Trout Coal, KGen free up for trading; Masonite term B pricing heads to the low end of talk

By Sara Rosenberg

New York, March 14 - Trout Coal Holdings LLC allocated its $420 million credit facility on Monday, with the first-lien term loan seen trading in the high 101 context and the second-lien term loan seen trading in the low 103 context. Also hitting the secondary on Monday was KGen Partners LLC's $475 million credit facility, with both the first- and second-lien term loans trading in the plus par area.

In the primary, Masonite International Corp. was able to firm up pricing on its term loan B at the low end of talk due to strong investor demand and positive market reception.

Trout Coal's $275 million first-lien term loan B opened for trading around 101½ bid, 101¾ offered and then moved higher during the session to end the day around 101¾ bid, 102 offered, according to a trader.

Meanwhile, the $125 million second-lien term loan C opened for trading around 102½ bid, 103½ offered and then levels tightened up and moved higher by the end of the day to close out the session around 103 bid, 103¼ offered, the trader added.

The first-lien term loan B, which was originally issued to investors at par, is priced with an interest rate of Libor plus 250 basis points. The tranche had been launched with price talk of Libor plus 300 basis points but was reverse flexed during syndication on strong oversubscription.

The second-lien term loan C, which was originally issued to investors at par, is priced with an interest rate of Libor plus 500 basis points and contains call protection of 102 in year one and 101 in year two. The tranche had been launched with price talk of Libor plus 600 basis points but was also reverse flexed during syndication on strong oversubscription.

In fact, the entire deal received so many orders that the syndicate had to shut the books down a few days earlier than was originally planned.

Commitments started flooding in for both term loans immediately after the Feb. 23 bank meeting took place, with one source attributing the positive feedback to an overall need for paper and a general liking among market players for the coal sector.

Trout Coal's facility also contains a $20 million revolver with an interest rate of Libor plus 250 basis points. The revolver was also reverse flexed during syndication from Libor plus 300 basis points. Any size revolver commitment got an upfront fee of 100 basis points.

Lehman and Deutsche Bank are the lead banks on the deal.

Proceeds will be used to refinance existing debt and pay a dividend to sponsor ArcLight Capital Partners.

Trout Coal is a Central Appalachia, W.Va., coal mining company that owns five operating coal mines in Central Appalachia and mine developments in West Virginia and Illinois.

KGen breaks

KGen's $325 million 61/2-year first-lien term loan (B2/B) and $150 million 61/2-year second-lien term loan (B3/B-) freed up for trading on Monday afternoon with trades taking place between par and 101 on both tranches, according to a market source.

The first-lien term loan, which was originally issued at par, is priced with an interest rate of Libor plus 262.5 basis points and contains call protection of 101 in year one.

The second-lien term loan, which was originally issued at par, is priced with an interest rate of Libor plus 900 basis points, split between Libor plus 325 basis points cash payout and Libor plus 575 basis points PIK, and contains call protection of 103 for two years and par thereafter.

At launch, the first-lien term loan was sized at $225 million with price talk of Libor plus 300 basis points and the second-lien term loan was sized at $250 million with price talk of Libor plus 600 basis points, split between 300 basis points cash payout and 300 basis points PIK. Both term loans were being issued with call protection of 101 for two years.

Then, on March 1, the syndicate upsized the first-lien term loan to $300 million and downsized the second-lien term loan to $175 million being that the first-lien tranche was at least two times oversubscribed while the second-lien tranche was still in the process of attracting enough orders to fill the book. Also, pricing on the second-lien term loan was increased to Libor plus 700 basis points, split between Libor plus 300 basis points cash payout and Libor plus 400 basis points PIK.

On March 8 another round of changes were made to the deal, upsizing the first-lien term loan again and reducing pricing on the tranche, downsizing the second-lien term loan again and raising pricing on the tranche and changing call protection provisions on both term loans, which brought the deal to its final structure.

Credit Suisse First Boston is the lead bank on the credit facility that will be used to refinance existing bank debt, repay seller notes and increase liquidity.

KGen, which is owned by MatlinPatterson Global Opportunities Partners II, purchased Duke Energy's merchant generation assets in the southeast United States last year.

Masonite firms up pricing

Masonite firmed up pricing at the cheap end of guidance on its $1.175 billion term loan B with the tranche now said to be priced at Libor plus 225 basis points, according to a market source. Previous unofficial price talk was Libor plus 225 to 250 basis points.

The $350 million revolver is still talked at Libor plus 250 basis points.

The term loan is being offered to investors at par, and the revolver carries upfront fees of 125 basis points for commitments of $25 million and 100 basis points for commitments of $15 million.

Commitments are due March 21.

Masonite's term loan B received a strong amount of interest right from the start, with some investors placing commitments even before the March 7 bank meeting took place, and, following the bank meeting, the momentum continued, a source previously told Prospect News.

The deal has a number of factors working in its favor, including Masonite being an existing issuer, the business being one that is easy to understand and the amount of equity being contributed by Kohlberg Kravis Roberts & Co. as part of this leveraged buyout financing package.

In addition to the $1.525 billion credit facility (B2/BB-), Masonite will be getting $825 million of bond debt (which kicked off via a roadshow Monday) and equity to fund KKR's purchase of the company.

The Bank of Nova Scotia and Deutsche Bank are co-lead arrangers on the credit facility, Deutsche and UBS Securities are co-syndication agents, and SunTrust and Bank of Montreal are agents.

Masonite International is a Mississauga, Ont.-based building products company.

Headwaters repricing closes

Headwaters Inc. completed its repricing amendment that lowered the interest rate on its $442 million term loan B to Libor plus 225 basis points from Libor plus 325 basis points through the creation of a new term loan.

Pricing on the term loan can fluctuate as determined by a ratings-based grid.

The term loan contains 101 call protection against a repricing for one year and against voluntary prepayments.

Morgan Stanley and JPMorgan are the lead banks on the credit facility, with Morgan Stanley listed on the left.

In addition to the repricing, the amendment also increases allowed capital expenditures to $62 million from $50 million in fiscal 2005 and 2006, allows the company to prepay second-lien term loan debt after Sept. 8, 2005 with cash flow, subject to contractual prepayment premium, and decreases the required amount of the floating to fixed hedge to $150 million from $300 million.

The company chose to approach lenders with the repricing proposal since it recently paid down a decent amount of bank debt using proceeds from an equity offering.

On March 1, Headwaters announced the closing of a common share offering that resulted in about $199 million in net proceeds for the company after deducting underwriting discounts and commissions and other estimated offering expenses.

Proceeds from the equity offering were used to repay second-lien term loan debt (which was not amended at this time) at the call protection level, bringing the outstanding balance down to $100 million from $150 million, and repay term loan B debt. Overall, the company paid down the bank debt by about a turn of leverage.

"Headwaters' credit profile improved with the early repayment of approximately $199 million of our senior secured debt from proceeds of the recently completed equity offering. We are pleased that the holders of this debt agree that this credit improvement justifies these changes," said Steven G. Stewart, chief financial officer, in a company news release. "We plan on continuing to focus available cash flow on the reduction of Headwaters' debt. These changes will provide significant financial savings and the operational flexibility needed as we move forward."

Headwaters is a South Jordan, Utah, provider of technology and services that maximize the value of fossil fuels.

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