PGT Industries' pricing and overall business sector expected to attract investor appetite

By Sara Rosenberg

New York, Jan. 14 - PGT Industries' newly launched $195 million credit facility is anticipated to syndicate smoothly simply based on the facts that price talk on the tranches is pretty enticing and the company operates in a relatively favorable sector.

"I'm sure it will go pretty well," a fund manager said. "It's priced pretty decent. [There is] pretty low leverage. And, it's a decent sector.

"It's basically the same kind of deal as Associated Materials and Atrium, and those went pretty well."

On Wednesday afternoon, PGT held a bank meeting for the facility, which consists of a $120 million six-year first lien term loan talked at Libor plus 325 basis points, a $50 million 61/2-year second lien term loan talked at Libor plus 650 basis points and a $25 million five-year revolver.

Leverage through the first lien is expected to be 2.9 times and leverage through the second lien is expected to be 4.1 times, according to a market source.

Expected ratings on the deal are B1 from Moody's Investors Service and B+ from Standard & Poor's, the source added.

The facility will be used to help support the buyout of PGT by JLL Partners Inc. As part of the LBO the company also will receive a $157 million equity investment of which $32 million will come from the management team, according to the source.

UBS is the sole bookrunner on the deal. The syndicate could not be immediately reached to comment on the deal's progress.

PGT is a Nokomis, Fla., manufacturer of custom windows, doors and patio rooms.

Del Monte repricing expected to succeed

Del Monte Food Co.'s most recent attempt to lower pricing on its credit facility is expected to gain lender support, unlike a failed attempt in August, since this time around the company is willing to pay the call protection to get the reduced rate.

This past Monday, the company came to market with a proposal to convert its term loan A, Euro term loan B and U.S. term loan B into a new $885 million term loan B with an interest rate of Libor plus 250 basis points, compared to current pricing of Libor plus 375 basis points, according to a source close to the deal.

Furthermore, the company is also looking to reprice its $300 million revolver to Libor plus 250 basis points, compared to existing pricing of Libor plus 350 basis points, the source added.

"They would have gotten it done last time if they were willing to adhere to the credit agreement. They tried to circumvent the hard call protection. If they don't try to do that this time then there shouldn't be any problem with getting it done," a fund manager said.

"For a four B credit it's not an unreasonable spread," the fund manager added.

In August, Del Monte had to pull a somewhat controversial amendment proposal from the market that 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.

At that time, the company tried 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 be used to repay existing bank debt.

Once this repayment became a mandatory one, investors would no longer have been entitled to the previously agreed upon call protection. The new term loan C would also have gone out to investors at Libor plus 250 basis points. 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.

By comparison, under the latest proposal the company is offering to repurchase the existing bank debt at the currently specified 101 call protection level (reduced from 102 due to a step down contained in the existing agreement), however, the repriced tranches would no longer contain call protection, according to the fund manager.

According to a source close to the deal there is a 100 basis points amendment fee. But, according to the fund manager, that 100 basis points is probably referring to investors being bought out at 101. "If it's an additional 100 basis points then they should have just bought the paper at 102," the fund manager explained.

Bank of America and JPMorgan are the lead banks on the San Francisco processed food company's proposed amendment.

Interestingly, when the previously failed amendment was brought to market last August Morgan Stanley had replaced JPMorgan as lead bank. But with this newest proposal, JPMorgan has retaken its position as co-agent and Morgan Stanley is no longer involved.

Calpine holds steady

Calpine Corp.'s bank debt continued "holding well" on Wednesday after news emerged that the California Energy Commission licensed Calpine's power plant proposed for Fresno County, according to a trader.

The San Jose, Calif., power company's second lien term loan was quoted at 98½ bid, 99 offered, although the bank debt was "not super active" during market hours, the trader said.

Calpine estimates the capital cost of building the power plant to be $400 million to $600 million. The project would occupy 25 acres within the city of San Joaquin in Fresno County and include a 230-kilovolt switchyard, according to a commission news release.

Overall it was "kind of a ho hum day" in the secondary bank loan market with nothing really standing out, a second trader said.

"It's still a strong market. Better buyers. If you can get offerings there's usually someone to buy it. And, [It was] busier than yesterday. Nothing notable though. It's a scrappy market," the second trader added.

© 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.