Pinnacle Entertainment term loan hits the secondary with levels hovering around 101

By Sara Rosenberg

New York, Dec. 12 - Pinnacle Entertainment Inc.'s $300 million credit facility (B1/B+) allocated and broke for trading on Friday with the institutional paper immediately moving up to levels in the 101 area, according to market sources.

"It straddles 101 on both sides," one trader said regarding the bid/offer on the term loan portion of the facility.

The institutional tranche consists of a $146 million funded term loan B and a $79 million delayed draw term loan B with a commitment fee of 125 basis points. The company has until Sept. 30, 2004 to draw on the term loan.

Both the term loan B and the delayed draw term loan underwent some changes this past Monday, including an increase in size and a reduction in pricing by 25 basis points to Libor plus 350 basis points due to overwhelming demand. Originally, the draw term loan was sized at $140 million with price talk of Libor plus 375 basis points, and the delayed draw term loan was sized at $75 million with price talk of Libor plus 375 basis points.

Proceeds from the institutional paper are being used to refinance the company's existing facility, which was obtained to fund the Lake Charles project as well as a project in Belterra. However, a good portion of the project financing was being kept in a reserve account. So, with this upsized deal, the company is basically increasing what they have in that reserve account without having to draw on the proposed revolver as much as they previously anticipated, giving Pinnacle greater flexibility, a source close to the deal told Prospect News.

The credit facility also contains a $75 million revolver with an interest rate of Libor plus 350 basis points, which was left unchanged since launching in November.

Lehman Brothers and Bear Stearns are joint bookrunners and joint lead arrangers on the deal, with Lehman listed on the left and acting as administrative agent and Bear acting as syndication agent.

Closing on the Las Vegas gaming company's facility is anticipated to occur early next week.

In follow-up news, Mission Energy Holdings International Inc. closed on its $800 million three-year term loan B that was offered to investors at 991/2, carries an interest rate of Libor plus 500 basis points and contains a 2% Libor floor.

The deal had originally been sized at $700 million and had originally been offered to investors at 99 carrying an interest rate of Libor plus 550 basis points. But since the facility received more than $2 billion in commitments, the deal underwent some changes including the size increase, the reverse flex in pricing and the increase in the offer price.

The 2% Libor floor remained intact throughout syndication.

The loan is intended to provide bridge financing to asset sales, including the sale of some or all of the company's international operations, depending upon, among other things, market prices.

Security is 65% of the stock of MEC International and notes receivable totaling about $286 million at Sept. 30 held by Mission Energy Holdings International and EME UK International LLC.

Net proceeds from the loan were used to make an equity contribution of about $550 million in Edison Mission Midwest Holdings, which, combined with cash on hand, was used to repay Edison Mission Midwest Holdings' $781 million debt due on Dec. 11. Remaining net proceeds were used to make a deposit of cash collateral of about $67 million under a new letter-of-credit facility obtained by Midwest Generation EME LLC and to repay about $160 million of debt of a foreign subsidiary under the Coal and CapEx facility.

Midwest Generation EME's letter-of-credit facility, which also just closed, is sized at $100 million and carries a tenor of three years. Citibank is the issuing bank on the deal.

Under the terms of this letter-of-credit facility, Midwest Generation EME is required to deposit cash in a bank account to cash collateralize any letters of credit that may be outstanding under it, according to a filing with the Securities and Exchange Commission.

Citigroup, Credit Suisse First Boston, JPMorgan Chase Bank and Lehman Brothers Inc. provided the commitment for the deal.

Mission Energy is a subsidiary of the Rosemead, Calif.-based energy company Edison Mission Energy.

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