Quantum carves out second lien, adds OID; Hanesbrands ups B loan spread; HealthSouth trades higher

By Sara Rosenberg

New York, Aug. 14 - Quantum Corp. made some changes to its credit facility, carving a second-lien term loan out of its first-lien term loan tranche and adding an original issue discount to the first-lien institutional debt.

In other primary news, Hanesbrands Inc. increased pricing on its $1 billion-plus term loan B by 25 basis points.

Meanwhile, in the secondary, HealthSouth Corp.'s term loan B traded at stronger levels on Monday as the company announced that it is considering selling or spinning off certain assets.

Quantum made a second round of modifications to its $500 million credit facility, this time creating a new second-lien term loan tranche out of some first-lien term funds and adding an original issue discount to the first-lien term loan B, according to a market source.

With these changes, the six-year first-lien term loan B (B3/B) is now sized at $225 million, down from an original size of $350 million, and the tranche is now being offered to investors at an original issue discount of 991/2, the source said.

Pricing on the first-lien term loan B was left at Libor plus 400 basis points, where it firmed up toward the end of July.

On the flip side, a new $125 million second-lien term loan was added to the capital structure to compensate for the first-lien downsizing, the source continued. This second-lien tranche is priced with an interest rate of Libor plus 750 basis points and is also being offered to investors at an original issue discount of 991/2.

The $150 million three-year revolver (B3/B) contained in the facility was left unchanged in terms of size and carries an interest rate of Libor plus 300 basis points, subject to a grid.

Additional enhancements to the credit facility structure that were just added on Monday include fixed amortization for the first two years on the first lien and excess cash flow recapture at 50% thereafter. The amortization had been tweaked the first time in late July when it was changed to 10% annually.

Both the first- and second-lien term loans have an accelerated four-year maturity if the company's convertibles due in 2010 are not redeemed. This accelerated maturity feature had first been added to the first-lien term loan in late July.

Covenants under the facility include minimum EBITDA, maximum total leverage, maximum senior leverage, minimum fixed charge coverage ratio and minimum unrestricted cash.

KeyBanc Capital Markets is the lead arranger, bookrunner and administrative agent on the deal, which is expected to close by late August.

Proceeds from the credit facility, along with available cash on hand, will fund the approximately $780 million acquisition of Advanced Digital Information Corp. and for general corporate purposes.

Under the purchase agreement, Advanced Digital shareholders will receive $12.25 per share in cash, with the right to elect, in lieu of cash, 3.461 shares of Quantum stock for each share they own. The stock election is subject to pro-ration such that Quantum will issue no more than approximately 10% of the total merger consideration in Quantum stock.

Quantum is a San Jose, Calif., provider of storage, backup, recovery and archive solutions. Advanced Digital is a Redmond, Wash., provider of intelligent storage solutions for the open systems marketplace.

Hanesbrands raises pricing

Hanesbrands flexed pricing higher on its $1.3 billion seven-year term loan B (Ba2/BB-) to Libor plus 225 basis points from original price talk at launch of Libor plus 200 basis points, according to a market source.

No other changes were made to the $2.6 billion senior secured credit facility, so the $500 million five-year revolver (Ba2/BB-) and the $350 million six-year term loan A (Ba2/BB-) remained priced at Libor plus 175 basis points and the $450 million 71/2-year second-lien term loan (Ba3/B-) remained priced at Libor plus 375 basis points.

The second-lien term loan is non-callable for one year, then at 102 in year two and 101 in year three, the source added.

Merrill Lynch and Morgan Stanley are joint lead arrangers on the deal, with Merrill the left lead.

Proceeds from the credit facility will be used to help fund the company's spinoff from Sara Lee Corp., including the payment of a $2.4 billion dividend to Sara Lee. The businesses to be spun off into Hanesbrands include Hanes, Champion, Playtex, Bali, Just My Size, barely there and Wonderbra. Following the spinoff, Winston-Salem, N.C.-based Hanesbrands will operate as a stand-alone, publicly traded, global apparel company.

In addition to the senior secured credit facility, the company will also be getting a $500 million one-year bridge loan facility that will be funded for the time being.

The bridge loan is expected to be taken out with proceeds from a $500 million senior note offering that will likely come to market some time in the third quarter.

Morgan Stanley and Merrill Lynch are joint leads on the bridge loan/bond offering, with Morgan Stanley on the left.

Acxiom launches with $800 million size

Acxiom Corp. launched its credit facility (Ba2/BB) with a total size of $800 million as was outlined by the commitment letter that the company filed with the Securities and Exchange Commission, according to a market source.

The deal is comprised of a $200 million five-year revolver talked at Libor plus 150 basis points and a $600 million six-year term loan B talked at Libor plus 200 basis points.

Previously, there had been some talk floating around the market that the total deal size was $500 million with the term loan B rumored to be only $300 million, but this speculation proved untrue once the deal was presented to lenders with a bank meeting during Monday's session, the source added.

JPMorgan is the lead bank on the deal.

Proceeds from the term loan will be used to fund a modified Dutch auction self-tender offer to repurchase $300 million in shares in a range of $25 to $27, for general corporate purposes and to repay certain debt.

The tender will expire on Sept. 12.

Acxiom is a Little Rock, Ark., provider of customer and information management solutions.

AM General flexes up

AM General LLC increased pricing on its $750 million seven-year term loan B to Libor plus 300 basis points from original talk at launch of Libor plus 250 to 275 basis points, according to a market source.

The company's $815 million credit facility also contains a $65 million six-year revolver.

Citigroup is the lead bank on the deal that will be used to refinance existing debt and fund a dividend.

AM General is a South Bend, Ind., military and special purpose vehicles company.

HealthSouth trades up

Switching to the secondary, HealthSouth's term loan B inched its way higher during Monday's market hours after the company revealed that it is evaluating spinning off or selling its surgery center and outpatient rehabilitation divisions, according to a trader.

The company plans to use a substantial portion of the proceeds from the potential divestments for deleveraging.

HealthSouth has appointed Goldman, Sachs & Co. to assist in evaluating strategic alternatives for the divisions to be divested, which is expected to take about 12 months to complete.

"People are thinking that any cash they can raise will be put to good use. The loan bounced around this morning on that news," the trader remarked.

HealthSouth's term loan B closed the day quoted at par bid, par ¼ offered, up about an eighth to a quarter of a point from previous levels, the trader added.

In addition to the streamlining news, the company announced second-quarter numbers, including a pretax loss from continuing operations of $28.9 million, an improvement of $17 million over the second-quarter 2005 pretax loss from continuing operations of $45.9 million.

Revenues for the second quarter were $787.5 million, a 3.8% decline from the same quarter a year ago.

HealthSouth is a Birmingham, Ala.-based provider of outpatient surgery, diagnostic imaging and rehabilitative health care services.

Secondary sees strong tone

In general, the secondary market felt better on Monday with names higher by about an eighth to a quarter of a point, including the bank debt of Avis Budget Car Rental LLC and Cebridge Connections Inc., according to a trader.

Avis, a Parsippany, N.J.-based car rental group saw its term loan head up to 99½ bid, 99¾ offered, the trader said.

And, Cebridge, a St. Louis-based provider of cable television and internet access, saw its term loan head up to 99¼ bid, 99¾ offered, the trader added.

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