Penn National, Burn Philp increase term B pricing by 50 basis points

By Sara Rosenberg

New York, Feb. 10 - Pricing on both Penn National Gaming Inc.'s and Burns Philp's term loan B's was flexed up by 50 basis points, according to market sources. Penn National Gaming's $600 million B loan is now priced at Libor plus 400 basis points and Burns Philp's $375 million six-year B loan is Libor plus 450 basis points.

When Penn National first launched in January, one market professional told Prospect News that he found the deal to be slightly lacking in pricing, primarily due to the amount of leverage.

The company's bank debt pro forma is 3.4 times and total debt is 4.7 times, the professional had explained. "Over three times is slightly high. Looking at the ratios, pricing seems a little skimpy. They're saying it's a sellers market and they're pushing it."

Other possible negatives that were noted for the deal are a more skeptical attitude towards the gaming sector due to weakness in Las Vegas and an unfavorable regulatory climate for riverboats, and the large size of the facility, according to the professional. However, offsetting this is the consistency of cash flows in the gaming industry.

Meanwhile, a second market professional previously told Prospect News at the end of January that the deal "looks like it's going slower-than-expected. I heard that they only got half of it done so far. I don't think it's a bad deal. It's just interesting since so many deals have been blowing out immediately following launch."

The week prior to Penn National's launch, there was a surge of new deals hitting the market, with the number of bank meetings held entering into the double digits. Because of this, the market professional did remark that the facility's slow progress could have something to do with the fact that people had so many new issues to digest that they simply moved slower on this deal.

Not all market participants felt unenthused by the deal. For example, one fund manager admitted to committing early so as to be given preferential treatment for allocations.

When asked what was attractive about the facility, the fund manager responded: "Diversity of revenue stream, strong management team with a history of successfully integrating acquisitions, M&A potential, a number of exit strategies and the management team has had no problem accessing the capital markets."

In addition to the term B, the loan also contains a $100 million revolver with an interest rate of Libor plus 300 basis points and a $100 million term loan A with an interest rate of Libor plus 300 basis points, sources 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.

Bear Stearns and Merrill Lynch are joint lead arrangers, joint bookrunners and syndication agents on the deal.

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

The Burns Philp loan is being led by Credit Suisse First Boston.

Proceeds from the term loan B will be used to help fund the acquisition of Goodman Fielder Ltd. Also, to help fund the acquisition the company received commitments for a A$1.3 billion multi-currency five-year term loan A via Credit Suisse First Boston, BOS International Ltd. and Credit Agricole Indosuez Australia Ltd., a $100 million one-year subordinated bridge loan via Credit Suisse First Boston to be repaid with an issuance of senior subordinated notes and a NZ$250 million bridge loan due Sept. 30 via Credit Suisse First Boston to be repaid with capital notes. The term loan A and the capital notes bridge loan have already been executed, according to a company news release.

Burns Philp is an Australian producer of bakers' yeast, yeast extracts, specialty yeast products such as wine/brewers' yeast, bakery ingredients, and herbs and spices.

Northwestern Corp. closed on its $390 million term loan B due December 2006 with an interest rate of Libor plus 575 basis points. Credit Suisse First Boston was the lead bank on this refinancing deal.

Northwestern is a Sioux Falls, S.D. provider of air conditioning, heating, plumbing, propane distribution, networked communication, electric and natural gas services and solutions.

Iasis Healthcare Corp. closed on its $475 million credit facility that consists of a $125 million five-year revolver with an interest rate of Libor 450 basis points and a $350 million six-year term loan B with an interest rate of Libor plus 425 basis points. Bank of America, Citibank and UBS Warburg were the lead banks on the deal that was used to refinance amounts outstanding under the previous facility.

The new facility reduces the Franklin, Tenn. acute care hospital company's current mandatory principal repayments and allows additional annual capital expenditures as compared with the previous senior credit facility. Furthermore, certain financial covenants were revised including the replacement of a fixed charge coverage ratio with a senior leverage ratio requirement.

"We are pleased to have successfully completed the refinancing of our senior bank credit facility. This refinancing provides us with greater flexibility in pursuing and investing in the growth initiatives at our hospitals and will position the Company to continue the operational success demonstrated over the past four quarters," said David R. White, chairman, president, and chief executive officer, in a news release.

In the secondary Hughes Electronics Corp.'s bank debt was reported as being quoted basically sideways with quotes in the 99s, according to a trader, showing little reaction to news of what is essentially a refinancing of the loan.

DirecTV Holdings LLC is launching a new $1.55 billion facility on Thursday and starting a roadshow on Wednesday for $1.4 billion senior unsecured notes due 2013. Proceeds from the bonds and bank debt will be used to repay outstanding indebtedness under Hughes existing credit facilities, to fund Hughes' business plan through projected cash flow breakeven and for Hughes' other corporate purposes. Hughes' existing $1.8 billion senior secured credit facilities will terminate upon the repayment.

Deutsche Bank, Bank of America, Credit Suisse First Boston, Goldman Sachs and Salomon Smith Barney are the lead banks on the new deal.

DirecTV, a wholly owned subsidiary of Hughes, is an El Segundo, Calif. digital satellite television service provider.

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