Slow holiday activity expected to end soon as market revs up for new deals in January

By Sara Rosenberg

New York, Jan. 3 - At the close of what has been an uneventful holiday week in the bank loan market, peoples' attention are focused on what the upcoming month has to offer in terms of new deals. Some names that have been mentioned as slated to launch in January include Houghton Mifflin, Lamar Media Corp. Penn National Gaming Inc. and the Boston Celtics.

Houghton Mifflin is expected to hit the market in mid-January with a $725 million credit facility. CIBC, Goldman Sachs and Deutsche Bank are the lead banks on the deal.

The loan consists of a $325 million revolver with an interest rate of Libor plus 325 basis points and a $400 million term loan B with an interest rate of Libor plus 375 basis points, a syndicate source previously told Prospect News.

Proceeds will be used to help fund the purchase of Houghton Mifflin from Vivendi Universal by Thomas H. Lee Partners, Blackstone Group, Bain Capital and Apax Partners. The actual acquisition already closed at the end of December, however, syndication on the loan is slated for this month due to the recent holidays. The sale is expected to go ahead on the basis of an enterprise value of €1.75 billion, representing 1.4 times Houghton Mifflin's 2001 revenue and 9.5 times its 2001 EBITDA after bookplate amortization.

Standard & Poor's lowered Houghton Mifflin's corporate credit rating on Friday to BB- from BB due to the leveraged acquisition of the company. Furthermore, the company's notes due 2006 and 2011 were upgraded to BB- from B+ since the company pledged collateral that put the notes on an equal basis with the senior secured borrowings under its existing credit facilities.

Ratings reflect "the company's strong business position in the educational publishing industry and stable operating performance, offset by financial risk resulting from the leveraged acquisition of the company," S&P said.

Houghton Mifflin is a Boston publishing company.

Lamar Media is expected to hit the primary with a $1.3 billion credit facility in January, according to market source. JPMorgan is the lead bank on the deal.

The loan consists of a $300 million revolver, a $350 million term loan A and a $650 million term loan B. Preliminary pricing on the pro rata tranches is Libor plus 200 basis points and preliminary pricing on the term B is Libor plus 250 basis points, market sources said.

Proceeds will be used to replace the company's existing bank facility.

The company is also selling $260 million of senior subordinated notes. Proceeds from the note sale will be used to redeem all of the outstanding $255 million 9 5/8% senior subordinated notes due 2006.

Lamar is a Baton Rouge, La. outdoor advertising company.

Penn National Gaming's $800 million credit facility is now anticipated for the third week of January, according to market sources. Bear Stearns and Merrill Lynch are joint lead arrangers, joint bookrunners and syndication agents on the deal.

The loan is expected to consist of a $600 million term loan B with an interest rate of Libor plus 300 basis points and a $200 million revolver with an interest rate of Libor plus 275 basis points, sources previously said.

The loan is secured by assets and stock and will be used to help fund the acquisition of Hollywood Casino Corp. and refinance debt.

Penn National Gaming is a Wyomissing, Pa. owner and operator of gaming properties.

A bank meeting for the Boston Celtics credit facility is currently expected to take place on Jan. 15 in Boston, according to a syndicate source who added that more details on the upcoming deal would be available next week. SG Cowen is the lead bank on the credit facility.

Previously, a syndicate source told Prospect News that the loan would total $180 million, consisting of a $100 million five-year term loan for the operating company, which is expected to be investment grade, and an $80 million five-year term loan for the holding company, which is expected to be non-investment grade.

Proceeds will be used to help finance the acquisition of the NBA basketball team by Boston Basketball Partners LP, according to the syndicate source, who added that the total acquisition price is $360 million.

Looking even further ahead, upcoming deals expected to hit the market in the first quarter of 2003 include, AmeriPath Inc., Dole Food Co. Inc. and TRW Automotive.

AmeriPath is expected to launch a $375 million credit facility, according to a syndicate source. Credit Suisse First Boston and Deutsche Bank are the lead banks on the deal.

The loan is anticipated to consist of a $300 million term loan B and a $75 million revolver, the syndicate source said.

In addition to the bank debt, the company is expected to use bonds and equity to help fund the merger with Amy Acquisition Corp., a corporation formed by Welsh, Carson, Anderson & Stowe. The transaction is valued at approximately $839.4 million, including AmeriPath's anticipated indebtedness as of Dec. 31, 2002 of approximately $106.9 million to be refinanced and an estimated present value of $65.1 million of existing contingent obligations. Of the total amount 30% will be funded by equity and the bonds will probably cover the rest (minus the amount that the bank debt is used for), the source added.

Credit Suisse First Boston and Deutsche Bank are also leading the bond deal.

The buyout is expected to be completed before April 30, 2003. Completion of the transaction is subject to shareholder approval, the closing of financing arrangements, the expiration of the applicable waiting period under Hart-Scott-Rodino and other customary conditions.

AmeriPath is a Riviera Beach, Fla. provider of cancer diagnostics, genomic, and related information services.

DHM Acquisition Co., which is wholly owned by David H. Murdock, will use up to $1.15 billion of senior secured credit facilities to fund the buyout of Dole Food Co. Inc.

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

Currently, the facility is expected to consist of a up to $850 million of term loans and up to a $300 million revolver, a portion of which will be drawn upon on the closing date of the merger, according to a filing with the Securities and Exchange Commission.

Commitment letters have already been received from those three banks for the credit facility financing needed to complete the merger and refinance some of Dole's debt.

The company also plans to use up to $450 million of high-yield bonds to help finance the transaction. Under the acquisition agreement, Murdock is permitted to purchase approximately 76% of Dole's outstanding common stock that he and his family do not own for $33.50 per share in cash. The per-share consideration places the total enterprise value of Dole, which includes the assumption of debt, at approximately $2.5 billion.

A special meeting of stockholders to vote on the proposed merger is expected to take place in late February or early March.

Dole is a Westlake Village, Calif. producer and marketer of fresh fruit, fresh vegetables and fresh-cut flowers, and markets a growing line of packaged foods.

TRW Automotive is expected to issue high-yield bonds and enter into a new credit facility in order to help pay the cash portion of the company's acquisition by the Blackstone Group from Northrop Grumman Corp., according to a market source.

JPMorgan, Credit Suisse First Boston, Lehman Brothers and Deutsche Bank are providing the necessary financing for the transaction.

Under the acquisition agreement, Northrop will receive $3.757 billion in cash, $600 million in debt securities and an initial $368 million equity interest in TRW Automotive (approximately 42%) for a total amount of $4.725 billion, according to a company news release.

At the close of the transaction, which is expected in the first quarter of 2003, Northrop's equity interest will be approximately 20%, which would increase total cash consideration to between $3.9 billion and $4 billion.

Northrop will use the proceeds from the sale to pay down debt.

TRW Automotive is a Livonia, Mich. diversified supplier of automotive systems, modules and components.

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