Shea breaks; F&W stumbles on accounting, covenant rumors; Scorpion ups spread; Day sets first-lien talk

By Sara Rosenberg

New York, Oct. 27 - Shea Capital allocated its credit facility Thursday, with the term loan tranche freeing up for trading pretty much wrapped around 101. In other secondary doings, F&W Publications Inc.'s bank debt took a tumble as rumors about potential accounting irregularities and covenant shortfalls swirled around the marketplace.

As for the primary, Scorpion Drilling increased pricing pretty considerably on its second-lien term loan and added juicy call protection provisions. Also, Day International Group Inc. released price talk on its first-lien debt as the new deal launched via a bank meeting Thursday; however, pricing on the second-lien financing has yet to emerge.

Shea Capital's new credit facility freed up for trading during the Thursday session, with the $250 million term loan quoted steadily at par 7/8 bid, 101¼ offered throughout the day, according to a trader.

The term loan is priced with an interest rate of Libor plus 200 basis points.

Shea's $750 million credit facility also contains a $225 million revolver with an interest rate of Libor plus 175 basis points and a $275 million "subscription facility" with an interest rate of Libor plus 75 basis points.

JPMorgan is the lead bank on the deal that will be used to develop master-planned communities in California and Arizona.

F&W rumors spark investor fears

F&W Publications' first-lien term loan gave up about 4 points during the session and the second-lien term loan plummeted by about 13 points as rumors circulated that the company may have some accounting and covenant issues to deal with - igniting a whole bunch of uncertainties in the minds' of investors, according to a market source.

"There's something going on. I'm hearing that they may possibly trip covenants. And, I'm hearing that there's some sort of problem with the way they account for their inventory," the market source explained.

F&W is planning on holding a private lender call on Friday, probably to discuss the situation, a trader added.

Following the outburst of rumors, the first-lien term loan was quoted at 94 bid, 96½ offered by late day, down from 98¼ bid, par offered during the previous session, a secondary player said.

Meanwhile, the second-lien term loan was quoted around 85 bid, 87 offered, down from the high-90s, the trader added.

F&W is a Cincinnati-based publisher of special interest magazines and books.

Scorpion ups pricing

Scorpion Drilling increased pricing on its $200 million second-lien term loan pretty dramatically, with the spread flexing up to Libor plus 750 basis points from Libor plus 500 basis points, according to a market source.

In addition, to the 250 basis point coupon boost, the syndicate added enticing call protection to the tranche, making the paper non-callable for four years, then callable at 102 in year five and 101 in year six, the source added.

Morgan Stanley is the lead bank on the deal that will be used to fund construction of up to four new jack-up rigs in the Gulf of Mexico.

Scorpion is a wholly owned subsidiary of Houston-based Scorpion Offshore, an oil and gas exploration and production company.

Day sets first-lien spread

Price talk of Libor plus 250 basis points surfaced Thursday on Day International's $25 million revolver (B1/B) and $250 million first-lien term loan (B1/B) as the deal was officially launched for retail syndication, according to market sources.

However, price talk on the $140 million second-lien term loan (B2/CCC+) contained in Day's proposed $415 million credit facility has yet to be announced, sources added.

Goldman Sachs is the lead bank on the deal that will be used to refinance existing debt.

Day International is a Dayton, Ohio, producer and distributor of consumable products for the offset printing and textile industries.

Roundy's upsizes

Roundy's Supermarkets Inc. increased the size of its term loan and added soft call protection to the tranche after the company decided to drop its bond offering altogether, according to a buyside source.

The six-year term loan was increased to $750 million from $700 million and 101 soft call protection for one year was incorporated into the deal. Pricing on the tranche, however, was left unchanged at Libor pus 300 basis points, the source said.

Meanwhile, the company's $175 million offering of eight-year senior fixed-rate notes that were talked at 10¼% to 10½% was withdrawn after having gone through a restructuring and covenant changes.

Furthermore, just last week, the company cancelled a $150 million offering of senior subordinated notes that it had been marketing, with rumor being that this portion of the bond financing had been struggling.

When the senior subordinated notes offering was cancelled the company decided to scale back its planned dividend payment to principal shareholder Willis Stein & Partners III, LP to $400 million from $550 million.

And now that the senior fixed-rate note offering was terminated as well, the dividend payment was once again decreased, this time going down to $280 million.

As for the remaining portion of Roundy's $875 million senior credit facility (B2/B+), the $125 million five-year revolver was left unchanged in terms of size and pricing, which is currently set at Libor plus 300 basis points.

Bear Stearns and Goldman Sachs are the lead banks on the deal, with Bear the left lead.

In addition to funding the dividend payment, proceeds from the credit facility will be used to repay all of the company's existing bank debt, and conduct a tender offer and consent solicitation for its 8 7/8% senior subordinated notes due 2012.

Roundy's is a Pewaukee, Wis., food retailer and wholesaler.

Tensar increases revolver

Tensar Earth Technologies increased the size of its five-year revolving credit facility to $30 million from $25 million while leaving pricing unchanged at Libor plus 275 basis points, according to a syndicate document.

The revolver contains a 50 basis point commitment fee.

Tensar's now $177 million credit facility (B2/B-) also contains a $147 million seven-year term loan B with an interest rate of Libor plus 275 basis points that was left unchanged in terms of size and pricing.

Credit Suisse First Boston is the lead bank on the deal that will be used to help fund Arcapita Inc.'s acquisition of Tensar from KRG Capital Partners.

Tensar is an Atlanta-based provider of technology-driven site solutions for site development of commercial, residential, industrial and municipal properties as well as transportation and environmental infrastructure.

Targa readies allocations

Targa Resources Inc. is hoping to allocate its rather large facility on Friday now that all the structural tweaks to the deal have been completed, according to a market source.

Earlier this week, the syndicate reverse flexed pricing on both the seven-year $1.25 billion term loan B and the $300 million six-year synthetic letter-of-credit facility down to Libor plus 225 basis points from original price talk of Libor plus 250 basis points, the source said.

Furthermore, a step down to Libor plus 200 basis points was added to the institutional debt upon the sale of the company's North Texas asset.

This change in pricing came on the heels of the decision about a week-and-a-half ago to upsize the term loan B by $100 million from $1.15 billion after downsizing the company's bond offering by $100 million to $250 million.

Targa's $2.4 billion credit facility (Ba3/B+) also contains a $250 million six-year revolver with an interest rate of Libor plus 225 basis points and a $700 million two-year asset sale term loan with an interest rate of Libor plus 225 basis points.

Credit Suisse First Boston, Merrill Lynch and Goldman Sachs are the lead banks on the deal, with CSFB the left lead.

Proceeds from the loan and the bonds will be used to help fund Targa's acquisition of Dynegy Inc.'s Midstream natural gas business for $2.35 billion.

The Midstream business, once acquired, will continue to be based in Houston and will be combined with Targa's Louisiana and Texas assets.

Completion of the acquisition, which is expected to take place in the fourth quarter, is conditioned on the expiration or termination of the Hart-Scott-Rodino waiting period and the fulfillment of other customary closing conditions.

Targa is an independent midstream energy company formed in 2003 by management and the global private equity firm Warburg Pincus.

Hertz targeting late next week

The Hertz Corp. is hoping to launch its proposed $3.6 billion credit facility to retail investors on either Wednesday or Thursday of next week; however, with some things still to be worked out, such as typical regulatory issues, the bank meeting may find itself pushed out until a later date, a market source explained to Prospect News.

"There's nothing definitive at this time," the source said, while another market player admitted that trying to nail down timing right now on the deal is a bit "premature."

Deutsche Bank, Lehman Brothers and Merrill Lynch are the lead banks on the deal, with Deutsche the left lead.

Although the retail launch hasn't happened yet, the syndication process has somewhat begun on the massive credit facility as it has already been presented to potential senior managing agents.

The facility consists of a $2.1 billion term loan and a $1.5 billion asset-based revolver.

In September, Hertz, a Park Ridge, N.J., vehicle rental organization, agreed to be acquired by Clayton, Dubilier & Rice Inc., The Carlyle Group and Merrill Lynch Global Private Equity from Ford Motor Co. in a transaction valued at $15 billion.

In connection with the LBO, Hertz has recently begun a cash tender offer for its various series of notes. The tender ends at 8 a.m. ET on Nov. 15.

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