First Data opens B-1, B-3 for syndication; Autos up with GM labor accord; Thomson Learning trades up

By Sara Rosenberg

New York, Sept. 26 - First Data Corp. decided to include the term loan B-1 and term loan B-3 in its syndication process as demand cried out for it. However, not all of the company's term loan debt will be allocated because it is of prime importance for the overall loan market that this paper trade well once it hits the secondary.

Moving to the secondary market, autos, such as General Motors Corp., Ford Motor Co. and Chrysler Financial, were stronger on Wednesday as General Motors reached a tentative agreement with the United Auto Workers union.

Also in trading, Thomson Learning inched its way higher as investors were expecting the loan to be added to the LCDX series 9 roll. But by early evening sentiment seemed to sway more toward the loan not being added.

First Data is now syndicating its term loan B-1 and term loan B-3, since the term loan B-2 that was already being syndicated is two times oversubscribed on cash orders alone, according to a market source.

But, of the total B-1, B-2 and B-3 term loan debt, only a portion will be allocated so as to keep the general loan market momentum moving in a positive direction, the source said.

The deal is expected to allocate and break for trading on Thursday.

First Data's seven-year term loan B-1 is sized at $5 billion, priced at Libor plus 275 basis points, offered with an original issue discount of 96 and prepayable at par.

The seven-year term loan B-3 is sized at $3 billion, priced at Libor plus 275 bps, offered with an original issue discount of 97 and non-callable for 3.25 years.

And, as was previously reported, the seven-year term loan B-2 is sized at $5 billion, priced at Libor plus 275 bps, offered with an original issue discount of 96 and carries call protection of 103 in year one, 102 in year two and 101 in year three.

The term loan B-2 includes a euro-denominated sub-tranche that is sized at roughly $1 billion, but only about $400 million to $500 million of this sub-tranche will be distributed in Europe, with the remainder distributed in the United States.

The term loan B-2 was launched to investors with a retail bank meeting on Sept. 17, and, under the original plan, the term loan B-1 and term loan B-3 were expected to be syndicated at a later time.

However, with $10 billion in cash orders on the books for the term loan B-2 by Tuesday's originally set commitment deadline, the banks decided to syndicate the other term loan tranches as well and reset the commitment deadline for Wednesday at 4 p.m. ET, the source explained.

To avoid pushing the loan market "in the wrong direction," the banks will only allocate about $7 billion to $8 billion of the $13 billion in term loan debt, the source said.

"It's tremendously important that the deal trades well in the secondary. Best thing is to place it cheap and underallocate it," the source continued. "Pent up demand should keep the price up as it breaks. If it trades well, it keeps the market open to bring some of the new deals that are waiting to come. If it trades down, the market might back off again and that doesn't do anyone any good."

Credit Suisse, Citigroup, Deutsche Bank, Goldman Sachs, HSBC, Lehman Brothers and Merrill Lynch are the lead banks on the deal.

HSBC is currently opting not to syndicate its portion of the deal at current prices, the source said. "They're holding $1.5 billion in loans. Don't think that includes revolver."

The source went on to explain that HSBC is typically not as big a player in the leveraged market as the other underwriters and, therefore, it probably has more room on its books to hold onto its portion of the facility, whereas someone like Citigroup is probably more backed up.

First Data's $15 billion credit facility (Ba3/BB-/BB) includes a $2 billion six-year revolver, in addition to the term loan debt, that is also priced at Libor plus 275 bps.

The revolver has a 50 bps commitment fee.

The credit facility contains a maximum senior secured net debt-to-EBITDA ratio of 7.25 times that is first tested (quarterly) on Dec. 31, 2008, decreasing by 0.25 times each year after that to 6.00 times at Dec. 31, 2013.

Proceeds from the deal are being used to help fund Kohlberg Kravis Roberts & Co.'s buyout of the company for $34 in cash per share.

The transaction, which has a total value of about $29 billion, was completed on Monday.

First Data is a Greenwood Village, Colo., provider of electronic commerce and payment services for businesses.

Autos stronger as GM strike ends

Switching to trading news, General Motors, Ford and Chrysler Financial all saw their bank debt head higher on Wednesday as a tentative agreement on a new national labor contract was reached between General Motors and the UAW, ending a strike that began Monday, according to traders.

The agreement includes a memorandum of understanding to establish an independent retiree health care trust, as well as other changes to the national agreement.

The agreement is subject to UAW member ratification. Following ratification, implementation of the memorandum of understanding is subject to approval by the courts and satisfactory review of accounting treatment with the Securities and Exchange Commission.

"There's no question this was one of the most complex and difficult bargaining sessions in the history of the GM/UAW relationship," Rick Wagoner, General Motors chairman and chief executive officer, said in a news release.

"This agreement helps us close the fundamental competitive gaps that exist in our business. The projected competitive improvements in this agreement will allow us to maintain a strong manufacturing presence in the United States along with significant future investments," Wagoner added in the release.

In reaction to this news, General Motors' term loan was quoted at 97½ bid, 98 offered, up from Tuesday's levels of 97 bid, 97½ offered, a trader said.

As for General Motors' revolver, that was quoted by one trader at 91½ bid, 92½ offered, up from Tuesday's levels of 91 bid, 92 offered, and by a second trader at 92 bid, 92½ offered, up from 90½ bid, 92 offered.

Meanwhile, Ford's term loan was quoted at 97¼ bid, 97½ offered, up from 96½ bid, 97 offered, another trader said.

Chrysler Financial's first-lien term loan was quoted at 99¾ bid, par offered, up from 99¼ bid, 99¾ offered, a fourth trader added. During trading hours, the loan traded as high as par before settling in a bit.

Ford and Chrysler Financial were said to be better because the company now has a template to work with in terms of reaching their own agreement with the union, so that they can avoid a strike situation.

General Motors is a Detroit-based developer, producer and marketer of cars, trucks and parts. Ford is a Dearborn, Mich.-based automaker. Chrysler Financial is a provider of financial services for vehicles in the NAFTA region.

Thomson Learning gains ground

Thomson Learning's term loan B was better as investors were anticipating that the loan will be added to the LCDX North America index, which is expected to roll on Oct. 3, according to a trader. But, by evening, it appeared to be more likely that the loan won't gain entrance into the index.

The term loan B ended the day at 97 bid, 97½ offered, up from 96 5/8 bid, 96 7/8 offered, the trader added.

Eligibility for Thomson Learning to be added to the index will be reviewed after the close of business on Wednesday.

Originally, it was contemplated that First Data would be added to the LCDX series 9, but that was pending the ability to get suitable obligations onto the syndicated secured list. If not eligible, First Data would be replaced by Thomson Learning.

Being that First Data isn't expected to free up for trading until Thursday, people were expecting Thomson Learning to be added, the trader explained.

By early evening, the trader said that while things were still up in the air, it appeared as if First Data may actually make the cut.

Other names being added to the series 9 include Biomet, Inc., Claire's Stores, Inc., Community Health Systems, Inc., DaimlerChrysler Financial Services Americas LLC, Kinder Morgan, Inc., Nielsen Finance LLC, Realogy Corp., Swift Transportation Co., Inc. and Tribune Co.

Names being removed include Advanced Micro Devices Inc., Altivity Packaging LLC, Boise Cascade, LLC, Chiquita Brands LLC, Emmis Operating Co., HLI Operating Co., Inc., Huntsman International LLC, Movie Gallery, Inc., Mueller Group, LLC and Reynolds American Inc.

Thomson Learning is a Stamford, Conn.-based higher education, careers and library reference company.

LCDX slightly higher

LCDX was up a touch during Wednesday's trading session as equities were stronger, according to a trader.

The index went out around 97.35 bid, 97.45 offered, up from 97.25 bid, 97.40 offered, the trader said.

As for stocks, Nasdaq was up 15.58 points, 0.58%, Dow Jones Industrial Average was up 99.50 points, or 0.72%, S&P 500 was up 8.21 points, or 0.54%, and NYSE was up 46.30 points, or 0.47%.

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