Burlington, Avis break; Hertz pressure continues on repricing buzz; Venoco cuts second-lien spread

By Sara Rosenberg

New York, April 17 - Burlington Coat Factory Warehouse Corp. freed for trading early on in the session Monday, with its term loan B quoted right atop par. And, Avis Budget Car Rental LLC (Cendant Car Rental Group LLC) hit the secondary as well, with its term loan also seen in the par-type context.

In other trading news, The Hertz Corp.'s term loan B continued to feel pressure as investors are still convinced that there's room for a repricing based on the current market environment and Avis' spread outcome.

Meanwhile, in the primary, Venoco Inc. lowered pricing on its second-lien term loan as the deal was well oversubscribed.

Burlington Coat Factory allocated its credit facility Monday morning, with the $900 million term loan B (B2/B/B-) freeing for trading at par ¼ bid, par ½ offered and quoted in that context consistently throughout the day, according to market sources.

The term loan B is priced with an interest rate of Libor plus 225 basis points. During syndication the tranche was upsized from $775 million as the company decided to downsize its bond offering to $375 million from $500 million to reduce cost of capital, and pricing came at the low end of original guidance of Libor plus 225 to 250 basis points.

Burlington's $1.7 billion credit facility also contains a $735 million ABL revolver tranche (NA/NA/BB-) priced at Libor plus 150 basis points and a $65 million first-in, last-out revolver tranche A+ (NA/NA/BB-) priced at Libor plus 275 basis points. Pricing on the first-in, last-out revolver tranche A+ was reverse flexed during syndication from original price talk at launch of Libor plus 325 basis points.

Bear Stearns and Bank of America acted as the joint lead arrangers and joint bookrunners on the deal that closed late last week.

Proceeds from the credit facility and the bonds were used to help fund Bain Capital Partners LLC's leveraged buyout of the Burlington, N.J., retailer of branded apparel for $45.50 per share in cash, or $2.06 billion.

Avis breaks atop par

Avis Budget Car Rental's credit facility also freed for trading on Monday, with the $875 million six-year term loan quoted at par ¼ bid, par ½ offered on the break and then coming in a little to par 1/8 bid, par 3/8 offered where it closed out the session, according to a trader.

"There was some selling pressure. It has a low spread," the trader remarked.

"The market in general felt a touch heavy today - very sluggish. [It] felt like a lot of people were still on vacation," the trader added.

Avis' term loan is priced with an interest rate of Libor plus 125 basis points. During syndication, pricing on the tranche was reverse flexed from original price talk at launch of Libor plus 150 basis points.

The company's $2.375 billion credit facility (Ba2/BBB-/BBB-) also contains a $1.5 billion five-year revolver with an interest rate of Libor plus 150 basis points.

JPMorgan and Deutsche Bank are the lead banks on the deal, with JPMorgan the left lead.

Proceeds from the credit facility, along with $1 billion in bonds, will be used to help fund the car rental group's - which includes Avis Rent A Car System Inc. and Budget Rent A Car System Inc. - spinoff from Cendant Corp. into an independent company that is being renamed Avis Budget Car Rental LLC.

Hertz softens

Hertz's term loan B again felt a touch heavier as investors believe the paper to be a potential repricing candidate based on the current market technicals and comparable company, Avis', ability to get done at a low-100 plus spread, according to a trader.

The Park Ridge, N.J., vehicle rental organization's term loan B closed the session quoted at par ¾ bid, 101¼ offered, down a quarter of a point on the bid-side from a previous levels of 101 bid, 101¼ offered, the trader said.

Worries over a Hertz repricing really solidified last week when Avis was able to successfully syndicate its term loan at pricing of Libor plus 125 basis points. Being that ratings are similar on the Avis (Ba2/BBB-/BBB-) and the Hertz (Ba2/BB/BBB-) deals and they both operate in the same sector, market players have been speculating that Hertz may try to lower its spreads to be more in-line with Cendant's spreads.

However, at this time, no real word has emerged on whether Hertz will try its hand at a repricing amendment or not, the trader added.

Movie Gallery bid falls

Movie Gallery Inc.'s term loan B saw a drop on the bid-side, possibly as a result of the lack of trading activity in the name Monday and possibly as a continued reaction to the company's chief financial officer resigning, according to traders.

The term loan B closed the session quoted at 88 bid, 90 offered, down a point on the bid-side from prior levels of 89 bid, 90 offered, traders said.

Late last week, the Dothan, Ala.-based video rental company announced that its chief financial officer, Timothy R. Price, resigned for personal reasons and would be replaced on an interim basis by Mark D. Moreland, senior vice president and treasurer.

GM trades in the mid-90's

General Motors Corp.'s revolver traded a few times just shy of the mid-90's type of context on Monday after seeing a drop and widening out in levels over the past few sessions on refinancing uncertainty, according to a trader.

The Detroit-based automotive company's revolver traded a couple of times at 94½ and a couple of times at 94¾ during market hours, the trader said. By comparison, at the end of last week, the bank debt was being quoted really wide at 92½ bid, 95 offered.

For weeks now there has been speculation that GM might be refinancing its revolver in the near-term since there is some doubt as to whether lenders would allow any borrowings under the facility due to the recent restatement of prior financial statements.

"People are thinking it could be an amendment that comes instead of a new deal altogether," the trader said. "So, it has been trading down and widening out."

Venoco trims pricing

Switching to the primary, Venoco reverse flexed pricing on its $350 million five-year second-lien term loan (Caa1/B-) Monday morning by 50 basis points as the deal had been well received by the market, according to a market source.

The second-lien term loan is now priced with an interest rate of Libor plus 450 basis points, down from original price talk at launch of Libor plus 500 basis points, the source said.

Furthermore, if the company completes an initial public offering of common stock, pricing on the second-lien loan will drop to Libor plus 400 basis points.

This 50 basis point step down upon completion of an IPO was always part of the credit agreement, but with the reverse flex in pricing, the step down now goes to Libor plus 400 basis points as opposed to Libor plus 450 basis points as was originally contemplated, the source explained.

The second-lien term loan contains, and has since launch, call protection of 102 in year one, 101 in year two and par thereafter.

Recommitments from lenders were due by the end of business Monday, at which time the book on the deal was closed.

Venoco's $650 million credit facility also contains a $300 million three-year reserve-based revolver that contains a pricing grid ranging from Libor plus 150 to 225 basis points depending on utilization.

The revolver commitment fee can range from 37.5 to 50 basis points depending on utilization. The initial borrowing base under the revolver is set at $200 million.

Credit Suisse and Lehman Brothers are the joint lead arrangers on the second-lien term loan, with Credit Suisse acting as administrative agent, Lehman acting as syndication agent and Harris Nesbitt acting as co-arranger. Harris Nesbitt is the lead arranger on the revolver, with Credit Suisse and Lehman acting as co-arrangers, co-syndication agents and co-documentation agents.

Proceeds from the credit facility will be used to fund the already completed acquisition of TexCal Energy LLC

Venoco is a Denver-based independent energy company.

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