Simmons oversubscribed on launch date; Kraton receives several commitments; Agco breaks at 101¾ bid

By Sara Rosenberg

New York, Dec. 2 - Simmons Co.'s bank meeting, which wrapped up late afternoon Tuesday, was extremely well attended and institutional market reception was reported to be strong as the term loan was "way oversubscribed" by the end of the day, according to a market participant. Furthermore, Kraton Polymers Group's bank meeting also went well with a number of commitments on the books already.

Meanwhile, in the secondary, Agco Corp.'s credit facility (BB+) broke for trading with the term loan B quoted at plus par levels.

And, although investors may not be thrilled with Argosy Gaming Co.'s recently announced repricing amendment, chances are many will stay involved in the deal and give consent to the proposed modifications to avoid being paid down at par.

Simmons' $480 million credit facility consists of a $75 million revolver and a $405 million term loan B with price talk in the Libor plus 275 basis points to 300 basis points area.

Goldman Sachs and UBS Securities are the joint lead arrangers and co-syndication agents on the Simmons bank deal, with Goldman listed on the left and acting as sole bookrunner. Deutsche Bank will also be involved in the bank financing and will receive an agent title. During the meeting, it was also announced that CIT and GECC signed on to the deal as co-documentation agents, the participant added.

Previously the deal was estimated around $475 million with the term loan B anticipated around $400 million. However, it was also previously reported that the term loan B could increase in size, if the company decided to roll over some additional debt.

Proceeds will be used to help support the company's acquisition by Thomas H. Lee Partners, chairman and chief executive officer Charlie Eitel and senior management from Fenway Partners.

The company is also expected to sell about $340 million of high-yield bonds to help fund this transaction. Goldman Sachs is also on the left for the bond deal, with UBS and Deutsche acting as joint bookrunners.

In addition to the debt financing, the company is expected to receive $330 million of equity from Thomas H. Lee and $70 million of equity from Fenway and senior management.

The transaction, which is expected to close before year-end and is subject to usual conditions, values the company at $1.1 billion, according to a company news release. Fenway, which acquired Simmons in October 1998 from Investcorp for about $513 million, will retain a 10% stake in the company once the transaction closes.

Also on Tuesday, Standard & Poor's announced its B+ rating for the credit facility and lowered the company's corporate credit rating to B+ from BB-. The corporate credit rating was removed from CreditWatch, where it was placed Sept. 2.

"The rating actions reflect Simmons Co.'s leveraged financial profile stemming from the pending debt-financed acquisition of Simmons Company by Thomas H. Lee Partners LP," said S&P credit analyst Martin Kounitz, in the rating release. "This debt leverage is partially offset by the company's No. 2 market share, its history of new product innovation, and its stable cash-flow generation in the domestic mattress industry, a business with stable demand."

Simmons is an Atlanta-based manufacturer and distributor of branded bedding products.

Kraton Polymers' $390 million credit facility consists of a $60 million revolver with an interest rate of Libor plus 250 basis points and a $330 million term loan with an interest rate of Libor plus 275 basis points.

"The bank meeting went extremely well. Good crowd, good questions, a lot of interest," a source close to the deal said. "[The deal is] fortunate to be in such a robust market. [There are] several commitments in hand."

UBS Securities and Goldman Sachs are the joint lead arrangers on the bank deal.

Proceeds from the loan, combined with proceeds from a bond offering that is being led by UBS and Goldman as well, will be used to help support the company's leveraged buyout by Texas Pacific Group from Ripplewood Holdings LLC.

Under the acquisition agreement, Kraton is attributed a total enterprise value of $770 million. The transaction is expected to close by year end.

Kraton is a Houston specialty chemicals company and a producer of styrenic block copolymers.

Agco's credit facility (BB+) started trading in the secondary bank loan market on Tuesday with the term loan B quoted at par ¾ bid, 101 offered, according to one trader, and at par ¾ bid, 101 1/16 offered, according to a second trader.

The approximately sized $450 million institutional tranche is split between a $300 million U.S. dollar denominated loan and a 150 million euro denominated loan, both priced with an interest rate of Libor plus 225 basis points, according to the second trader.

"Only the U.S. piece has been trading. The euro piece hasn't traded at all," the trader added.

Agco launched the credit facility at the end of October with bank meetings in both London and New York via Rabobank as lead bank on the deal.

Besides the term loan, the credit facility also contains a $300 million multi-currency revolver.

Proceeds will be used to help fund the acquisition of Valtra Corp. for €600 million, or about $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.

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.

Some other new paper is expected to hit the secondary market this week including Atrium Cos. Inc. and Sola International Inc., according to a market source.

Atrium's $230 million credit facility (B1/B+) should allocate and begin trading on either Wednesday or Thursday, the source said.

The facility consists of a $180 million five-year term loan B with an interest rate of Libor plus 275 basis points (flexed down from initial pricing of Libor plus 325 basis points last week) and a $50 million five-year revolver with an interest rate of Libor plus 300 basis points.

There is a $100 million greenshoe on the deal (increased last week from $50 million), and the term loan B has an option to be extended for an additional two years.

CIBC World Markets and UBS Securities are the lead banks on the deal that will be used to help support Kenner & Co.'s buyout of the Dallas window manufacturer in a transaction valued at about $610 million.

Sola's $225 million credit facility (Ba3/BB-) is expected to allocate and break for trading on Wednesday, according to the market source.

The facility consists of a $175 million six-year term loan B with an interest rate of Libor plus 250 basis points (flexed down from original pricing of Libor plus 300 basis points about a week and a half ago) and a $50 million five-year revolver priced with an interest rate of Libor plus 300 basis points. Pricing on the term loan B can drop to Libor plus 225 basis points, if the company's leverage falls to 1.75 times.

UBS Investment Bank and JPMorgan are joint lead arrangers and bookrunners, with UBS listed on the left. Union Bank of California, a participant in the company's existing credit facility, signed on as administrative agent prior to the deal's launch and in fact was one of the only early commitments received.

Proceeds will be used to refinance existing debt.

Sola is a San Diego designer, manufacturer and global distributor of plastic and glass eyeglass lenses.

Under Argosy Gaming's proposed amendment, the company would reduce pricing under its term loan (Ba2) to Libor plus 225 basis points from Libor plus 275 basis points, and the rate could go down to Libor plus 200 basis points, if there is an upgrade in ratings.

Responses by lenders are due by Friday. If a lender does not want to agree to the amendment, the lender will be repaid at par through the "yank the bank" clause, according to a fund manager.

"They went out to lenders last night. We're probably going to sign. [Argosy's bank debt] will probably still trade north of par after the amendment, so you're better off selling it then at a premium than getting yanked at par," the fund manager said.

Wells Fargo is the agent on the loan.

There is $269 million outstanding on the term loan. The company also has a $400 million revolver with a current interest rate of Libor plus 262.5 basis points, which will stay as is.

Argosy Gaming is an Alton, Ill., owner and operator of riverboat casinos.

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