Kinetic Concepts hits secondary with a bang, trading as high as 101

By Sara Rosenberg

New York, Aug. 4 - Kinetic Concepts Inc.'s $580 million senior secured credit facility (B1/BB-) broke for trading on Monday, with the new $480 million seven-year institutional piece ending the day at par ¾ bid, par 7/8 offered after trading as high as 101, according to a trader.

Pricing on the term loan B is set at Libor plus 275 basis points.

The facility also contains a $100 million six-year revolver with an interest rate of Libor plus 250 basis points and a 50 basis points commitment fee.

Morgan Stanley Senior Funding Inc. and Credit Suisse First Boston are the lead banks on the San Antonio medical device company's deal, which is anticipated to close in mid-August.

Proceeds from this new credit facility are anticipated to be used as part of a recapitalization of the company, which is expected to include repayment of the outstanding balance on its existing credit facility and the redemption of its 9.625% senior subordinated notes.

Meanwhile, Moran Transportation is expected to hit the secondary Tuesday with its new $175 million senior secured credit facility, which consists of a $50 million five-year revolver with an interest rate of Libor plus 250 basis points and a $125 million six-year term loan B with an interest rate of Libor plus 325 basis points.

Fleet is the sole lead arranger and Bank of America syndication agent on the deal that will be used to refinance existing bank debt.

Oriental Trading Co. Inc.'s $250 million term loan B continued to trade between par 5/8 and par ¾ on Monday, basically in line with previous levels since breaking last week.

"It's a hard business for some people to understand even though it's a cash rich business so it never really broke much beyond the par 5/8 level," on trader explained.

The institutional tranche is priced at Libor plus 275 basis points, following a reverse flex by 75 basis points during the syndication process. The credit facility had been expected to reverse flex since day one based on the overwhelming demand the deal received. The term loan B was oversubscribed before the bank meeting and the $40 million six-year revolver was pretty much spoken for by the lead arrangers and a few other banks.

Credit Suisse First Boston and BNP Paribas are leading the deal.

The Omaha, Neb. direct marketer of novelties and toys is obtaining the facility as part of a recapitalization effort.

Wackenhut Corrections Corp.'s new term loan B continued to trade at the 101 level on Monday, according to a trader, which is pretty noteworthy considering the deal broke about a month ago.

The tranche hit the secondary at the par 5/8 level and then subsequent trades moved it to around par 7/8 bid, 101 1/8 offered within a few days of trading.

The Wackenhut facility consists of a $100 million term loan with an interest rate of Libor plus 300 basis points and a $50 million revolver with an interest rate of Libor plus 300 basis points.

Syndication of the deal went very well as the B loan was almost immediately oversubscribed and the revolver was almost immediately fully subscribed. In fact, due to the overwhelming demand, the B loan was reverse flexed to 300 over from price talk of Libor plus 375 basis points. The company's existing term loan B was priced at Libor plus 400 basis points. Pricing on the new revolver compared to the existing one is the same.

Wackenhut is a Palm Beach Gardens, Fla. correctional and detention facilities company.

In follow up news, Alderwoods Group Inc.'s $275 million term loan B, which launched last week, is said to be going very well. In fact, the book on the institutional was expected to be shut down on Monday due to the overwhelming response, a source said.

The Cincinnati funeral home operator's facility also contains a $50 million revolving credit facility.

Both the institutional and the pro rata tranches are talked at Libor plus 350 basis points.

Banc of America Securities LLC is leading the deal, which is expected to be completed within the next couple of weeks.

The proceeds from the term loan B will be used to retire the company's $195 million of 11% senior secured notes due 2007 and $80 million of Rose Hill's 9.5% senior subordinated notes due 2004. Rose Hill is a subsidiary of the Alderwoods Group.

The revolver is expected to be undrawn, except for letters of credit.

In addition, on or before the closing of the refinancing, the company expects to repay the $20 million of borrowings on its existing revolving credit facility with cash on hand. The $20 million repayment will bring the total debt repaid in fiscal 2003 to $96.5 million and to $178.1 million since emergence from Chapter 11 on Jan. 2, 2002.

Corrections Corp. of America upsized its proposed new term loan B by $25 million late last week, according to a market source. The tranche now totals $275 million and is priced at Libor plus 275 basis points.

Lehman is the lead bank on the deal.

As was previously reported, the company is in the process of amending its senior secured credit facility to increase its revolver to $125 million from $75 million and to allow it to obtain this new term loan B expiring March 31, 2008. The revolver will include a $75 million subfacility for letters of credit, increased from $50 million, and will expire on March 31, 2006.

Furthermore, the company is modifying the facility to improve interest rate pricing and, with respect to covenants, greater flexibility for incurring unsecured indebtedness, capital expenditures and permitted acquisitions.

Security for the amended facility would be liens on a substantial portion of the company's tangible and intangible assets and pledges of all of the capital stock of the company's domestic subsidiaries.

The effectiveness of the amendments is subject to requisite consent of the lenders and prepayment of approximately $265 million under the existing term loan. There are approximately $515.3 million principal amount of loans outstanding under the credit facility.

Corrections Corp. is a Nashville, Tenn. owner, operator and manager of prisons and other correctional facilities, and provider of inmate residential and prisoner transportation services.

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