Sports Authority, Standard Pacific break; 24 Hour Fitness repricing sees resistance; Kraton floats talk

By Sara Rosenberg

New York, April 25 - The Sports Authority Inc. and Standard Pacific Corp. saw their credit facilities break for trading during Tuesday's market hours, and both deals' institutional term loans were seen trading in the low-par context.

Also in the secondary, Movie Gallery Inc.'s term loan B strengthened on the coattails of Netflix Inc. releasing good first-quarter financial results and General Motors Corp.'s revolver found new life as levels revved higher despite the lack of credit specific news.

In the primary, price talk on Kraton Polymers LLC's upcoming term loan started circulating throughout the market as the deal is gearing up for its Wednesday lender presentation and 24 Hour Fitness Worldwide Inc.'s recent repricing request is being met with some opposition, leading to speculation of tweaks to the proposal before it gets done.

Sports Authority allocated its credit facility Tuesday, with the $275 million seven-year covenant-light term loan B (B1/B) quoted at par bid, par ½ offered from the break until the close, according to a trader.

The term loan B is priced with an interest rate of Libor plus 225 basis points. During syndication, the tranche was upsized from $225 million and pricing was reverse flexed from Libor plus 250 basis points.

Sports Authority's $1.025 billion senior secured credit facility also includes a $685 million five-year ABL revolver with an interest rate of Libor plus 150 basis points and a 25 basis point commitment fee, and a $65 million five-year first-in, last-out ABL revolver with an interest rate of Libor plus 300 basis points.

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

Proceeds will be used to help fund the leveraged buyout of Sports Authority by Leonard Green & Partners LP and Sports Authority's senior management for $37.25 per share in cash. The total transaction value, including assumed debt, is about $1.3 billion.

Sports Authority is an Englewood, Colo., full-line sporting goods retailer.

Standard Pacific breaks

Also freeing up for trading Tuesday was Standard Pacific's credit facility, with the $200 million seven-year term loan B seen quoted at par bid, par ½ offered throughout the session as well, according to a trader.

The term loan B is priced with an interest rate of Libor plus 150 basis points.

Standard Pacific's $300 million deal (NA/NA/BB) also includes a $100 million five-year term loan A with an interest rate of Libor plus 112.5 basis points.

Bank of America and JPMorgan are joint lead arrangers on the new term loans. Bank of America and JPMorgan are joint bookrunners on the term loan A, while Bank of America is bookrunner on the term loan B.

Proceeds from the term loans will be used to repay outstanding debt under the company's revolver and for other general corporate purposes. As of March 17, there was $686.6 million drawn under the revolver, not including $81.8 million of issued but undrawn letters of credit.

Standard Pacific is an Irvine, Calif., builder and seller of single-family attached and detached homes.

Movie Gallery trades up

Movie Gallery Inc.'s term loan B continued to tread higher during Tuesday's session on the heels of the release of movie rental company Netflix Inc.'s positive first-quarter results, according to a trader.

For the quarter ended March 31, Netflix reported revenue of $224.1 million, a 47% year-over-year growth from $152.4 million for the first quarter of 2005. GAAP net income was $4.4 million, or $0.07 per diluted share, compared with GAAP net loss of $8.8 million, or $0.17 per share, for the first quarter of 2005. And, non-GAAP net income was $6.4 million, or $0.10 per diluted share, compared with non-GAAP net loss of $4.5 million, or $0.09 per share, for the first quarter of 2005.

Movie Gallery's term loan B ended the session quoted at 91 bid, 92 offered, up about a quarter to a half a point from Monday's levels of 90¾ bid, 91½ offered, the trader said.

On Monday, the bank debt also had a good day, strengthening on the bid side from levels of 90 bid, 91½ offered at the end of last week, with some attributing the momentum to the company's recent announcements that it has reached a management agreement with Hilco Real Estate LLC under which a program will be initiated to restructure leases at more than 1,100 existing Movie Gallery and Hollywood Video stores, and that it expects to be in full compliance with the financial covenants for the reporting period ended April 2.

Movie Gallery is a Dothan, Ala.-based movie rental company. Netflix is a Los Gatos, Calif.-based online movie rental subscription service provider.

General Motors rebounds

In other trading news, GM's revolver "came back in nicely" on Tuesday with levels bouncing back to the 95 bid, 96¼ offered context that were seen at the end of last week, according to a trader.

On Monday, the Detroit-based automotive company's revolver had dropped about three quarters to a full point to 94¼ bid, 95½ offered basically due to market technicals.

Kraton sets spread guidance

Switching to the primary, Kraton Polymers came out with price talk on its proposed $365 million senior secured term loan due 2013 (B1/B+) ahead of its Wednesday bank meeting, with guidance emerging at Libor plus 200 to 225 basis points, according to a market source.

Goldman Sachs is the lead arranger on the deal.

Security for the term loan is substantially all assets of the company and its subsidiaries, all stock of the company and its domestic subsidiaries and 65% of the capital stock of first-tier foreign subsidiaries.

Proceeds from the term loan will be used to refinance the company's existing $263 million term loan and help fund a cash tender offer for any and all of its parent company's, Polymer Holdings LLC, outstanding $150 million 12% senior discount notes.

With the new term loan, the company will be increasing its senior secured debt by about $103 million.

Pro forma for the transaction, Kraton's total leverage is expected to be 4.6x last-12-month bank adjusted EBITDA and senior secured debt to EBITDA is expected to be 2.9x. Last-12-month adjusted bank EBITDA is expected to be $123.8 million.

Consummation of the tender offer is subject to a number of conditions, including receipt of consents from noteholders and the successful completion of the credit facility refinancing.

The tender offer will expire at 9 a.m. ET on May 22.

In conjunction with the new term loan, the company plans on amending its existing credit agreement.

Under the amendment proposal, the excess cash flow sweep will be modified to eliminate the prepayment for the year ended Dec. 31, 2005. Thereafter it will be set at 50%, dropping to 25% if total leverage is less than 5x but greater than 3x and 0% of total leverage is less than 3x.

In addition, the investment basket in non-guarantor subsidiaries will be increased to $125 million.

Lastly, under the amendment, the maximum consolidated capital expenditure covenant will be eliminated, the definition of consolidated EBITDA will be modified, the total leverage and interest coverage covenants will be changed, and an equity cure right for financial covenant defaults will be added.

Lender consents on the credit facility amendment are due May 9, with the effective date set at May 15. Closing and funding of the new term loan is targeted for May 15 as well.

Kraton Polymers is a Houston-based specialty chemicals company.

24 Hour Fitness repricing sees push back

24 Hour Fitness' recently launched term loan B repricing amendment request is being met with some resistance as investors have been voicing concern over the aggressive nature of the proposal, according to a market source.

Under the repricing, the San Ramon, Calif.-based owner and operator of fitness centers is looking to lower the spread on its term loan B to Libor plus 225 basis points from Libor plus 300 basis points, the source said.

But, when the lender call to launch the JPMorgan led deal was held on Monday afternoon, the company got somewhat of an icy reception.

"Most lenders voiced concern that a 75 basis point cut in pricing for a company with no physical assets was too aggressive," the source commented.

"A lot of lenders also asked JPMorgan to add some call protection to the offer.

"[It] doesn't sound like the cut will end up being 75 basis points - maybe 50 basis points with one year soft call protection," the source concluded.

Trident shifts funds

Trident Exploration Corp. has moved $25 million out of its unsecured term loan tranche and into its second-lien term loan add-on, and with this change in place, the syndicate is aiming to allocate the deal on Wednesday, according to a market source.

The add-on to the company's existing $325 million second-lien term loan is now sized at $125 million, up from an original size of $100 million, and the unsecured term loan due November 2011 is now sized at $125 million, down from an original size of $150 million, the source said.

Pricing on both tranches remained unchanged, with the second-lien add-on priced at Libor plus 750 basis points, in line with existing second-lien pricing, and the unsecured term loan priced at Libor plus 950 basis points all pay-in-kind. At Dec. 31, pricing on the unsecured term loan will increase by 50 basis points PIK per quarter. The unsecured loan will convert to cash pay once net debt to EBITDA is less than 4x.

The unsecured loan is callable at par until June 30, 2007. In 2008, the loan will carry a call premium of 103, dropping down to 102 in 2009, 101 in 2010 and par thereafter.

Recommitments on the deal were due on Tuesday, the source added.

Credit Suisse is bookrunner on the $250 million deal that will be used for drilling and gas processing plants.

Based on a first-quarter 2006 private placement of equity, Trident has an equity value of $1.8 billion, backing the $575 million of total debt.

Trident Exploration is a Calgary-based company focused on the discovery and commercial development of natural gas in coal resources in the Western Canadian Sedimentary Basin.

Lear closes

Lear Corp. closed on its new $1 billion first-lien term loan B due April 2012 (B2/B+) that carries an interest rate of Libor plus 250 basis points, according to a company news release.

Originally, Lear came to market in early April with a $600 million first-lien term loan B talked at Libor plus 300 basis points and a $200 million second-lien term loan (B3/B-) talked at Libor plus the 450 to 475 basis points.

However, during syndication, the second-lien loan was removed from the capital structure and the first-lien loan was upsized by $400 million - giving the company $200 million of additional liquidity.

Also during syndication, the first-lien term loan B was reverse flexed on two occasions, first to Libor plus 275 basis points from Libor plus 300 basis points and then to Libor plus 250 basis points.

JPMorgan Chase Bank, Bank of America, Citibank and Deutsche Bank acted as the lead banks on the deal.

Proceeds from the new term loan are being used to refinance the company's $400 million term loan scheduled to mature in February 2007, to fund the retirement of the company's outstanding convertible senior notes and for general corporate purposes.

"The new credit facility addresses Lear's 2007 debt maturities and a portion of our 2008/2009 debt maturities," said Bob Rossiter, chairman and chief executive officer, in the release. "By addressing those debt maturities early, investors can be assured that the company is focused on improving our longer-term operating performance."

In connection with the new term loan B, Lear's primary credit facility was amended and restated to, among other things, provide additional collateral for both the company's existing revolver and the new term loan, increase the revolver's interest rate to Libor plus 225 basis points and provide additional flexibility under existing financial covenants through 2007.

Lear is a Southfield, Mich., supplier of automotive interior systems and components.

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