Dex Media West launches to positive reception, Del Monte amendment pulled

By Sara Rosenberg

New York, Aug. 11 - Dex Media West LLC's (QwestDex) $2.11 billion credit facility (BB-) is expected to syndicate smoothly for a number of reasons including continued strong investor demand for new paper, positive performance of the previous Dex Media East deal and overall strong company performance.

"Investors are pretty excited to get anything out there so I think it will be a blowout," one source said.

"It's going to do fine," a second source said in agreement. "It's so well syndicated on the East side. There's nothing in the market as we speak that has held up so well. It's been much higher than par levels in the secondary. And, when you look at the combined entity and combined cash flows there's no reason not to want this deal."

Asked whether there has been any talk of early commitments, the source responded: "There's no need for it. It's so big that people will have their chance."

Furthermore, he explained that many people who were involved in the Dex Media East deal are expected to participate in this one as well based on the favorable performance of the initial deal.

"The only issue you'd be looking at is absolute market saturation," a buy side source added. "But this market is so liquid that I don't think that will be a problem.

Dex Media West's credit facility launched to retail investors on Monday afternoon via JPMorgan, Bank of America, Deutsche Bank, Wachovia Securities and Lehman Brothers. The deal was originally slated for July 29, but was postponed due to regulatory issues. A meeting for managing agents has already taken place.

The facility consists of a $1.05 billion term loan B talked at Libor plus 275 basis points, 25 basis points lower than initial price talk, a $100 million revolver talked at Libor plus 300 basis points and a $960 million term loan A talked at Libor plus 300 basis points, the source said.

Last year, Qwest reached an agreement to sell QwestDex, its yellow pages directories business, to The Carlyle Group and Welsh, Carson, Anderson & Stowe for $7.05 billion.

The buyout involves two stages. In the first stage, already completed, QwestDex's operations in Colorado, Iowa, Minnesota, Nebraska, New Mexico, North Dakota and South Dakota were purchased for $2.75 billion. In this second stage, operations in Arizona, Idaho, Montana, Oregon, Utah, Washington and Wyoming will be purchased for $4.3 billion.

For the acquisition of Dex Media East, approximately $1.79 billion of bank debt was syndicated, consisting of a $700 million term loan B with an interest rate of Libor plus 400 basis points, a $690 million term loan A with an interest rate of Libor plus 300 basis points and a $100 million revolver with an interest rate of Libor plus 300 basis points.

Del Monte Foods Co.'s controversial amendment, which went out to lenders last Wednesday, was pulled from the market, according to various sources. The proposed amendment would have allowed the company to avoid paying the 102 call protection under its credit agreement by essentially changing the prepayment of its term loan B into a mandatory rather than voluntary payment.

The company wanted to amend its credit agreement to change the definition of "other debt" to include senior secured debt. By doing this, Del Monte could have issued a new term loan C, which, under the new definition, would have to be used to repay existing bank debt. Once this repayment is a mandatory one, investors would have no longer been entitled to the previously agreed upon call protection. The new term loan C would have gone out to investors at Libor plus 250 basis points, compared to the Libor plus 375 basis points pricing on the existing institutional tranche. In return, the company was offering to pay investors 75 basis points for signing the amendment. The company needed 51% approval in order to effect the change in definition.

This proposal had many lenders upset, with some feeling that the company and the lead banks were trying to break contractual obligations rather than just trying to take advantage of strong market technicals.

Bank of America was the agent on the San Francisco processed food company's proposed amendment with Morgan Stanley replacing JPMorgan as co-agent.

Meanwhile, syndication on Monitronics International Inc. is expected to be completed by the end of this week, according to a source close to the deal, as the revolver is oversubscribed and lead banks are now only waiting on a few people for the term loan B.

The $325 million credit facility (B1/B+) consists of a $150 million five-year revolver with an interest rate of Libor plus 375 basis points and a $175 million six-year term loan B with an interest rate of Libor plus 400 basis points, according to the source.

This is a different structure than was originally anticipated. Previously, the deal was expected to consist of a $200 million revolver at Libor plus 375 basis points and a $125 million term loan B with an interest rate of Libor plus 375 basis points.

Proceeds, combined with proceeds from a $200 million senior subordinated notes offering slated to price either Tuesday or Wednesday, will be used to refinance existing bank debt.

Fleet is the administrative agent and co-lead arranger, and Bank of America is the co-lead arranger and syndication agent on the deal.

Monitronics is a Dallas provider of monitored security alarm systems.

In the secondary, Allied Waste Industries Inc.'s bank debt backed off by about a quarter of a point on Monday following news of a proposed $250 million add-on to its term loan B and a proposed $750 million bond offering as part of a refinancing plan. The paper was quoted at par ¼ bid, par ¾ offered, down from par ½ bid, 101 offered.

"I think it might hold at par ¼ but it could soften by another quarter of a point," a trader said. "A billion is significant on the leverage side."

The assumption is that the Scottsdale, Ariz. solid waste management company will approach existing lenders to invest in the add-on. However, if that doesn't work, the extra supply of bank paper would likely be absorbed by new CLOs and CLOs that will be ramping up in the fourth quarter, according to the trader.

Following up, U.S.I. Holdings Corp. closed on a new $155 million senior secured credit facility (BB-) comprised of a $30 million four-year revolver with an interest rate of Libor plus 350 basis points and a $125 million five-year term loan B with an interest rate of Libor plus 325 basis points. JPMorgan and Bank of America led the deal.

Proceeds from the term loan will be used to repay all amounts under its previously existing term and revolver, to payoff a portion of existing notes issued in prior acquisitions, to pay expenses related to the closing of the new credit facility and for general corporate purposes.

The revolver will be undrawn as of the issue date and will be used for general corporate purposes, including acquisitions.

"We entered 2002 with a stated goal of making significant headway in de-leveraging and solidifying our capital structure to meet our long term business goals of consistent organic revenue growth, margin expansion, and disciplined accretive acquisitions. The combination of our successful IPO in October 2002 with today's announced refinancing of our credit facilities, has positioned USI to deliver on these goals," said David L. Eslick, chairman, president and chief executive officer, in a news release. "We believe that the strong positive response of the lending community to participate in this new credit facility is a significant endorsement of the improvement in our operating and financial model. Our new credit facility's lower interest rates and more favorable amortization schedules will help strengthen our earnings and available cash flow."

U.S.I. is a San Francisco property & casualty, and employee benefits insurance company.

Kinetic Concepts Inc. closed on its new $580 million credit facility (B1/BB-), consisting of a $480 million term loan B with an interest rate of Libor plus 275 basis points and a $100 million revolver with an interest rate of Libor plus 250 basis points and a 50 basis points commitment fee.

Credit Suisse First Boston and Morgan Stanley acted as lead arrangers on the San Antonio medical device company's deal.

Security is a first priority interest in substantially all of the capital stock or membership interests of the company's subsidiaries that are guarantors under the facility and 65% of the capital stock or membership interests of certain foreign subsidiaries.

Proceeds from the new loan, combined with proceeds from a $205 million senior subordinated note sale and $263.793 convertible preferred stock sale, are being used to repay approximately $209 million under, and terminate the company's existing senior credit facility, to redeem the company's 9.625% senior subordinated notes due 2007 and to fund a tender offer of up to $589.763 million of outstanding common stock.

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