PlayCore may move some third lien debt to first, second lien tranches

By Sara Rosenberg

New York, July 19 - PlayCore Inc. may need to shuffle some funds from its third lien tranche into its first and/or second lien term loans in order to get the deal fully syndicated as the number of commitments so far received for the third lien loan are slightly below subscription levels.

"The first lien and the second lien were done. The third lien was a touch short so they might do some rejiggling to move some of the third lien debt. Whatever they were short on the third lien, they might move into the first or second or a combination of the two in order to pick up the slack. They'll get it done. They'll just move maybe five or six or 10 million bucks and be done with it," a fund manager said.

The $145 million credit facility currently consists of a $15 million five-year revolver with an interest rate of Libor plus 500 basis points at the operating company level, a $50 million five-year first-lien term loan with an interest rate of Libor plus 500 basis points at the operating company level, a $40 million six-year second-lien term loan with an interest rate of Libor plus 900 basis points and a 2% Libor floor at the operating company level and a $40 million 61/2-year third-lien term loan with a fixed-rate of 18%, split into 5% cash and 13% PIK, at the holding company level.

All term loans are being offered at par. Investors receive 100 basis points upfront for revolver commitments.

Leverage multiple include 3.7x second lien debt at the operating company, 1.7x first lien debt at the operating company and 5.7x total debt at the holding company.

"I didn't like how the tranches were all so tiny. It's a small company. Roughly $20 million of EBITDA isn't the biggest base to work off of if you miss a quarter. The first lien is fine but the second lien is already where you might start having a problem if something goes wrong," the fund manager added.

Credit Suisse First Boston is the sole lead arranger and bookrunner on the deal.

Proceeds will be used by the Chattanooga, Tenn., playground equipment manufacturer to refinance existing debt.

Alion book filled

Alion Science & Technology Corp. just slightly overfilled the book on its proposed $100 million five-year term loan (B+) with "maybe $120 million" in commitments, according to a buy-side source. The tranche, which launched at the end of June, is priced with an interest rate of Libor plus 275 basis points.

"Enough people liked it," the source said. "I passed on it. Obviously, it didn't go as well as some of these other deals that are in the market so if I wanted to sell it, it might be kind of tough.

"[Also], the company's really small. I haven't seen any real growth internally from what they do.

"Leverage is going to be pretty high. They have an incremental $50 million facility that they could draw on and if they draw on the revolver leverage can get really ugly," the source continued.

"I thought the [Standard & Poor's] rating should be a little lower and the spread should be higher," the buy-side source added.

However, according to another source, the deal was not hugely oversubscribed simply because the syndicate opted to only go out to a "a select group of guys".

Alion's facility also contains a $30 million five-year revolver with an interest rate of Libor plus 275 basis points and a 50 basis points commitment fee.

Credit Suisse First Boston is the sole lead arranger and bookrunner on the deal.

Proceeds will be used to by the McLean, Va., global research and development company to refinance existing debt.

Acosta expected at tight end of talk

Acosta Sales Co. Inc.'s $200 million six-year term loan B, that just launched last Tuesday, is expected to end up coming in at Libor plus 275 basis points, the tight end of the Libor plus 275 to 300 basis points price talk, according to a market source. The tranche is being issued to investors at par.

"I heard it's going pretty well," the source added.

On the day that the deal launched, the book was already said to be building quickly, making the potential for final pricing of Libor plus 275 basis points not a big surprise.

GE Capital and Wachovia are the lead banks on the deal, with GE listed on the left.

Acosta's facility also contains an $80 million five-year revolver with an interest rate of Libor plus 300 basis points that is being led by GE. The revolver is basically being done through a club syndication, although there is the possibility for some new lenders to be added to the deal.

Proceeds from the credit facility will be used to pay a $200 million dividend and refinance the existing revolver.

Acosta is a Jacksonville, Fla. sales and marketing agency to the consumer packaged goods industry.

Loan market watching Refco bonds

Refco Group Ltd. LLC's $875 million credit facility (B1/BB-), which launched July 12, is moving along, although some expect momentum on the deal to pick up after the company prices its high yield bond offering later this week.

"I heard it's going but it's one of those that people are doing a lot of work on. I think people are waiting to see where the bonds price and bond guys are waiting to see how the bank book fills up," a market source said.

The facility consists of an $800 million seven-year term loan B with an interest rate of Libor plus 275 basis points and a $75 million six-year revolver with an interest rate of Libor plus 275 basis points.

The bond offering is for $600 million of senior subordinated notes due 2012 that are non-callable for four years. The roadshow for the bond deal began last Wednesday.

Bank of America, Credit Suisse First Boston and Deutsche Bank are joint lead arrangers on the deal, and Deutsche is also documentation agent.

Proceeds from the credit facility and a high yield offering will be used to help fund Thomas H. Lee Partners acquisition of a major ownership stake in the company.

Financial terms of the Thomas H. Lee acquisition were not disclosed; but, the transaction, which is subject to regulatory and other approvals, values the company at approximately $2.25 billion. As part of the agreement, Refco's management team will retain a significant ownership stake in the company.

Refco is a New York diversified financial services organization.

Blockbuster sets launch

Blockbuster Inc. has scheduled a bank meeting for Thursday to launch its $1.45 billion credit facility to investors, according to market sources. JPMorgan, Citigroup and Credit Suisse First Boston are the lead banks on the deal, with JPMorgan listed on the left.

The facility consists of a $500 million seven-year revolving credit facility, of which $150 million will be reserved for a Viacom letter of credit, a $200 million seven-year term loan A and a $750 million seven-year term loan B, according to an S-4 filed with the Securities and Exchange Commission in June.

Revolver commitments will automatically reduce by 2.5% each quarter during the fourth, fifth and sixth years and terminate in full at the end of the seventh year.

Amortization on the term loan A is quarterly payments in installments aggregating 15% of the original principal balance in years two through five and installments aggregating 20% of the original principal balance in years six and seven.

Amortization on the term loan B is quarterly payments in installments aggregating 1% of the original principal balance in years two through four, installments aggregating 10% of the original principal balance in years five and six, and an installment of 77% of the original principal balance in year seven, according to the S-4 filing.

Financial covenants in the credit agreement are expected to include a maximum leverage ratio and a minimum fixed charge coverage ratio.

Blockbuster is looking to get the new credit facility to help fund its "split off" from Viacom Inc.

Security is pledges of the stock of some of Blockbuster's direct and indirect subsidiaries.

This new facility will also replace the company's existing revolver.

Proceeds will be used to pay a special distribution of $5 per share, or about $905 million, to its stockholders and to pay some of the transaction costs related to the special distribution, the split-off and credit agreement. The credit facility will also be available for working capital and general corporate purposes.

Viacom currently owns 81.5% of Blockbuster's outstanding shares. This means Viacom will receive a cash payment of $738 million in the special distribution.

The special distribution is part of the plan to separate Blockbuster and Viacom. This separation will occur through an exchange offer under which Viacom stockholders will have the chance to exchange some or all of their shares of Viacom class A or class B common stock for shares of Blockbuster class A and class B common stock held by Viacom. The exchange ratio for the offer will be set prior to the beginning of the offer.

The divestiture is expected to be completed in the third quarter of 2004.

Blockbuster is a provider of in-home movies and game entertainment.

Ripplewood around 102

Ripplewood Phosphorus LLC's term loan B was quoted around 102 on Monday during its second day of trading after quietly allocating and breaking on Friday, according to a market source.

The $140 million seven-year term loan finalized pricing at Libor plus 300 basis points, with a stepdown to Libor plus 275 basis points if the deal gets a B1 rating from Moody's Investors Service. Initially the tranche was launched with price talk of Libor plus 325 basis points but was reverse flexed during syndication on strong demand.

The $165 million senior secured credit facility (B+), which is expected to close any day now, also contains a $25 million five-year revolver with an interest rate of Libor plus 300 basis points.

UBS Warburg is the lead bank on the deal.

Proceeds will be used to help fund Ripplewood Holdings LLC's acquisition of Akzo Nobel's phosphorus chemicals business for €230 million free of cash and debt.

Ripplewood Phosphorus is a Chicago producer of organophosphorus flame retardants and functional fluids.

Six Flags holds strong

Six Flags Inc.'s bank debt was said to be holding up pretty well with the paper quoted in the 101 to 102 range, shrugging off a potential downgrade warning from Standard & Poor's and "not down very much at all pre-[earnings] announcement", a trader said.

Towards the end of last week, Six Flags announced that because year to date through June 30 park revenues were down by about 0.9% since last year, results for the six months ended June 30 are now expected to show revenues of approximately $400 to $402 million, down approximately $3 to $5 million from the 2003 period. EBITDA for the first six months of 2004 is now expected to be approximately $30 million, down approximately $11.8 million from the 2003 six month levels, and adjusted EBITDA is expected to be approximately $11.5 million, down approximately $14 million from the six months ended June 30, 2003.

In reaction to this news, S&P announced on Monday that it placed its ratings on Six Flags, including the B+ corporate credit rating, on CreditWatch with negative implications, with the expectation being that if a downgrade is warranted, it will only be by one notch.

"We had anticipated improvement in Six Flags' credit measures in 2004, which is now unlikely given the weak first half operating performance," said S&P credit analyst Hal Diamond, in the release.

"Discretionary cash flow has been minimal during the past three years despite reduced capital spending. The company plans to further reduce capital spending in the full year 2004 to roughly $75 million from $113 million in 2003. Standard & Poor's is concerned that this strategy is resulting in underinvestment in the rides and attractions necessary to stimulate visitation," S&P added.

Six Flags is an New York theme park company.

Intertape Polymer ups term loan, lowers pricing

Intertape Polymer Group Inc. recently upsized its term loan to $200 million from $175 million and decreased pricing on the tranche to Libor plus 225 basis points from initial pricing of Libor plus 275 basis points, according to a market source.

The $75 million revolver at Libor plus 275 basis points, remained unchanged in both size and pricing, the source added.

Citigroup is the lead bank on the deal.

Proceeds from the credit facility (Ba3/B+) and bonds will be used to repay an existing credit facility, redeem all three series of existing senior secured notes and pay related make-whole premiums, accrued interest and transaction fees.

Intertape Polymer Group is a Bradenton, Fla. developer and manufacture of specialized polyolefin plastic and paper packaging products and complementary packaging systems.

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