Emmis breaks for trading with B loan quoted at par bid on low interest rate

By Sara Rosenberg

New York, May 4 - Emmis Operating Co.'s $1.025 billion loan (Ba2/B+) broke for trading on Tuesday with the term loan B staying around the par region, an unusual feat in a market where a lot of paper breaks at 101 and higher, probably due to the lower interest rate on the tranche.

More specifically, the term loan B was quoted at par bid, par ½ offered, according to a trader.

"It ended up coming at Libor plus 175. There are not a lot of incremental buyers," the trader explained.

The $675 million term loan B was reverse flexed to Libor plus 175 basis points from Libor plus 200 basis points during syndication and increased by $25 million. The increase in size was a result of higher-than-expected participation in the tender offer for the 12½% senior discount notes due 2011. To this end, the company also increased its 6 7/8% senior subordinated notes offering by $25 million to $375 million.

Besides funding the tender offer, proceeds from the credit facility and the bond deal will be used to repay all debt under the existing credit facility of Emmis Operating and to repurchase or redeem all of the outstanding 8 1/8% senior subordinated notes of Emmis Operating.

Emmis' credit facility also contains a $350 million revolver.

The deal launched on April 16 to a very receptive market as a lot of orders were received within a couple of hours of the bank meeting as some investors knew the credit and liked its history of being able to trade high in the secondary. The existing term loan B is priced with an interest rate of Libor plus 225 basis points and traded at 101 plus in the secondary bank loan market.

Bank of America, Goldman Sachs, Deutsche Bank and Credit Suisse First Boston are the lead banks on the deal.

The credit facility and the sale of the senior subordinated notes are expected to close on May 10.

Emmis is an Indianapolis-based diversified media firm with radio broadcasting, television broadcasting and magazine publishing operations.

CACI lower on allegations

CACI International Inc.'s new term loan B headed lower by about half a point on Tuesday as investors reacted to news of alleged improper employee behavior toward prisoners in Iraq, according to a trader, who quoted the paper at par bid, par ½ offered.

On Monday, the company said that it has received no information on wrongdoing or violations by its employees from the U.S. government. CACI also said that its has supported the U.S. Army's investigation since it began several months ago at which time CACI personnel in Iraq volunteered to be interviewed by Army officials in connection with that investigation and it has received no information of any pending actions against any employee. Furthermore, the company has retained outside counsel to investigate actions of company employees in connection with the allegations reported in the media.

CACI is an Arlington, Va., provider of IT and network solutions. The Defense and Intelligence Group is a Fairfax, Va., provider of business management solutions to the U.S. government.

CalGen volatile on Duke sale

Calpine Generating Co. LLC's first lien term loan bounced around, dropping by about half a point and then rebounding to end the day unchanged to up about an eighth on the Duke Energy sale news, according to a trader.

The first lien term loan was trading around 99¾ to par, the trader said.

Meanwhile, the second lien term loan responded in very much the same way, ending the day basically unchanged at 93 bid, 94 offered after dipping during earlier market hours, according to a different trader.

On Tuesday, Duke Energy announced that it agreed to sell its merchant generation assets in the southeast United States for $475 million to KGen Partners LLC. Total proceeds from the transaction, including the sales proceeds and approximately $500 million in tax benefits, will be about $1 billion.

As a result of the sale Duke Energy will record an additional pre-tax loss of about $36 million or $.03 per share to its first quarter results reported on April 29. This adjustment will bring the company's first quarter 2004 reported results to $0.33 cents per share, while its ongoing earnings per share for first quarter 2004 will remain at $0.32 cents as this additional loss is a special item, according to a company news release.

Duke Energy is a Charlotte, N.C., diversified energy company. CalGen is a wholly owned subsidiary of Calpine Corp., a San Jose, Calif., power company.

Qwest down on numbers

Qwest Communications International Inc.'s term loan D was down about half a point to be quoted at 98 bid, 99 offered following the release of first quarter financial and operating results, according to a trader.

For the quarter, the net loss was $310 million, or $0.17 per diluted share, compared to net income of $152 million, or $0.09 earnings per diluted share, for the first quarter of 2003, revenue was $3.48 billion, a 3.9% decrease from the same time last year, operating income was $96 million compared to $183 million for the first quarter of 2003 and positive free cash flow was $105 million.

Also in the first quarter, the company successfully extended debt maturities by completing its placement for $1.775 billion in notes with varying maturity dates from five to 10 years. In addition, the company pre-paid its $750 million credit facility and replaced it with a new $750 million revolver, which remains undrawn, according to a company news release.

Qwest is a Denver provider of voice, video and data services.

Midwest Generation active

Midwest Generation LLC's new $700 million seven-year first priority secured institutional term loan was "very active" on Tuesday in the par 3/4, 101 range, according to a trader, who placed levels down about an eighth of a point on the day.

There was no specific news spurring the trading activity, the trader added.

Midwest Generation is a Chicago electric company.

Guilford Mills price talk

Price talk emerged on Guilford Mills' term loans, with the $100 million term loan B talked at Libor plus 325 basis points and the $75 million second lien term loan talked in the area of Libor plus 650 to 700 basis points, according to a market source.

The $215 million credit facility also contains a $40 million revolver.

Goldman Sachs is the lead bank on the deal.

Leverage through the first lien is 2x, and leverage through the second lien is 3.5x.

Proceeds will be used to help fund Cerberus Capital Management's leveraged buyout of the company. However, the actual acquisition was completed earlier this month when GMI Merger Corp., an affiliate of Cerberus, completed a cash tender offer for the outstanding shares of Guilford Mills at $19 per share.

Guilford Mills is a Greensboro, N.C., designer and manufacturer of engineered fabrics for automotive, technical and apparel applications.

Metris reverse flexes

Metris Cos. Inc. lowered pricing on its $300 million term loan to Libor plus 950 basis points from Libor plus 100 basis points, according to a market source.

This is the second time that the deal has undergone changes. Late last week, the company increased the size of the term loan to $300 million from $175 million due to the decision to pull its proposed $250 million senior secured notes offering, and revised pricing to Libor plus 1,000 basis points from a fixed rate of 11%.

Goldman Sachs is the lead bank on the deal.

Proceeds from the term loan will be used to refinance the company's $125 million one-year term loan that was obtained last June and is priced with an annual interest rate of 12% plus performance payments based on the excess spread in the Metris Master Trust. Proceeds will also be used to refinance existing bonds, including the 10% senior notes due in 2004 and a portion of the 10 1/8% senior notes due in 2006.

Metris is a Minnetonka, Minn., provider of financial products and services.

Leiner well attended

Leiner Health Products' bank meeting on Tuesday for its proposed $290 million senior credit facility "went really well" as the launch saw a "good turnout" from potential investors and the chief executive officer was a "great presenter," according to a market source.

The credit facility consists of a $50 million five-year revolver talked at Libor plus 275 basis points and a $240 million seven-year term loan talked at Libor plus 300 basis points.

UBS and Morgan Stanley are the joint lead arrangers and bookrunners, and Credit Suisse First Boston is a co-documentation agent on the deal.

Proceeds, along with proceeds from a proposed $150 million bond offering, will be used to help fund North Castle Partners and Golden Gate Capital's $650 million recapitalization of Leiner that involves a sale of North Castle's existing majority stake in the company.

Under the recapitalization Golden Gate, and a new fund investment vehicle managed by North Castle, will invest about $265 million and will be the co-sponsors of Leiner. Leiner's management team will retain a significant ownership in the company, according to a company news release.

Leiner is a Carson, Calif., manufacturer of vitamins, minerals, supplements and diet aids, and producer of store brand over-the-counter drugs.

Maidenform second lien

Maidenform Inc.'s $90 million first lien term loan, which is talked at Libor plus 375 basis points, is oversubscribed, according to a market source, but the $60 million second lien term loan, which is talked at Libor pus 650 basis points, has not quite reached subscription as of yet, showing once again the growing trend of an increasingly difficult second lien market.

"CLO baskets for second liens are getting full. There's too much spread compression in that asset class. I think that trend will continue throughout the year. I kind of feel like the second lien boat has sailed out. If they come back with the Libor plus 900 to 1,000 maybe they'll start attracting the hedge funds," the market source explained.

Maidenform is not the only deal to see less demand for its second lien paper. Just last week price talk on Bluelinx's $100 million 51/2-year second lien term loan was increased to Libor plus 750 to 800 basis points from Libor plus 600 to 650 basis points. The Holmes Group Inc. decreased its seven-year second lien term loan to $85 million from $105 million, increased its revolver and first lien term loan, and talk was that the second lien term loan would be flexed up to Libor plus 750 basis points from Libor plus 700 basis points.

In April, American Safety Razor decreased its second lien term loan to $40 million from $50 million, moving the funds to its first lien term loan, and pricing on the second lien was upped to Libor plus 700 basis points from Libor plus 650 basis points. Another example is Meridian Automotive Systems Inc.'s $175 million seven-year second lien term loan, which was flexed higher to Libor plus 850 basis points from Libor plus 700 basis points.

Maidenform's $180 million credit facility also contains a $30 million revolver.

BNP Paribas is the lead bank on the deal that will be used to help fund Ares Corporate Opportunities Fund LP's acquisition of Maidenform from Oaktree Capital Management.

Maidenform is a Bayonne, N.J., marketer and manufacturer of intimate apparel.

CKE allocations next week

CKE Restaurants Inc.'s $380 million credit facility (B1/B) is anticipated to allocate and break for trading next week, although timing is still fluid, according to a market source.

The facility could have been used as another example of what the second lien market has been experiencing since the syndicate opted to remove the second lien paper altogether from the deal as part of a restructuring that took place last week.

At first, the credit facility was structured as a $320 million first lien term loan talked at Libor plus 275 to 300 basis points and a $60 million second lien term loan talked at Libor plus 475 to 500 basis points.

However, "due to the massive oversubscription on CKE, [they] restructured that deal, collapsing the second lien tranche into the first," a sellside source said.

Now the facility consists of a $150 million revolver with an interest rate of Libor plus 275 basis points and a $230 million first lien term loan with an interest rate of Libor plus 300 basis points.

Proceeds will be used by the Santa Barbara, Calif., owner and operator of quick service restaurants to refinance existing debt.

BNP Paribas is the lead bank on the deal.

Adesa to allocate

Adesa Inc.'s $525 million credit facility (Ba2/BB) is expected to allocate some time this week, according to a market source. UBS and Merrill Lynch are the joint lead arrangers on the deal, with UBS listed on the left.

The credit facility consists of a $200 million six-year term loan B priced at Libor plus 250 basis points, a $175 million five-year term loan A priced at Libor plus 225 basis points and a $150 million five-year revolver (size left unchanged as well) priced at Libor plus 225 basis points.

Originally, the deal was launched with the term loan B sized at $150 million and the term loan A sized at $200 million, however, the tranches were sized toward the end of April, resulting in an increase of the total credit facility size by $25 million, as the company opted to downsize its proposed bond offering by $25 million to $125 million.

Upfront fees on the pro rata allocated amount are 62.5 basis points for a $50 million commitment, 50 basis points for a $35 million commitment and 37.5 basis points for a $25 million commitment.

There never was a formal launch of the term loan B to institutional investors since there were sufficient commitments on the B loan from pro rata lenders.

Security for the credit facility is expected to be a lien on some of assets.

Proceeds from the loan combined with proceeds from the senior subordinated notes offering and an initial public offering of Adesa's common stock will be used to help support Adesa's spinoff from Allete Inc.

More specifically, Adesa will replace and repay its existing credit facility, pay a $100 million dividend to Allete, repay $200.2 million of outstanding debt owed to unaffiliated third parties and repay all outstanding intercompany debt owed to Allete and its subsidiaries, which totaled $136.1 million as of Dec. 31, 2003.

The IPO is expected to be completed in the second quarter of 2004. After the IPO, Allete will own at least 80% of the equity of Adesa. The company anticipates completing the subsequent spinoff within four months of the IPO, according to an Allete news release.

Adesa is a Carmel, Ind., operator of used vehicle and auto salvage auctions.

Yonkers Raceway June business

It is now expected that Yonkers Raceway's approximately sized $185 million term loan will be a June affair as opposed to previously anticipated timing of a May launch, according to a market source. Merrill Lynch is the lead bank on the deal.

Pricing on the term loan is not being revealed at this time since the syndicate still needs to talk to the rating agencies and the deal is still a way off from launching.

Proceeds will be used by the Yonkers, N.Y., horse racing track to fund construction, according to the source.

BPL Acquisition closes

BPL Acquisition closed on its $100 million term loan (Ba1/BBB-), which is priced with an interest rate of Libor plus 225 basis points and contains a stepdown in pricing to Libor plus 200 basis points under certain conditions.

Goldman Sachs was the sole lead bank on the deal that was used to fund the purchase of Glenmoor Ltd., the parent of the company's general partner, Buckeye Pipe Line Co., by a new entity formed by Carlyle/Riverstone Global Energy and Power Fund II LP.

Buckeye Partners is an Emmaus, Pa., independent pipeline common carrier of refined petroleum products.

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