billion

For the fourth quarter, Freescale reported a net loss of $4 billion, compared to a loss of $3.5 billion in the previous quarter and $525 million in the last year's fourth quarter.

Loss from operations for the quarter was $4.2 billion, compared to a loss of $3.4 billion in the prior quarter and $595 million in the fourth quarter of 2007.

Net sales for the quarter were $940 million, compared to $1.4 billion in the third quarter of 2008 and $1.5 billion in the fourth quarter of 2007.

And, adjusted EBITDA for the fourth quarter was $94 million.

As for the company's financial position, on Dec. 31, 2008, cash, cash equivalents and short-term investments were $1.4 billion, compared to $1.3 billion on Sept. 26.

"The challenging economic climate significantly impacted our fourth quarter results," said Rich Beyer, chairman and chief executive officer, in a news release. "Despite the current climate, our priorities are clear and achievable. We remain focused on further reducing our break even point while ensuring we execute on our strategic growth initiatives and leverage our market leadership positions."

Freescale is an Austin, Texas-based designer and manufacturer of embedded semiconductors for the transportation, networking and wireless markets.

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