Reverse flexes, size changes continue to dominate primary market; Calpine dips as lawsuit begins

By Sara Rosenberg

New York, Sept. 27 - Over the last two days an overwhelming amount of in-market deals have undergone pricing reductions and/or size shifts as the primary loan market has essentially been on fire - a strong opposite from recent new issue high-yield performance.

In the secondary, Calpine Corp.'s second-lien bank debt fell by a few points as the company announced that it has filed a lawsuit against The Bank of New York for withholding proceeds from the July sale of domestic gas assets.

Thermal North America Inc. reverse flexed pricing on all tranches - institutional and pro rata alike - under its credit facility by 25 basis points to Libor plus 175 basis points as the deal was strongly oversubscribed, according to a market source.

The $312 million credit facility (Ba3/BB-) consists of a $30 million eight-year letter-of-credit facility, a $247 million eight-year term loan B and a $35 million multi-currency revolver that is not being syndicated.

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

Thermal North America is a Boston-based private venture focused on investments in district heating and cooling systems.

Transport Industries price cut

Transport Industries LP lowered pricing on its $280 million term loan to Libor plus 250 basis points from original price talk of Libor plus 300 basis points, according to a market source.

Pricing on the $70 million revolver remained unchanged at Libor plus 300 basis points, the source added.

Wachovia is the lead bank on the $350 million credit facility (B2/B+) that will be used to fund the purchase of several tuck-in companies in their business.

Transport Industries is a Dallas-based third party provider of dedicated "closed-loop" transportation services.

Pregis lowers spreads

Pregis Corp. reverse flexed pricing on its U.S. term loan B and its euro term loan by 25 basis points, according to a market source.

The $85 million U.S. seven-year term loan B is now priced at Libor plus 225 basis points, down from original talk of Libor plus 250 basis points, the source said.

Furthermore, the $84 million seven-year euro term loan B-2 is now priced at Libor plus 250 basis points, down from original talk of Libor plus 275 basis points, the source added.

Pregis' $219 million credit facility (B1/B+) also contains a $50 million six-year revolver that has a 50 basis point commitment fee.

Credit Suisse First Boston and Lehman Brothers are the joint lead arrangers on the deal, with CSFB the left lead.

Proceeds will be used to help fund AEA Investors LLC's purchase of Pactiv's North American and European protective and flexible packaging businesses.

Ventiv reverse flexes

Ventiv Health Inc. reduced pricing on its $175 million six-year term loan B to Libor plus 150 basis points from original price talk at launch of Libor plus 175 basis points, according to a market source.

UBS and Bank of America are the joint lead arrangers on the deal, with UBS also acting as bookrunner and Bank of America acting as syndication agent.

The $225 million senior secured credit facility (Ba3/BB-) also contains a $50 million five-year revolver.

Proceeds from the term loan will be used to fund the acquisition of inChord Communications Inc. for $172.5 million in cash and $12.5 million in common stock.

Revolver borrowings are available for working capital and general corporate purposes.

There is a $50 million accordion feature, under which the term loan and/or the revolver can be upsized.

The closing of the acquisition is subject to the completion of financing and other customary closing conditions, including the expiration or earlier termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.

Ventiv is a Somerset, N.J., provider of outsourced clinical, sales, marketing and compliance solutions for the pharmaceutical, biotechnology and life sciences industries. inChord is a Westerville, Ohio, health care marketing and communications company.

Knoll shifts funds

Knoll Inc. moved $50 million out of its term loan and into its revolver while at the same time adding a step down in pricing to the term loan tranche.

The five-year revolver is now sized at $200 million, compared to an original size of $150 million, with pricing left unchanged at Libor plus 200 basis points, according to a market source.

Meanwhile, the seven-year term loan is now sized at $250 million, compared to an original size of $300 million, and although pricing was left unchanged at Libor plus 200 basis points, a step down was added to the tranche under which pricing can drop to Libor plus 175 basis points when leverage falls below 3x, the source added.

UBS and Bank of America are the lead banks on the $450 million credit facility (Ba3/BB-) that will be used to refinance the company's existing credit facility at a lower interest rate, with new financial covenants and a less restrictive policy toward the payment of dividends.

Subject to the closing of the refinancing, Knoll plans on declaring and paying quarterly dividends of $0.10 per share on its common stock, double its current quarterly dividend.

Knoll is an East Greenville, Pa., designer and manufacturer of branded office furniture products and textiles.

Primedia cuts spread

Primedia Inc. reverse flexed pricing on its term loan B and added a 25 basis point step down based on leverage, according to a market source.

The $400 million term loan B is now priced with an interest rate of Libor plus 225 basis points, down from original price talk at launch of Libor plus 250 basis points, and pricing can now step down to Libor plus 200 basis points when leverage falls below 5x, according to a market source.

JPMorgan is the left lead bank on the deal that will be used to refinance existing debt.

Expected ratings on the credit facility are B2 from Moody's Investors Service and B from Standard & Poor's.

Primedia is a New York-based targeted media company.

Concentra reverse flexes

Concentra Operating Corp. reduced pricing on its $525 million six-year term loan B to Libor plus 200 basis points from original price talk at launch of Libor plus 225 basis points, according to a market source.

JPMorgan is the lead bank on the deal.

The $675 million credit facility (B1/B+) also contains a $150 million five-year revolver.

Proceeds will be used to refinance existing bank debt, to purchase Beech Street Corp and to purchase Occupational Health & Rehabilitation Inc.

Concentra is an Addison, Texas, provider of services designed to contain health care and disability costs.

Yellowstone upsizes

Yellowstone Club increased the size of its five-year term loan B to $375 million from $330 million, spurred on by strong demand, according to a market source.

Earlier this month, the deal had already reverse flexed pricing to Libor plus 237.5 basis points from initial price talk of Libor plus 250 to 275 basis points.

Credit Suisse First Boston is the lead arranger on the deal that will be used for a recapitalization.

Yellowstone Club is a Big Sky, Mont., private ski and golf community.

Turtle Bay upsizes, cuts spreads

Turtle Bay Resort increased the sizes of both its first- and second-lien term loan tranches while at the same time reverse flexing pricing on both tranches.

The five-year first-lien term loan B is now sized at $275 million, up from an original size of $250 million, and pricing came down to Libor plus 275 basis points from original price talk of Libor plus 300 basis points, according to a market source.

Meanwhile, the six-year second-lien term loan is now sized at $125 million, up from an original size of $100 million, and pricing came down to Libor plus 650 basis points from original price talk of Libor plus 700 basis points, the source said.

Credit Suisse First Boston and Deutsche Bank are joint lead arrangers on the $400 million deal.

Proceeds will be used for LBO financing.

Turtle Bay is a full-service luxury resort on the Hawaiian island of Oahu.

More loan changes

As was previously reported by Prospect News, there were a number of other deals that went through similar changes on Monday, including Walter Industries Inc./Mueller, The Neiman Marcus Group Inc., School Specialty Inc. and Renal Advantage Inc.

Walter (Ba3/B+), a Tampa, Fla.-based energy, homebuilding and financing company, upsized its term loan B to $450 million from $425 million, upsized its revolver to $225 million from $200 million and reverse flexed pricing on the term loan to Libor plus 200 basis points, with a step down to Libor plus 175 basis points under certain conditions, from Libor plus 225 basis points.

Mueller (B2/B+), a Tampa, Fla., water infrastructure and delivery systems company to be owned by Walter, reverse flexed its $1.05 billion term loan B to Libor plus 225 basis points, with a step down to Libor plus 200 basis points under certain conditions, from Libor plus 250 basis points.

Neiman Marcus, a Dallas-based high-end specialty retailer, upsized its 71/2-year term loan B (B1/B+/B) to $1.975 billion from $1 billion after downsizing its bond offering by the equivalent amount, and reverse flexed pricing to Libor plus 250 basis points from Libor plus 300 basis points, while leaving the 101 soft call protection for one year against voluntary repayments in place.

School Specialty (B1/B+), a Greenville, Wis., education company, downsized its delayed-draw term loan to $150 million from $250 million, upsized its term loan B to $325 million from $300 million, and cut pricing on both tranches to Libor plus 225 basis points from Libor plus 250 basis points.

And, Renal Advantage, a Nashville, Tenn., dialysis center operator, upsized its seven-year term loan B to $180 million from $150 million and reverse flexed pricing to Libor plus 250 basis points from Libor plus 325 basis points.

Calpine dips on battle with noteholders

Calpine Corp.'s second-lien bank debt dropped a few points in trading as the company confirmed that the collateral trustee for its bonds is holding onto asset sale proceeds and announced that Calpine has taken legal action against the trustee to rectify the situation.

The bank debt closed out the session quoted at 76 bid, 78 offered, although it did trade a couple of times around the 78 level during market hours, according to a trader. Previously, the bank debt was being quoted around the 79 bid, 82 offered context, the trader added.

On Tuesday, Calpine announced that it has filed an action in the Delaware Court of Chancery against The Bank of New York, as collateral trustee for its senior secured note holders, and Wilmington Trust Co., as indenture trustee for first-lien senior secured notes, in response to the recent withholding of the asset sale proceeds because of disputes over how the money was being put to use.

Last week, The Bank of New York informed Calpine that certain unidentified first-lien noteholders have raised disagreements regarding the reinvestment of the gas sale proceeds, and, acting through their counsel, these noteholders demanded that the company's previously withdrawn funds be returned to the gas sale proceeds account.

Calpine has already used about $360 million of the proceeds to acquire eligible natural gas assets. Following these acquisitions, about $400 million remains in the gas sale proceeds account with the trustee.

Calpine claims that the proceeds from the sale were first offered to the noteholders and that of the $785 million of outstanding notes, about $139 million was tendered in response to the offer.

Furthermore, Calpine say that the remaining first-lien noteholders were given the opportunity to be bought out at par in the tender offer and declined the offer.

The San Jose, Calif., power company goes on to argue that the indenture for the notes states that the company may use the remaining gas sale proceeds for "any purpose not otherwise prohibited by this indenture," including reinvestment in natural gas assets.

As such, the lawsuit seeks a declaration that Calpine's past and proposed purchases of natural gas assets are permitted by the indenture for the first-lien notes and related documents, and seeks an injunction compelling The Bank of New York to release the funds requested to be withdrawn for this purpose.

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