Blockbuster, Collins & Aikman Products pricing may increase on bond sale results

By Sara Rosenberg and Paul A. Harris

New York, Aug. 12 - A new trend seems to be appearing in the primary market as some deals that are approaching both the bank and the bond markets - like Blockbuster Inc., Collins & Aikman Products Co. and PanAmSat Corp. - have or are currently contemplating increasing pricing on their institutional term loans, not because of lack of loan demand but rather because of wider pricing on bonds.

Blockbuster started considering flexing up its $550 million seven-year term loan B to Libor plus 250 basis points from Libor plus 200 basis points and adding soft call protection of 101 once price talk emerged "wider than expected" at 8¾% to 9% Thursday on its $300 million eight-year senior subordinated notes offering, according to a fund manager.

The potential change in pricing and addition of soft call protection is still unofficial at this point as the bonds are not slated to price until Friday, the fund manager added.

The Libor plus 200 basis points pricing on Blockbuster's $500 million seven-year revolver and $100 million seven-year term loan A is not expected to change.

Interestingly, the bond deal was just a recent add-on to Blockbuster's spinoff from Viacom Inc. plan. Originally, the credit facility (Ba2/BB/BB) was sized at $1.45 billion with a $200 million term loan A, a $750 million term loan B and a $500 million revolver. At the time of the size changes, syndicate also added a 50% cash flow sweep to the loan.

JPMorgan, Citigroup and Credit Suisse First Boston are the lead banks on the deal, with JPMorgan listed on the left.

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

Collins & Aikman is also expected to increase pricing on its $400 million seven-year term loan B because of where its bond priced on Thursday, according to a market source, although the syndicate was unavailable for comment prior to press time to confirm the market talk.

Currently the term loan B is priced with an interest rate of Libor plus 325 basis points.

The Troy, Mich., automotive interior components maker sold $415 million of 12 7/8% eight-year senior subordinated notes at 96.416 to yield 13 5/8%. The price talk, a 12 7/8% coupon at a discount to yield 13 5/8%, had been revised upward from a 12¾% coupon to yield 13%.

Whether the Libor plus 325 basis points pricing on the $125 million supplemental revolver for institutional investors or the Libor plus 300 basis points pricing on the $150 million five-year revolver would be affected was unclear.

JPMorgan and Deutsche are the lead banks on the deal (B1), with JPMorgan listed on the left.

And, PanAmSat already made this move the other week when its syndicate took pricing on its term loan B up to Libor plus 275 basis points from Libor plus 250 basis points after its $1.01 billion bond deal priced wide.

PanAmSat reduces B loan

PanAmSat decreased the size of its seven-year term loan B to $1.66 billion from $1.86 billion on Thursday as the buyout sponsors were able to negotiate a $200 million reduction in the total purchase price due to the recent satellite trouble.

The decision to cut the bank loan size and not the equity size was one that the investment community had been hoping for.

And, now with the "renegotiations" out of the way, the $2.71 billion credit facility (Ba3/BB+) is anticipated to allocate and free up for trading around the middle of the Aug. 16 week, according to a market source.

Up until now, the PanAmSat sale had been in a holding pattern following the announcement that the secondary XIPS on the Galaxy 10R satellite experienced an unexpected shutdown, and the company has not been able to restart the system. And although the satellite is operating normally on its backup system, there has been no service interruption to customers and revenue is not expected to be affected, this unfortunately timed hitch gave the buying group a chance to negotiate a lower transaction price.

Under the newly reached agreement Kohlberg Kravis Roberts & Co. LP., The Carlyle Group and Providence Equity Partners Inc. will pay about $2.6 billion for The DirecTV Group's equity interest in PanAmSat. The agreement does not affect the $23.50 per share purchase price to be paid to the other PanAmSat shareholders.

"All the pieces are in place to close the transactions next week," said Chase Carey, president and chief executive officer of DirecTV, in a company news release. "This transaction continues to be a good value for our shareholders and enables us to take one more step toward our goal of focusing resources and management time on our core DirecTV business."

Even though the size of the term loan B was modified, pricing remained unchanged at Libor plus 275 basis points, the source added.

The credit facility also contains a $250 million five-year revolver with an interest rate of Libor plus 250 basis points and a 50 basis points commitment fee, and an $800 million five-year term loan A with an interest rate of Libor plus 250 basis points. Pricing on these tranches was unchanged throughout syndication.

PanAmSat's bank deal launched to managing agents toward the end of June at which time 10 institutions were invited to participate in the meeting. The bank meeting for retail syndication occurred in mid-July.

Citigroup and Credit Suisse First Boston are the joint lead arrangers and joint bookrunners on the deal, with Citigroup listed on the left. Bear Stearns, Lehman Brothers and Bank of America are co-documentation agents.

PanAmSat, a Wilton, Conn., satellite operator, has already received the necessary regulatory approvals by the Federal Communications Commission to complete this LBO, and it is expected that shareholders will approve the transaction at their annual meeting on Friday.

Closing of the acquisition is expected to take place on Wednesday, and the purchase of stock from DirecTV is anticipated for Aug. 20.

AAi.FosterGrant may up pricing

Talk is that AAi.FosterGrant may up pricing on its $100 million six-year term loan B "somewhere in the 400 range" from current talk of Libor plus 350 basis points, according to a market source.

In this case, the pricing change would not be a result of a bond deal, but rather with it being a seasonally slow August, the syndicate is considering this in an attempt to capture investor attention, the source explained.

Bear Stearns is the sole lead bank on the deal that is expected to close in late August.

Included in the credit facility is a $15 million five-year revolver.

Proceeds will be used to help fund the acquisition of Magnivision Inc. from American Greetings Corp. in an all-cash transaction.

AAi.FosterGrant is a Smithfield, R.I., eyewear and jewelry company. Magnivision is a reading glasses company.

JPMorgan wins TCW auction

JPMorgan Chase won the TCW auction on Thursday for a $300 million portfolio, beating out four other dealers with a 100.76 cover bid, according to a market source.

The auction, which kicked off in the morning, dominated most secondary players' focus, leaving the rest of the market pretty quiet, the source added.

Qwest still pushing lower

Qwest Communications International Inc.'s fixed-rate bank debt dropped down to, although didn't really trade at, 94¾ bid, 95¼ offered from 95¼ bid, 96¼ offered in Thursday's market as investors seemed displeased with where the company's bonds priced, according to a trader.

Since the start of this week, the paper has already lost a little over three points. Prior to the bond pricing, people were attributing the weakening in the fixed-rate bank debt to a weekend Barron's article that called Qwest the least of a bargain when compared to AT&T and MCI.

Now, sources are saying that the Denver telecommunications company's pricing of $575 million 7.875% seven-year notes on Thursday at 98.66 to yield 8 1/8% may be assisting in the downfall as well.

Prior to pricing, the bond deal was expected to be sized at $500 million and was talked to yield 8% to 8¼%.

CCC books closing Monday

CCC Information Services Group Inc. is scheduled to close the books on its "done" $207.5 million credit facility (B1/B+) on Monday, according to a market source.

The facility consists of a $30 million five-year revolver at Libor plus 300 basis points with a 50 basis points commitment fee and a $177.5 million six-year term loan B at Libor plus 300 basis points.

Credit Suisse First Boston is the sole lead arranger and bookrunner on the deal and Jeffries & Co. is syndication agent.

Proceeds will be used for recapitalization purposes.

CCC Information Services is a Chicago supplier of technology solutions to the automotive claims and collision repair industries.

Garrett oversubscribed

Garrett Aviation Services' $147 million term loan (B1/B+) and $80 million second-lien term loan (B2/B-) are both "way oversubscribed," according to a fund manager. And, the $60 million revolver (B1/B+) "is almost done too," the fund manager added.

The term loan is talked at Libor plus 275 basis points, the second-lien term loan is talked at Libor plus 525 basis points and the revolver is talked at Libor plus 250 basis points.

Lehman Brothers and Citigroup are joint lead arrangers and joint bookrunners on the Garrett Aviation credit facility, with Lehman left lead and administrative agent.

Proceeds will be used to help fund The Carlyle Group's acquisition of Garrett from General Electric Co.

Carlyle plans on combining Tempe, Ariz.-based Garrett with one of its existing portfolio companies, Piedmont Hawthorne, to create a general aviation aftermarket service provider offering a more comprehensive range of services, according to a Carlyle release.

The transaction is expected to close in the third quarter.

Borden Chemical closes

Borden Chemical Inc. closed on its $175 million five-year revolver (B1/BB-) that carries an initial interest rate of Libor plus 200 basis points and a 50 basis points commitment fee.

Credit Suisse First Boston and JPMorgan were the joint lead arrangers and joint bookrunners, with CSFB left lead. Fleet and Morgan Stanley were co-documentation agents.

The company got the credit facility in connection with Apollo Management LP's acquisition of Borden from BW Holdings LLC, an affiliate of Kohlberg Kravis Roberts & Co.

Borden is a Columbus, Ohio, supplier of high-performance resins, adhesives, coatings, and basic chemicals.

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