DaVita B loan opens in upper 101s; Skilled Healthcare B loan trades around 101; Tire Rack cuts spread

By Sara Rosenberg

New York, June 17 - DaVita Inc.'s massive term loan B allocated late in the day Friday, with the tranche trading throughout the 101 region at various points after the break. And, Skilled Healthcare Group Inc.'s new deal freed up for trading as well with its first-lien institutional paper quoted anywhere from upper-pars to low-101s and its second-lien term loan trading in the upper-101 region.

Meanwhile, in primary doings, The Tire Rack reduced pricing on its term loan due to strong demand.

DaVita's $2.65 billion seven-year term loan B allocated and freed up for trading in a flurry of activity roughly around 4 p.m. ET on Friday with levels quoted at 101 bid, 101½ offered immediately on the break, then moving to 101½ bid, 102 offered relatively quickly thereafter, before settling down at 101 3/8 bid, 101 5/8 offered by the end of the day, according to traders.

The institutional term loan is priced with an interest rate of Libor plus 225 basis points - the low end of revised price talk of Libor plus 225 to 250 basis points - and contains a step down to Libor plus 200 basis points, subject to certain conditions. Original price talk on the tranche at launch was Libor plus 200 basis points.

The term loan also contains 101 soft call protection for one year, which was added to the credit agreement during syndication.

DaVita's $3.15 billion credit facility (B1/BB-) also contains a $250 million six-year revolver and a $250 million six-year term loan A, with both tranches priced at Libor plus 200 basis points. Spreads on these loans were also flexed up during syndication - with the original price talk having been Libor plus 175 basis points.

JPMorgan is the sole bookrunner on the deal, and Credit Suisse First Boston is involved in the transaction as well.

Proceeds from the credit facility along with proceeds from an already completed $1.35 billion bond offering will be used to help fund the $3.05 billion cash acquisition of Gambro Healthcare's U.S. assets and to refinance debt.

The two-tranche bond deal priced in March. The offering included $500 million of eight-year senior notes (B2/B) priced at par to yield 6 5/8% and $850 million of 10-year senior subordinated notes (B3/B) priced at par to yield 7¼%.

Net proceeds from the bond offering along with available cash were already used by the company to repay all outstanding amounts under the term loan portions of its existing credit facilities, including accrued interest.

Following the acquisition, the company's leverage ratio will be in the 5x to 5.2x EBITDA range, but DaVita hopes to reduce that ratio to around 3x to 3.5x in the next three to four years using anticipated strong cash flows.

Completion of the acquisition is subject to customary closing conditions including Hart-Scott-Rodino antitrust clearance.

DaVita is an El Segundo, Calif., provider of dialysis services.

Skilled Healthcare breaks

Skilled Healthcare's $260 million seven-year term loan B (B1/B) started trading Friday with some quoting the paper at par ¾ bid, 101¼ offered during market hours, while another dealer had the paper quoted at 101 bid, 101½ offered, according to a market source.

Meanwhile, the $110 million 71/2-year second-lien term loan (Caa1/CCC+) was seen trading at 101¾ during the session, a trader added.

Skilled Healthcare's term loan B is priced with an interest rate of Libor plus 275 basis points. The tranche was originally sized at $225 million at launch but was increased by $35 million during syndication.

The second-lien term loan is priced with an interest rate of Libor plus 750 basis points and contains call protection of 103 in year one, 102 in year two and 101 in year three. The tranche was originally sized at $145 million but was decreased by $35 million during syndication - with the funds shifted into the first-lien term loan B.

Skilled Healthcare's $420 million credit facility also contains a $50 million five-year revolver (B1/B) with an interest rate of Libor plus 275 basis points and a 50 basis point commitment fee.

Credit Suisse First Boston is sole lead arranger and sole bookrunner on the deal.

Proceeds will be used to refinance existing debt and fund a dividend payment.

Skilled Healthcare is a Foothill Ranch, Calif., operator of long-term care facilities and a provider of a full continuum of post-acute care services.

Tire Rack lowers pricing

Tire Rack reverse flexed pricing on its $265 million term loan to Libor plus 225 basis points from original price talk in the Libor plus 250 to 275 basis points range, according to a market source.

The $50 million revolver remained priced at Libor plus 225 basis points, the source added.

JPMorgan is the lead bank on the $315 million deal that will be used to help fund Leonard Green & Partners LP's leveraged buyout of the company.

Tire Rack is a South Bend, Ind., mail-order and online tire retailer.

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