Knoll term loan flexes up to Libor plus 300 bps in effort to fill books

By Sara Rosenberg

New York, Sept. 20 - Knoll Inc. increased pricing on its $425 million term loan Monday morning by 50 basis points hoping to entice investors to commit to the deal and give new life to the book building process.

"Pricing was way too low given poor company performance over the past four years. [There was] absolutely no growth out of this company over the past few years. Actually their top line has declined the past few years. Now the equity sponsor is going to try and get a dividend out of the company before they do the IPO that gets them out of this investment that they've owned since 1996," one fund manager said in explanation of why the flex up was needed.

The term loan is now priced at Libor plus 300 basis points compared to the initial price talk of Libor plus 250 basis points.

Knoll's $75 million revolver is still talked at the Libor plus 250 basis points mark, a source said.

Whether the term loan will get done at this new pricing level still seems to be anybody's guess. "Nothing would surprise me with this crazy market," the fund manager said. But, "I won't do it at L+300."

On Sept. 10, just one day after the company held a bank meeting to launch the credit facility into syndication, Knoll filed an S-1 with the Securities and Exchange Commission announcing plans for an initial public offering of its common stock with a proposed maximum offering price of $230 million. The in-market credit facility is expected to be obtained before the IPO is done, according to the filing.

UBS Securities LLC and Goldman Sachs are the lead banks on the loan deal, with UBS listed on the left.

Proceeds from the $500 million senior secured credit facility (BB-) will be used to refinance existing debt and to fund a dividend to existing shareholders.

Knoll is an East Greenville, Pa., designer and manufacturer of branded office furniture products and textiles.

PacifiCare timing

PacifiCare Health Systems Inc.'s proposed $750 million credit facility (Ba2/BBB-) is anticipated to be October business, according to a market source, although a specific date has yet to be nailed down. JPMorgan is the lead bank on the deal.

The facility consists of a $550 million six-year term loan and a $200 million five-year revolver that is expected to be undrawn at closing.

Based on recent credit rating upgrades from both Standard & Poor's and Moody's Investors Service, pricing on the term loan is hoped to come out around Libor plus 175 basis points, investor relations director Dan Yarbrough previously told Prospect News. Pricing on the existing facility is Libor plus 22 basis points.

Proceeds from the term loan will be used to refinance $150 million of existing term loan debt and $400 million will be used to fund the acquisition of American Medical Security Group, a Green Bay, Wis., provider of individual and small group insurance products.

PacifiCare Health Systems, based in Cypress, Calif., is a consumer health organization offering.

Aquila closes

Aquila Inc. closed on its new $330 million unsecured credit facility consisting of a $110 million currently undrawn one-year revolver with an interest rate of Libor plus 575 basis points and a 100 basis point commitment fee and a $220 million one-year term loan with an interest rate of Libor plus 575 basis points. The spread on the tranches reduces as the company's credit ratings improve.

Originally, the total deal size was $300 million, comprised of a $100 million revolver and a $200 million term loan, but the tranches were upsized during syndication.

The company plans on seeking regulatory authority from various state public utility commissions as well as the Federal Energy Regulatory Commission to extend the final maturities of the credit facility to September 2009.

Credit Suisse First Boston served as the sole bookrunner for the new loans and joint lead arranger with Citibank and Lehman Brothers.

"Completing this financing package is another important step that we've been pursuing to ensure the company has sound liquidity while improving our capital structure," said Rick Dobson, chief financial officer, in a company news release.

"We clearly have more work ahead, but with this financing - along with the proceeds from our recent equity and convertible debt offerings - we have the ability to efficiently reduce other liabilities of the company," Dobson added in the release.

Proceeds were used to help retire the existing $430 million secured term loan and will also be used for working capital and other general corporate purposes.

Aquila is a Kansas City, Mo., operator of electricity and natural gas distribution utilities and owner of power generation assets.

Michael Foods closes

Michael Foods Inc. closed on the amendment of its $591.3 million senior secured credit facility that lowered pricing on the loan from previous pricing of Libor plus 250 basis points.

Furthermore, the company amended both the senior secured credit facility as well as the $135 million senior unsecured term loan to allow for some cash on the balance sheet to be used for a dividend distribution to equity holders and allow for M-Foods to sell some notes - a task that was already completed as $154.061 million of 9¾% senior discount notes due 2013 were sold for proceeds of about $100 million, according to a company news release.

For the amendment to pass, the company needed approval from 51% of its bank debt holders.

Bank of America was the lead bank on the deal.

Michael Foods is a Minnetonka, Minn., diversified food processor and distributor.

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