Pinnacle reveals plans for $2.15 billion loan, $1.25 billion bonds for Aztar buy

By Sara Rosenberg

New York, March 16 - Pinnacle Entertainment Inc. outlined details on the financing for its purchase of Aztar Corp., including that the package will contain a $2.15 billion credit facility and $1.25 billion of bonds, according to a commitment letter filed with the Securities and Exchange Commission Thursday.

The credit facility will consist of a $1.25 billion seven-year term loan B, a $400 million 61/2-year term loan X and a $500 million five-year revolver, with the tranches expected to carry pricing in the Libor plus 250 basis points context. The revolver will carry a 50 bps unused fee.

The credit facility also contains a $300 million accordion feature.

Loan covenants will include minimum interest coverage ratio, maximum senior leverage ratio and maximum total debt leverage ratio.

To back up the bond offering, the company has received a commitment for a $1.25 billion 365-day unsecured senior subordinated interim loan that would carry an interest rate of Libor plus 450 bps, increasing by 75 bps 180 days after funding and an additional 50 bps each 90 days thereafter up to a maximum interest rate of 11% per annum.

Lehman Brothers and Bear Stearns are acting as joint lead arrangers and joint bookrunners on the credit facility and the interim loan, with Lehman also acting as administrative agent and Bear Stearns acting as syndication agent, the commitment letter said.

Under the purchase agreement, Pinnacle will acquire all of the outstanding shares of Aztar for $38.00 per share in cash. The fully financed transaction is valued at $2.1 billion, including $1.45 billion of equity on a fully diluted basis and about $723 million in indebtedness.

The transaction, which will likely close in the fourth quarter, is subject to approval by Aztar shareholders and the satisfaction of customary closing conditions, including the receipt of necessary regulatory and governmental approvals. The transaction is not subject to financing.

Pinnacle Entertainment is a Las Vegas-based owner and operator of gaming entertainment facilities. Aztar is a Phoenix-based gaming company.

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