Enterprise breaks; TXU B-2 under pressure; Tousa slides; Houghton floats OID, second-lien talk

By Sara Rosenberg

New York, Oct. 30 - Enterprise GP Holdings LP's institutional term loan allocated and freed up for trading on Tuesday, with levels seen above its discount price, and Texas Competitive Electric Holdings Co. LLC's (TXU) term loan B-2 softened as people are awaiting term loan B-3 allocations.

Also in trading, Tousa Inc.'s bank debt lost some ground and LCDX was lower in sympathy with stocks.

In primary happenings, Houghton Mifflin Co. (Education Media & Publishing) came out with guidance on the original issue discount on its first-lien term loan and price talk on its second-lien term loan ahead of the formal bank meetings that will launch the deal into syndication.

Enterprise GP Holdings' $850 million institutional term loan hit the secondary market during Tuesday's session, with levels seen at 99¼ bid on the break and proceeding to trade up from there, according to traders.

At the close, some traders had the loan quoted at 99 5/8 bid, par offered, while others said it was as high as 99¾ bid, par 1/8 offered.

The term loan is priced at Libor plus 175 basis points and was sold to investors with an original issue discount of 99.

Citigroup and Lehman are the lead banks on the deal.

The institutional term loan is part of a $1.175 billion credit facility that the company actually closed on in late August.

Other tranches under the deal include a $200 million revolver due Aug. 24, 2012 and a $125 million term loan A due Aug. 24, 2012.

Pricing on the revolver and the term loan A can range from Libor plus 100 bps to Libor plus 250 bps, depending on leverage.

In early August, the institutional term loan had been pulled from syndication as a result of market conditions. At that time, Enterprise was looking at a $1 billion institutional term loan that was talked at Libor plus 200 bps. The original deal also included a $200 million revolver but there had been no term loan A tranche.

Proceeds from the credit facility were used to refinance an interim credit facility.

Enterprise is a Houston-based midstream energy company.

Texas Competitive B-2 softens

Texas Competitive Electric Holdings' term loan B-2 came under some pressure as "lots of people are getting ready for the B-3 to come out so they want to get out of the B-2 first," according to a trader.

The term loan B-2 closed out the day at 99 7/8 bid, par offered, down from par bid, par 1/8 offered, the trader said.

On Monday, news emerged that the loan syndicate on Texas Competitive's credit facility started taking orders on a minimum $3 billion portion of the already funded $6 billion seven-year term loan B-3 from investors at par.

The term loan B-3 is priced at Libor plus 350 bps and is non-callable for three years.

Books on the term loan B-3 closed on Tuesday at 3 p.m. ET.

The final allocation amount will be subject to market demand.

The amount of term loan B-3 debt not sold at this time will be subject to the existing Most-Favored-Nation language, which protects buyers from price pressure in the event that the arrangers sell part or all of the loans that have remained on their books in the future at prices below the original issue discount.

Citigroup, JPMorgan, Goldman Sachs, Lehman Brothers, Morgan Stanley and Credit Suisse are the joint lead arrangers and bookrunners on the deal, with Citi administrative agent, JPMorgan syndication agent, and Credit Suisse, Goldman, Lehman and Morgan Stanley co-documentation agents.

Proceeds from the credit facility were used to help fund the recently completed leveraged buyout of TXU Corp. by an investor group led by Kohlberg Kravis Roberts & Co. and Texas Pacific Group for $69.25 per share. The transaction was valued at $45 billion.

Tousa falls

Tousa's bank debt was lower on Tuesday, with some speculating that it was just following the bonds down.

The revolver and first-lien term loan were both quoted at 97½ bid, 98½ offered, off by about half a point from previous levels, a trader said.

The second-lien term loan was quoted at 89½ bid, 90½ offered, off by about two points from previous levels, the trader continued.

"The second-lien was down a point due to a PIK payment they made so it's really only down one point," the trader added.

Late in the day Monday, Tousa announced in an 8-K filed with the Securities and Exchange Commission that its revolver and first-lien term loan amendment was successfully completed.

Under the amendment, the revolver was reduced by $50 million, amounts that can be borrowed under the revolver prior to Dec. 31 was limited and the revolver pricing grid was changed so that pricing can range anywhere from Libor plus 250 bps to Libor plus 525 bps depending on ratings and leverage.

In addition, first-lien term loan pricing was increased to Libor plus 500 bps, compliance with certain revolver and first-lien term loan financial covenants was waived and the definition of material adverse effect was changed under the two tranches.

Furthermore, under the revolver, minimum operating cash flow requirements were established and compliance with weekly budgets is now required.

The Hollywood, Fla.-based homebuilder went on to say in the 8-K that although the amendment provides temporary relief, there are still many challenges including, among other things, its current level of debt.

Tousa is pursuing asset sales and is considering all available restructuring and reorganization alternatives and processes, including restructuring its capital structure and attempting to exchange some or all of its outstanding debt for equity.

The company has asked its bondholders to organize as a group in order to discuss such restructuring and reorganization alternatives.

When asked whether this 8-K filing was the impetus behind the drop in bank debt levels, the trader responded, "I don't think so. The filing came out yesterday. No one seems to know why it's down. The bonds are down so maybe that's why. Once the bonds started to trek lower, the bank debt started to come off."

LCDX down with stocks

LCDX 9 was weaker on Tuesday as equities were softer ahead of Wednesday's Federal Reserve announcement on interest rates, according to a trader.

The index went out at 98.40 bid, 98.50 offered, down from 98.65 bid, 98.80 offered, the trader said.

As for stocks, Nasdaq was down 0.73 points, or 0.03%, Dow Jones Industrial Average was down 77.79 points, or 0.56%, S&P 500 was down 9.96 points, or 0.65%, and NYSE was down 91.25 points, or 0.89%.

Houghton first-lien OID, second-lien talk emerge

More details surfaced on the Houghton Mifflin credit facility as the deal is gearing up for its official bank meetings, including first-lien discount expectations and second-lien price talk, according to a market source.

The $4.95 billion 61/2-year first-lien term loan will be offered to investors with an original issue discount in the 99 area, the source said. As was previously reported, this tranche is being talked at Libor plus 375 bps and carries call protection of 103 in year one, 102 in year two and 101 in year three.

As for the $1.7 billion seven-year second-lien term loan, price talk came out as being in the Libor plus 850 bps area, the source added. This tranche is non-callable for 18 months, then at 104 for a year, at 102 for a year and at par after that.

Houghton Mifflin's $7.15 billion credit facility also includes a $500 million six-year revolver that is being talked at Libor plus 375 bps.

Credit Suisse, Lehman Brothers and Citigroup are the lead banks on the deal.

A bank meeting to launch the credit facility to U.S. investors will take place in New York on Monday.

In addition, a bank meeting will be held this Thursday in London for European investors and a presentation was already made on Tuesday in Barcelona at Credit Suisse's leveraged finance conference.

Proceeds from the facility will be used to help fund the acquisition of the Harcourt Education, Harcourt Trade and Greenwood-Heinemann divisions of Reed Elsevier for $4 billion, consisting of $3.7 billion in cash and $300 million of common stock of Houghton Mifflin Riverdeep Group plc, Houghton's parent company.

Existing investors, including J&E Davy, have committed to provide $235 million of new equity financing to support the transaction.

Boston-based Houghton Mifflin will be renamed Education Media & Publishing.

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