Capital Safety down on repricing; Education Management dips; Varel, NEP Broadcasting reworked

By Sara Rosenberg

New York, Jan. 11 - Capital Safety's term loan was a bit softer in trading on Friday as the company approached investors with a repricing transaction, and Education Management LLC's term loan dropped with a ratings downgrade.

Switching to the primary, Varel International Energy Funding Corp. shifted some funds between its term loan and mezzanine debt, sweetened term loan amortization and increased mezzanine pricing, and NEP Broadcasting LLC revised sizes and pricing on its term loans.

Also, Apex Tool Group and Cole Haan LLC disclosed price talk as their deals were presented to lenders during the session, and Tesoro Corp. announced that it will be bringing a new term loan B to market.

Capital Safety weakens

Capital Safety's term loan gave up some ground in the secondary market on Friday following news of a repricing proposal, according to a trader.

The term loan was quoted at 101 bid, 102 offered, down from 101¼ bid, 102¼ offered, the trader said.

In the morning, the company held a call to launch the repricing of its $421.8 million term loan B with talk of Libor plus 350 basis points to 375 bps with a 1.25% Libor floor, compared to current pricing of Libor plus 500 bps with a 1.25% Libor floor, a source told Prospect News.

Commitments are due in one week, the source added.

UBS Investment Bank, Morgan Stanley Senior Funding Inc., Mizuho Securities USA Inc. and KKR Capital Markets are leading the deal.

Capital Safety is a Red Wing, Minn.-based provider of fall protection, confined space and rescue equipment.

Education Management falls

Education Management's term loan slid to 77¼ bid, 78¾ offered, from 79¾ bid, 80¾ offered after the company's ratings were lowered by Moody's Investors Service, according to a market source.

Moody's cut the company's corporate family rating to Caa2 from B3, senior secured bank debt rating to Caa2 from B3, and senior unsecured notes rating to Ca from Caa2. The ratings outlook is negative.

The downgrades reflect "heightened default risk given the approaching springing maturity of all of Education Management's senior secured credit facilities, which will become due and payable on March 1, 2014 if the company does not refinance or repay its $375 million of 8¾% senior notes on or prior to this date," the ratings release said.

Education Management is a Pittsburgh-based provider of private post-secondary education.

Varel tweaks deal

Moving to the primary, Varel reduced its 41/2-year first-lien term loan to $220 million from $230 million, while leaving pricing at Libor plus 775 bps with a 1.5% Libor floor and an original issue discount of 98, according to a market source. The debt continues to be non-callable for one year, then at 103 in year two, 102, in year three and 101 in year four.

Also, amortization on the term loan was changed to 3% in year one, 5½% in year two, 6 3/8% in year three, and 8¼% thereafter, from 2% in year one, 4½% in year two, 4¾% in year three and 6¼% in year four, the source remarked.

With the term loan downsizing, the mezzanine tranche was upsized to $85 million from $75 million and pricing was lifted to 10% plus 4% PIK from 11% plus 1.5% PIK, the source continued. The debt still has an original issue discount of 98, and is non-callable for two years, then at 103 in year three, 102 in year four and 101 in year five.

The Credit Suisse Securities (USA) LLC-led $240 million credit facility, which also provides for a $20 million four-year revolver, will be used to refinance existing debt.

Varel is a Carrollton, Texas-based manufacturer of drill bits for oil and gas and mining.

NEP restructures

NEP Broadcasting upsized its seven-year covenant-light first-lien term loan (B1/B) to $470 million from $455 million, cut pricing to Libor plus 400 bps from Libor plus 425 bps and tightened the original issue discount to 99½ from 99, according to a market source. The 1.25% Libor floor and 101 soft call protection for one year were unchanged.

Also, the company downsized its 71/2-year covenant-light second-lien term loan (Caa1/CCC+) to $150 million from $165 million, reduced the spread to Libor plus 825 bps from Libor plus 875 and revised the discount to 99 from 98, the source remarked. This tranche still has a 1.25% Libor floor and call protection of 103 in year one, 102 in year two and 101 in year three.

The company's $680 million senior secured credit facility also provides for a $60 million five-year revolver (B1/B) that has a springing covenant.

With the changes to structure and pricing, the commitment deadline was moved up to 5 p.m. ET on Monday from 5 p.m. ET on Jan. 18, the source continued.

NEP acquired

Proceeds from NEP's credit facility will be used to back its already completed purchase by Crestview Partners from American Securities LLC.

As a result of the changes to the term loans, first-lien leverage moved to 4 times from 3.9 times, while total leverage remained at 5.2 times, the source added.

Barclays, Morgan Stanley Senior Funding Inc. and GE Capital Markets Corp. are the joint lead arrangers on the first-lien debt, with Barclays the left lead, and Morgan Stanley and Barclays are leading the second-lien loan, with Morgan Stanley the left lead.

NEP is a Pittsburgh-based provider of outsourced teleproduction services critical to the delivery of live sports and entertainment events.

Apex guidance surfaces

Apex Tool Group held a "well attended" bank meeting on Friday morning to launch its credit facility, and with the event, price talk on the term loan was announced, according to a market source.

The $835 million seven-year covenant-light term loan is talked at Libor plus 400 bps to 425 bps with a 1.25% Libor floor and an original issue discount of 99, and includes 101 soft call protection for one year, the source said.

The company's $1.01 billion senior secured credit facility, for which commitments are due on Jan. 25, also provides for a $175 million five-year revolver.

Talk is that the deal already has some good momentum, the source remarked.

Apex lead banks

Barclays, Goldman Sachs & Co., Morgan Stanley Funding Inc., RBC Capital Markets LLC, Citigroup Global Markets Inc. and Deutsche Bank Securities Inc. are leading Apex Tool's credit facility.

Proceeds will be used to help fund the roughly $1.6 billion buyout of the Sparks, Md.-based tool manufacturing company by Bain Capital from Cooper Industries and Danaher Corp.

Closing is expected in the first half of this year, subject to regulatory approvals, and with the transaction, Apex's senior secured leverage will be 3.6 times and net total leverage will be 5.4 times.

Cole Haan reveals talk

Cole Haan also released guidance with its bank meeting, launching its $270 million seven-year covenant-light term loan (B2/B) at Libor plus 500 bps to 525 bps with a 1.25% Libor floor, an original issue discount of 99 and 101 soft call protection for one year, according to a market source.

Jefferies & Co. is leading the $370 million credit facility, which also includes a $100 million asset-based revolver.

Commitments are due on Jan. 24, the source remarked.

Proceeds, along with $300 million in equity, will fund the buyout of the company by Apax Partners from Nike Inc. for $570 million in cash.

Leverage is roughly 4.25 times.

Cole Haan, a New York-based designer and retailer of men's and women's footwear, apparel and accessories, expects the transaction to close early this year.

Tesoro plans loan

Tesoro emerged with plans to hold a bank meeting in New York at 2 p.m. ET on Wednesday to launch a $500 million three-year term loan B, according to a market source.

J.P. Morgan Securities LLC is the lead bank on the deal.

Proceeds, along with cash, will fund the purchase of BP's integrated Southern California refining and marketing business for $1.175 billion, plus the value of inventory at the time of closing.

Closing is expected before mid-year, subject to regulatory approval.

Tesoro is a San Antonio-based refiner and marketer of petroleum products.

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