Bluegrass reworks deal; Coleto adds second lien; Rexnord ups spread; Bombardier, Texas Petro break

By Sara Rosenberg

New York, June 26 - Bluegrass Container Co. LLC made a number of changes to its credit facility Monday, including upsizing the first-lien term loan while downsizing the second-lien term loan, increasing pricing on the tranches and giving the second-lien loan more appetizing call protection premiums.

Also on the primary side, Coleto Creek LP played with its credit structure, carving a second-lien term loan out of the first-lien term loan tranche, and Rexnord Corp. flexed pricing higher on its covenant-light term loan.

Moving to the secondary, Bombardier Recreational Products Inc. and Texas Petrochemicals Inc. both saw their institutional bank debt free for trading atop par on Monday.

Bluegrass reworked the structure on its $1.315 billion credit facility as first- and second-lien tranche sizes were modified, pricing was increased and second-lien call protection was tweaked, according to a market source.

Under the changes, the first-lien term loan B (Ba3/BB-) is now sized at $835 million, an increase of $75 million when compared to its original size of $760 million, and pricing on the paper was flexed up to Libor plus 225 basis points from original talk at launch of Libor plus 200 basis points, the source said.

As for the second-lien term loan (B3/B-), that tranche is now sized at $330 million, a decrease of $75 million when compared to its original size of $405 million, and pricing on the paper was flexed up to Libor plus 500 basis points from original talk at launch of Libor plus 450 basis points, the source continued.

In addition, call protection premiums on the second-lien term loan were sweetened to 103 in year one, 102 in year two and 101 in year three, compared to the original proposal of just having 101 call protection for one year, the source added.

Bluegrass' credit facility also contains a $150 million revolver (Ba3/BB-).

JPMorgan, Lehman Brothers and Bank of America are the lead banks on the deal, with JPMorgan the left lead.

Proceeds from the credit facility will be used to help fund the leveraged buyout of Smurfit-Stone Container Corp.'s consumer packaging segment by Texas Pacific Group for $1.04 billion in cash.

Coleto Creek tweaks structure

Coleto Creek opted to reduce the size of its first-lien term loan on Monday by adding a new second-lien term loan to the deal that was not previously present in the capital structure, according to a market source.

The $200 million second-lien term loan, which is unrated, is priced with an interest rate of Libor plus 300 basis points, carries an original issue discount of 250 basis points and has 101 call protection for one year, the source said.

To compensate for the second-lien loan, the first-lien term loan (B1/B+) was downsized to $735 million from an original size of $935 million, the source added. This tranche is, and has been through syndication, priced at Libor plus 275 basis points, offered with a 50 basis point original issue discount and carrying 101 call protection for one year.

Coleto Creek's $1.165 billion credit facility also contains a $60 million revolver (B1/B+) and a $170 million synthetic letter-of-credit facility (B1/B+), with both of these tranches priced at Libor plus 275 basis points.

The synthetic letter-of-credit facility is also being offered with a 50 basis point original issue discount and also carries call protection of 101 for one year.

Credit Suisse and Goldman Sachs are joint lead arrangers on the deal that will be used to help fund American National Power Inc.'s $1.14 billion acquisition of the 632 megawatt coal-fired Coleto Creek Power generation facility in Goliad County, Texas, from Topaz Power Group.

In addition, American National's parent company, International Power plc, will contribute $288 million toward the purchase that will come from the current liquid resources.

The majority of Coleto Creek's output is forward contracted to 2009. Additional forward contracts have been agreed and will be put in place through to 2013 for about 50% of the plant's output. The credit support required for these forward hedging arrangements will be provided within the financing facility.

International Power is a London-based independent electricity generating company, and American National Power is the company's wholly owned subsidiary with operations in the United States.

Rexnord flexes up

In pricing news, Rexnord increased the spread on its $580 million covenant-light term loan to Libor plus 250 basis points from Libor plus 200 basis points, according to a market source.

The company's $705 million credit facility (B1/B+) also contains a $125 million revolver with a 50 basis point commitment fee.

Merrill Lynch, Credit Suisse, Bear Stearns and Lehman are the lead banks on the deal, with Merrill Lynch the left lead.

Proceeds will be used to help fund the leveraged buyout of Rexnord by Apollo Management from The Carlyle Group and management

Under the LBO agreement, Apollo is purchasing RBS Global, Inc., the corporate parent of Rexnord, for $1.825 billion.

The transaction is subject to government approvals and other customary conditions and is expected to close in the third quarter.

Rexnord is a Milwaukee-based manufacturer of highly engineered precision motion technology products, primarily focused on power transmission.

Gleason retranches

Going back to the topic of shifting funds, Gleason Corp. moved some money out its second-lien term loan and into its first-lien term loan, according to a market source.

The 71/2-year second-lien term loan is now sized at $50 million, down from an original size of $65 million, the source said. Pricing was left unchanged at Libor plus 550 basis points.

Meanwhile, the seven-year first-lien term loan is now sized at $165 million, up from an original size of $150 million, the source added. Pricing on this tranche was left unchanged as well at Libor plus 250 basis points.

Gleason's $363 million dollar- and euro-denominated senior secured credit facility also contains a $40 million six-year revolver priced at Libor plus 225 basis points, a €35 million six-year revolver priced at Libor plus 225 basis points and a €50 million first-lien term loan priced at Libor plus 250 basis points.

UBS and Dresdner are the lead banks on the deal, with UBS the left lead.

Proceeds will be used to help fund a management and Gleason Foundation led buyout of the company.

Gleason is a Rochester, N.Y., designer, manufacturer and seller of machines that make, test and finish gears used in drive shafts.

Trilogy moves funds, firms spreads

Also on the retranching front, Trilogy moved some funds out of its second-lien term loan and into its first-lien term loan while at the same firming up pricing on both tranches, according to a market source.

The second-lien term loan (B2/CCC+) is now sized at $125 million, down from an original size of $160 million, and pricing firmed up at Libor plus 625 basis points, the midpoint of original guidance of Libor plus 600 to 650 basis points, the source said.

On the flip side, the first-lien term loan B (Ba3/B) is now sized at $435 million, up from an original size of $400 million, and pricing firmed up at Libor plus 400 basis points, the high end of original guidance of Libor plus 350 to 400 basis points, the source added.

Goldman Sachs is the lead bank on the $590 million credit facility that also contains a $30 million revolver (Ba3/B).

Proceeds from the new deal will be used to help fund the merger of CTC Communications, Choice One Communications and Conversent Communications Inc., and to refinance existing debt.

The new company, named Trilogy, will be the second largest competitive communications provider in the United States.

Cedar Fair official talk emerges

In other primary news, Cedar Fair LP came out with official price talk on its $2.095 billion credit facility now that ratings from both Moody's Investors Service and Standard & Poor's were released over the course of last week, according to a market source.

Both the $350 million five-year revolver and the $1.745 billion six-year term loan B are being talked at Libor plus 175 to 200 basis points on ratings of Ba3/BB-, the source said.

Previously, rumored price talk on both tranches had been Libor plus 175 basis points, although the lead bank had never officially gone out with that spread level, and now some sources are saying that pricing is anticipated to fall out at the high end of official talk at Libor plus 200 basis points.

Of the total revolver amount, $40 million will be in Canadian equivalent, and of the total term loan amount, $270 million will be in Canadian equivalent.

Bear Stearns is the lead bank on the transaction.

Proceeds from the credit facility will be used to help fund the $1.24 billion cash acquisition of five Paramount Parks from CBS Corp. and to refinance Cedar Fair's existing debt.

The five Paramount Parks consist of Canada's Wonderland near Toronto, King's Island near Cincinnati, King's Dominion near Richmond, Va., Carowinds near Charlotte, N.C., and Great America located in Santa Clara, Calif.

In 2005, the Paramount Parks generated revenues of about $423 million while entertaining 12.2 million guests. Cedar Fair reported $569 million in revenues and 12.7 million guest visits. On a combined basis, the two companies generated almost $1 billion in revenues and entertained about 25 million guests in 2005.

Pro forma for the acquisition, leverage will be around 5.6x.

Cedar Fair has said that it plans on repaying a portion of the proposed term loan debt using proceeds from an up to $250 million public offering of its limited partnership interests that is expected to be completed within the next six months.

The public offering, if completed, will reduce the company's overall leverage and achieve an economical total cost of capital.

Bombardier trades in low pars

Switching to the secondary, Bombardier Recreational Products' credit facility allocated and freed for trading on Monday, with its $790 million seven-year term loan B quoted at par 1/8 bid, par 3/8 offered, according to a trader.

The covenant-light term loan B (B1/B+) is priced with an interest rate of Libor plus 275 basis points with a step up to Libor plus 300 basis points at 41/2x net leverage and a step down to Libor plus 250 basis points at 3x net leverage, and carries 101 soft call protection.

During syndication, pricing on the term loan was increased from original talk at launch of Libor plus 250 basis points, with the addition of the pricing grid, the call protection and a net debt to EBITDA covenant of 51/2x.

Bombardier's credit facility also contains a C$250 million five-year revolver (Ba2/BB) with an interest rate of Libor plus 225 basis points.

Merrill Lynch is the global transaction coordinator on the entire deal. Merrill Lynch and RBC Capital are joint lead arrangers on the term loan B, with Merrill Lynch, RBC and UBS the joint bookrunners. BMO Nesbitt Burns and Merrill Lynch are joint lead arrangers on the revolver, with BMO, Merrill Lynch and RBC the joint bookrunners.

Proceeds will be used to help fund a recapitalization that includes tendering for the company's $200 million 8 3/8% senior subordinated notes due 2013.

Bombardier is a Valcourt, Quebec, motorized recreational vehicles company.

Texas Petrochemicals breaks

Texas Petrochemicals' credit facility also hit the secondary on Monday, with the strip of term loan and prefunded letter-of-credit facility debt quoted at par ¼ bid, par ½ offered, and the term loan on its own quoted at par 3/8 bid, par 5/8 offered, according to a trader.

The $70 million 21/2-year prefunded letter-of-credit facility tranche (Ba3/B+) and the $210 million seven-year covenant-light term B (Ba3/B+) are priced with an interest rate of Libor plus 250 basis points, the high end of original guidance of Libor plus 225 to 250 basis points.

The prefunded letter-of-credit facility will convert into a term loan once it is drawn. This tranche was carved out of the term loan that was originally expected to carry a size of $280 million when the deal was relaunched to investors around mid-June.

Syndication had been put on hold after the initial April launch because of problems with the Huntsman Corp. assets that the company is purchasing. Huntsman experienced a fire in its Port Arthur, Texas, olefins manufacturing plant at the end of April, and although this plant is not one of the assets being acquired by Texas Petrochemicals, it does provide the C4 supply to assets being acquired.

As a result, the acquisition agreement was restructured so that Texas Petrochemicals will pay $197.5 million for the Huntsman U.S. butadiene and related MTBE operations at closing, subject to customary adjustments, and an additional payment of $70 million will be made upon the satisfaction of certain milestones related to the resumption of crude C4 supply from Huntsman's Port Arthur, Texas, unit.

The prefunded letter-of-credit facility was incorporated into the credit structure to back the $70 million conditional additional payment.

Texas Petrochemicals' $395 million credit facility also includes a $115 million five-year asset-based revolver that is priced with an interest rate of Libor plus 150 basis points and a 37.5 basis point commitment fee.

Deutsche Bank and Credit Suisse are joint lead arrangers on the term loan and letter-of-credit facility, with Deutsche the left lead. Deutsche and LaSalle are joint lead arrangers on the revolver, with Deutsche the left lead.

Texas Petrochemicals is a Houston-based chemical company.

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