Michael Foods term loan B heavily oversubscribed on launch date

By Sara Rosenberg

New York, Oct. 30 - Michael Foods Inc.'s newly launched $595 million credit facility received quite a positive response from investors, as market participants described the term loan B as a complete blowout with the tranche comfortably oversubscribed by the end of the day.

The facility consists of a $100 million revolver and a $495 million term loan B talked at Libor plus 275 basis points.

"I think the $800 million was the last number I heard," a market source said regarding the amount of commitments already received on the institutional tranche. "It's an existing deal that people love. Great sponsor. There are a lot of good things about it."

"It's a real solid company with a great management team," a fund manager added.

Bank of America and Deutsche Bank are the lead banks on the deal.

Proceeds will be used to help support the company's leveraged buyout by Thomas H. Lee Partners, chairman and chief executive officer Gregg A. Ostrander and senior management from Vestar Capital Partners, Goldner Hawn Johnson & Morrison and the Michael family.

The transaction, which is expected to close by year-end, values the Michael Foods at approximately $1.05 billion, subject to certain adjustments.

Banc of America Securities LLC was the sell side M&A advisor to Michael Foods and Vestar. Kirkland & Ellis LLP was the legal advisor to Michael Foods and Weil, Gotshal & Manges LLP advised Thomas H. Lee in the transaction.

Michael Foods is a Minnetonka, Minn. diversified food processor and distributor of egg products, refrigerated grocery products and refrigerated potato products.

Meanwhile, market sources say that Bank of Tokyo, SunTrust, CoBank and Morgan Stanley have all gotten involved in Agco Corp.'s $750 million credit facility, which launched in New York on Thursday.

The facility, which is being led by Rabobank, consists of a $450 million term loan B with an interest rate of Libor plus 275 basis points and a $300 million multicurrency revolver.

Proceeds will be used to help fund the acquisition of Valtra Corp. for €600 million, or approximately $660 million. Equity is also expected to be used to fund the acquisition. The transaction is expected to close later in the fourth quarter at the earliest, company officials previously said.

The facility was launched in London this past Monday.

Agco is a Duluth, Ga. manufacturer and distributor of agricultural equipment and related replacement parts. Valtra is a tractor and off-road engine manufacturer with market leadership positions in the Nordic region of Europe and Latin America.

Commitments are due Friday on Key Energy Services Inc.'s $175 million four-year revolver, according to a source close to the deal, but there is relatively little stress surrounding that deadline as $190 million in commitments have already been received.

PNC Capital Markets and Wells Fargo acted are co-lead arrangers, with PNC listed on the left and acting as bookrunner as well.

Credit Lyonnais has committed $25 million to the deal taking the title of syndication agent. And, Comerica and Bank One have each committed $25 million to the deal taking the title of co-documentation agents.

"There have also been a handful of additional commitments at $15 million," the source added.

The revolver is priced with an initial interest rate of Libor plus 200 basis points and is locked in at that rate for nine months. Pricing is grid based and can range from Libor plus 150 basis points to Libor plus 225 basis points depending on leverage.

There is a greenshoe provision that could increase the revolver to $225 million but it's uncertain whether this feature will be utilized. "The company doesn't need it at this time so I think it will stay at $175," the source said.

Closing on the facility is expected to take place during the week of Nov. 10.

The new facility would be used to replace the company's existing $150 million revolver, which is set to expire in July 2005. Features of the new facility as compared to the existing one include a lower interest rate, an enhanced covenant package designed to accommodate the company's growth strategy and an extended term, according to a news release.

Proceeds from the new revolver will be used for short-term working capital, letters of credit and flexibility to reduce or refinance higher cost debt.

Key Energy is a Midland, Tex. rig-based, onshore well service company.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.