Reynolds upsizes, trims pricing; Michaels ups pricing; Celanese, Harrah's slide with earnings

By Sara Rosenberg

New York, Oct. 27 - Reynolds came out with some changes to its well oversubscribed U.S. term loan on Tuesday, including increasing the size, reducing the spread and tightening the original issue discount.

Also, Michaels Stores Inc. revised its amendment proposal by increasing the price talk on extended term loan B debt and is giving lenders an extra day to throw in their consents/commitments.

Meanwhile, over in the secondary market, Celanese Corp. and Harrah's Operating Co. both saw levels on their term loan debt head lower following the release of quarterly numbers.

Reynolds tweaks deal

Reynolds reworked size and pricing on its U.S. term loan as a result of the tranche blowing out during syndication, according to market sources.

The term loan is now sized at $1.035 billion, up from $835 million, pricing was cut to Libor plus 425 basis points from original talk at launch of Libor plus 500 bps and the original issue discount was reduced to 99 from initial talk of 97 to 98, sources said.

A change in pricing has been expected by the market since last week because of how well the deal was going. By Friday morning, talk was that more than $2 billion in orders came in for the U.S. term loan, leaving some to guess that pricing would be lowered by at least 50 bps and the OID would end up at 99.

As before, the U.S. term loan carries a 2% Libor floor.

The company's roughly $1.65 billion, up from $1.45 billion, credit facility still includes a $120 million revolver, an €80 million revolver and a €250 million term loan.

Reynolds led by Credit Suisse

Credit Suisse is the lead bank on the Reynolds credit facility that will be used to help fund the acquisition of Closure Systems International and Reynolds Consumer Products by Beverage Packaging Holdings, the holding company of SIG Group, which is owned by Rank Group.

The total purchase price for the companies is $3.023 billion, or 7.7 times LTM adjusted pro forma EBITDA.

Other funds for the acquisition will come from $1.1 billion of senior secured notes, €450 million of senior secured notes, €116 million of existing cash and €500 million of equity.

These financings will also be used to repay existing bank borrowings at Beverage Packaging of around €485 million and repay existing Reynolds debt.

Funds from the term loan upsizing are expected to be used to pay for a larger distribution to the Rank Group.

Closing on the acquisition is expected to take place in the fourth quarter and the combined entity will assume the Reynolds name.

Reynolds is a manufacturer of aluminum foil, wraps and bags. Closure Systems is a manufacturer of plastic caps and closures, primarily serving the beverage market. And, Beverage Packaging is a manufacturer of aseptic carton packaging systems.

Michaels raises pricing

Michaels Stores increased pricing on its proposed extended term loan B debt to Libor plus 450 bps from Libor plus 375 bps and extended the consent deadline to 5 p.m. ET on Wednesday from noon ET on Tuesday, according to a market source.

Pricing on the non-extended term loan B is Libor plus 225 bps.

As was previously reported, the company is looking to amend its credit facility to extend the maturity on $1 billion of its term loan B (B3) to July 2016 from Oct. 31, 2013.

Michaels extended has MFN

As part of the amendment, Michaels Stores' proposed extended term loan B will have 25 bps of most-favored-nation protection.

In addition, if the company does not meet a senior secured leverage test of 3.25 times, the extended term loan B will mature 91 days prior to the maturity of the company's senior notes that are due on Nov. 1, 2014.

Lenders are being offered a 5 bps amendment fee.

Deutsche Bank is the lead bank on the amendment.

Michaels Stores is an Irving, Texas-based specialty retailer of arts, crafts, framing, floral, wall dιcor and seasonal merchandise for the hobbyist and do-it-yourself home decorator.

Celanese dips on results

Switching to trading happenings, Celanese's term loan B weakened on Tuesday after the company came out third-quarter earnings, according to a trader.

The term loan B was quoted at 93½ bid, 94½ offered, down from Monday's levels of 94 bid, 94¾ offered, the trader said.

For the third quarter, the company reported net earnings of $399 million, or $2.53 per diluted share, compared to net earnings of $158 million, or $0.97 per diluted share, in the prior year period.

Adjusted earnings per share for the quarter were $0.58, versus $0.78 last year.

Net sales for the quarter were $1.304 billion, down 28% from $1.823 billion in the third quarter of 2008.

Operating EBITDA for the quarter was $241 million, versus $314 million in the previous year.

Cash and cash equivalents at the end of the third quarter were $1.293 million, compared with $584 million at the end of the third quarter of 2008.

And, net debt at the end of the quarter was $2.284 billion, compared with $3.036 billion in the same period last year.

Celanese predicts earnings growth

Also on Tuesday, Celanese said that it foresees three key areas of earnings growth for 2010, including increased volumes across all of its businesses, additional fixed spending reductions of about $100 million, and an adjusted tax rate in the low 20% range.

"We expect the considerable progress we have made in executing our strategy to deliver significant earnings improvement," said David Weidman, chairman and chief executive officer, in a news release.

"Absent a pronounced economic recovery in the short term, we expect the benefits from these efforts to result in about $1.00 per share of increased earnings in 2010," Weidman added.

Celanese is a Dallas-based chemical company.

Harrah's softens

Another company to release third-quarter results on Tuesday was Harrah's Entertainment Inc., and in reaction to the news, the term loan debt of Harrah's Operating Co. headed lower, according to traders.

The term loan B-2 was quoted by one trader at 80 3/8 bid, 81 offered, down from 80¾ bid, 81¼ offered, and by a second trader at 80¼ bid, 80¾ offered, down from 80¾ bid, 81¼ offered.

And, the term loan B-4 was quoted by one trader at 98½ bid, 98 7/8 offered, down from 98 7/8 bid, 99 3/8 offered, and by a second trader at 98¾ bid, 99¼ offered, compared to 98¾ bid, 99¾ offered.

For the third quarter, Harrah's Entertainment reported a loss from operations of $1.05 billion, compared with income from operations of $349.6 million in the previous year.

Excluding impairment charges, income from operations for the quarter would have been $278.4 million, compared with income from operations of $349.6 million last year.

Net revenues for the quarter were $2.282 billion, down 13.7% from $2.646 billion in the third quarter of 2008.

Adjusted EBITDA for the quarter was $539.2 million, down 14.9% from $633.9 million last year.

Harrah's Operating results

Harrah's Operating, the Harrah's Entertainment subsidiary that holds a substantial portion of its debt, reported a loss from operations of $909.7 million, compared to income from operations of $258.8 million in the 2008 quarter.

Net revenues for Harrah's Operating were $1.756 billion, down 13.1% from $2.026 billion last year.

And, adjusted EBITDA for Harrah's Operating was $404.2 million, down 11% from $454.4 million in the prior year.

Harrah's is a Las Vegas-based provider of branded casino entertainment.

USI closes

In other news, USI Holdings Corp. closed on its new $100 million incremental senior secured term loan (B-), according to a news release.

The loan is priced at Libor plus 500 bps with a 2% Libor floor and was sold at an original issue discount of 95.

Goldman Sachs acted as the lead arranger on the deal.

Proceeds will be used to pay down revolver borrowings and for general corporate purposes.

USI is a Briarcliff Manor, N.Y.-based distributor of property and casualty insurance and employee benefits products.

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