TriZetto shifts funds; Clear Channel success in question; Gaming sector trades up; Masonite better

By Sara Rosenberg

New York, July 18 - TriZetto Group Inc. moved some funds out of its term loan A and into its term loan B since the B loan was so well received by the market.

In other news, Clear Channel Communications Inc.'s term loan B has left some investors feeling uninspired to get involved in the deal and there is some speculation floating around that the original issue discount price will have to move even lower for it to get done.

Over in the secondary market, Harrah's Entertainment Inc., Penn National Gaming Inc., Venetian Macao Ltd. and Las Vegas Sands all saw their bank debt levels head higher possibly because some investors are currently viewing the debt as cheap.

Also in trading, Masonite International Inc.'s term loan was stronger on Friday after falling quite a bit earlier on in the week.

TriZetto came out with a change to its credit facility that involved downsizing the term loan A and upsizing the "well oversubscribed" term loan B, according to a market source.

The six-year term loan A is now sized at $92.5 million, down from $112.5 million, and the seven-year term loan B is now sized at $300 million, up from $280 million, the source said.

All other terms of the credit facility were left unchanged, the source added.

Pricing on the term loan A is Libor plus 425 basis points and pricing on the term loan B is Libor plus 450 bps.

Both the term loan A and the term loan B have a 3% Libor floor and are being offered to investors at an original issue discount of 98.

TriZetto's $442.5 million senior secured credit facility also includes a $50 million six-year revolver priced at Libor plus 400 bps.

Recommitments are due from lenders on Monday and allocations are expected to go out around mid-week.

Sources previously told Prospect News that some things working in favor of the deal include that TriZetto is a public company that already has a lot of investors in its convertibles and it's a strong credit in the health care sector, which is a favorable industry right now.

RBC Capital Markets is the lead arranger and bookrunner on the deal, with GE Capital the syndication agent.

Proceeds will be used to help fund the acquisition of the company by funds advised by Apax Partners along with BlueCross BlueShield of Tennessee and the Regence Group for $22 per share in cash in a transaction valued at about $1.4 billion.

The financing also includes $187.5 million of private senior unsecured mezzanine notes and more than $891 million of equity comprising more than 60% of the capital structure.

The mezzanine debt has also been well received and was already fully circled before the bank deal was even officially launched into syndication.

Total leverage is 5.5 times.

The deal was privately rated. Corporate ratings are in the high single-B profile. Senior secured ratings have a four-B profile.

The acquisition is subject to customary closing conditions, including shareholder and regulatory approvals.

On July 14, TriZetto's stockholders approved the transaction, with 34.2 million shares, or 99.8% of shares voted and 79.2% of shares outstanding, voting for the proposal.

TriZetto is a Newport Beach, Calif., developer, licenser and supporter of proprietary and third-party software products for the health care industry.

Clear Channel struggling?

Rumors are going around that the building of a cash book for roughly $4 billion of Clear Channel's term loan B may not be going that well, even at the revised original issue discount guidance of 85 to 86, and that in order to get lenders interested, the price may have to go down even more.

"It's not getting done at 85. At 85, they got leverage. Why would you do it if you're not getting leverage. I have not heard anything and frankly I haven't put a call in. Lots of people on the sidelines. It's not just technical. There are credit issues there," one buyside source said.

"I think it will get done over a period of time if they're willing to bring pricing down to the low 80s. From what hear, there's no incentive to do it now. People have not picked up the book. Nobody's touching it. For people to crack the books open, it's going to take the low 80s," the buyside source added.

On July 11, the original issue discount on the about $4 billion worth of term loan B debt that the banks are looking to sell under the $10.7 billion 71/2-year tranche (B1/B), was widened from the 90 to 91 talk that surfaced at launch.

Before the official move, speculation had been going around for a while that the original issue discount would increase, with the earlier rumors putting the price in the high 80s and the later rumors putting it in the mid 80s.

The spread on the term loan B is Libor plus 365 bps with a step down to Libor plus 340 bps at less than 7:1 total leverage.

At the time of the discount change, the commitment deadline was reset for July 18. When the deal was first launched, the commitment deadline had been set for July 2.

Upon the discount news coming out, it also emerged that Clear Channel already sold $5.5 billion of its bank debt in a leveraged trade, with talk being that the trade went off at 85.

Under a leveraged syndication, the actual commitment size is less than the amount of the order size that's put in the book. For example, if a lender puts in $150 million and the banks give four turns of leverage, that $150 million is marked down as a $600 million commitment.

By comparison, under a cash syndication, if a lender puts in $150 million, the commitment is marked down at that actual size.

Citigroup, Deutsche Bank and Morgan Stanley are the joint lead arrangers and bookrunners on the deal, with Citi the administrative agent, Deutsche and Morgan Stanley the syndication agents, and Credit Suisse, RBS and Wachovia the co-documentation agents.

Clear Channel's $16.77 billion senior secured credit facility also includes a $690 million six-year receivables-based revolver, a $1.425 billion six-year term loan A (B1/B), a $2 billion six-year revolver (B1/B) that is split into $1.85 billion in U.S. dollars and $150 million available in alternate currencies, a $705.6 million 71/2-year asset sale term loan C (B1/B) and a $1.25 billion 71/2-year delayed-draw term loan (B1/B).

Pricing on the receivables-based revolver is initially set at Libor plus 240 bps, but it can range from Libor plus 215 bps to 240 bps, depending on leverage. This tranche has a 37.5 bps commitment fee.

Initial pricing on the term loan A and the revolver is Libor plus 340 bps, but it can range from Libor plus 290 bps to 340 bps, depending on leverage. The revolver has a 50 bps commitment fee.

And, pricing on the term loan C and the delayed-draw term loan is Libor plus 365 bps with a step down to Libor plus 340 bps at less than 7:1 total leverage. The delayed-draw term loan has a 182.5 bps commitment fee.

Covenants under the facility include a maximum consolidated senior secured net debt to adjusted EBITDA ratio requirement.

Proceeds will be used to help fund the buyout of Clear Channel by Bain Capital Partners LLC and Thomas H. Lee Partners LP for $36.00 in cash or stock per share, in a transaction valued at about $17.9 billion. The purchase price was lowered from $39.20 per share in connection with a settlement agreement that enabled the buyout to progress, and entailed putting all debt and equity financing in escrow.

Of the total delayed-draw funds, $750 million can be used to purchase or repay Clear Channel's outstanding 7.65% senior notes due 2010 and the remainder will be available to purchase or repay Clear Channel's outstanding 4¼% senior notes due 2009.

Other buyout financing is coming from $980 million of 10¾% senior unsecured notes, $1.33 billion of 11% cash pay/11¾% PIK senior unsecured toggle notes and equity.

The acquisition of Clear Channel is expected to close by the end of the third quarter, subject to shareholder approval, which will be sought at a meeting on July 24.

Clear Channel is a San Antonio media and entertainment company specializing in "gone from home" entertainment and information services.

Gaming names see improvement

Switching to trading news, the gaming sector felt better on Friday with names like Harrah's, Penn National Gaming, Venetian Macao and Las Vegas Sands all gaining ground, according to a trader.

Harrah's, a Las Vegas-based provider of branded casino entertainment term loan, saw its term loan B-2 and B-3 quoted at 87¼ bid, 87¾ offered, up from 86 7/8 bid, 87 1/8 offered, the trader said.

On Thursday, Moody's Investors Service downgraded Harrah's bank debt to Ba3 from Ba2 and corporate family rating to B3 from B2, citing the expectation that, given the material softness in the Las Vegas and Atlantic City gaming markets, the company's credit metrics will deteriorate from already weak levels as the reason behind the move.

Penn National Gaming, a Wyomissing, Pa., owner and operator of casino and horse racing facilities, saw its term loan B quoted at 95 3/8 bid, 95 7/8 offered, up from 95 1/8 bid, 95 5/8 offered, the trader continued.

Venetian Macao, a subsidiary of Las Vegas Sands, saw its term loan quoted at 96¼ bid, 97 offered, up from 96 bid, 96¾ offered.

And, Las Vegas Sands, a Las Vegas-based developer of multi-use integrated resorts, saw its term loan quoted at 86½ bid, 87¼ offered, up from 86 bid, 86½ offered, the trader remarked.

On Thursday, Moody's put Las Vegas Sands' ratings on review for possible downgrade because of the softness in the Las Vegas gaming market. The ratings of Venetian Macao were not affected by the rating action.

The trader explained that even though there has been some bad news surrounding the gaming names, such as the downgrades/rating watch negative, the debt has been trading up likely on some opportunistic buying.

The trader went on to say that early on in the week, the gaming names "got hammered" and then by mid-week they started to pop back up as guys started to view the paper as cheap.

Masonite strengthens

Masonite's term loan B moved higher during the session, regaining a good amount of the losses that the debt experienced in the first half of the week, according to a trader.

The term loan B was quoted at 89½ bid, 91½ offered, up about half a point on the day, the trader said.

On July 14, Masonite held a call to discuss an amendment with lenders under which the credit agreement's total leverage and interest coverage ratios would be replaced with a minimum adjusted LTM 12 months EBITDA test.

The amendment would also change pricing on the term loan to be based on a grid that can range from Libor plus 350 bps to 500 bps. Currently, the term loan is priced at Libor plus 200 bps.

In addition, a 3.25% Libor floor would be added to the loan.

Lenders would get a 50 bps amendment fee in return for their consents.

Shortly before launching the amendment, the company had said that, based on a preliminary evaluation of its financial performance, it expected to be unable to comply with financial covenants for the quarter ended June 30 as a result of challenging conditions in the U.S. housing industry.

With the appearance of the amendment proposal, Masonite's term loan B went on a bit of a rollercoaster ride as some investors were not pleased with the amendment terms.

For example, on Wednesday, the term loan B had been quoted at 87½ bid, 88½ offered and a couple of big blocks had traded in the 86s. On Tuesday, the debt was seen at 88½ bid, 89½ offered and on July 14 the debt was at 90¾ bid, 91½ offered.

When asked why the paper traded up on Friday, the trader said he wasn't sure, but offered a few guesses, such as lenders coming in and buying more paper so they could block the amendment, or maybe it was up on an assumption that the amendment would not get the required consents and lenders will get better terms.

Masonite is a Tampa, Fla.-based manufacturer of residential and commercial doors.

MF Global closes

MF Global Ltd. closed on its new $300 million two-year unsecured term loan on Friday, according to an 8-K filed with the Securities and Exchange Commission.

Pricing on the loan can range from Libor plus 400 bps to 500 bps depending on the company's credit rating. The spread will increase by 100 bps on the first anniversary of the closing date and by 200 bps on all overdue amounts.

Originally, the company got a commitment for a $450 million term loan, but the sized was reduced as a result of the sale of $150 million of 9% convertible senior notes.

Proceeds from the term loan, the convertibles, $150 million of 9.75% series B non-cumulative convertible preference shares and cash on hand are being used to repay the company's outstanding bridge loan due in December.

Financial covenants under the term loan include minimum net worth, a maximum leverage ratio, a minimum interest coverage ratio, a maximum ratio of total debt to capitalization and a minimum ratio of net cash capital to net liquid assets.

MF Global is a Hamilton, Bermuda-based broker of exchange-listed futures and options.

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