Jostens lowers pricing on term B; Amsted soft call addition to repricing seems to please investors

By Sara Rosenberg and Paul A. Harris

New York, Sept. 21 - Jostens IH Corp. reduced pricing on its $870 million seven-year term loan B by 25 basis points on Tuesday. And, Amsted Industries Inc.'s proposed repricing amendment that launched Tuesday has, so far, been met with a positive response from lenders with some sources pointing to the payment of current call protection and the addition of soft call protection to the amendment as factors that could make everybody happy.

Jostens' term loan B is now priced at Libor plus 250 basis points compared to initial price talk of Libor plus 275 basis points, according to a market source, in a move that presumably is not that surprising as syndication was expected to go well from the very start.

As for the $150 million six-year term loan A and the $250 million five-year revolver, price talk remained unchanged at Libor plus 250 basis points. The revolver has a 50 basis point commitment fee.

Credit Suisse First Boston is the sole lead arranger and bookrunner on the deal. Deutsche Bank and Bank of America are involved in the deal in agent roles as well.

Proceeds from the $1.27 billion credit facility (B1/B+) will be used to help fund Kohlberg Kravis Roberts & Co.'s $2.2 billion combination of Jostens Inc., Von Hoffmann Corp. and Arcade Marketing into one large company.

KKR will acquire Von Hoffmann and Arcade from DLJ Merchant Banking Partners and Von Hoffmann and Arcade will contribute to Jostens Holdings in exchange for stock of Jostens Holdings, which will then be recapitalized. Upon completion of these transactions, KKR and DLJ Merchant Banking will each own a 45% stake of Jostens Holdings, which will be renamed. The remaining 10% stake will be held by the management team as well as a small group of existing minority investors in Jostens.

The transaction is expected to close this fall and is subject to customary closing conditions.

Jostens is a Minneapolis provider of yearbooks, class rings and graduation products. Von Hoffmann is a St. Louis printer of educational textbooks and supplemental materials and direct marketing print services. Arcade is a New York printer and manufacturer of sampling products for the fragrance, cosmetics, consumer products, and food and beverage industries.

Amsted proposal greeted OK

Amsted's amendment is aiming to lower the interest rate on the company's approximately $420 million term loan B to Libor plus 250 basis points from Libor plus 400 basis points, while giving lenders soft call protection of 101 for one year against a refinancing of this tranche and paying lenders 101 because of call protection contained in the existing credit agreement.

"Overall people seemed okay with this," one market source said. "[They] added the soft call. Everybody is being paid at 101. I think [they're] giving everybody what they want."

The company is approaching the market now with this proposal because financial statistics are improving and because of overall strong bank loan market technicals.

"It's BB-/B1. Performance has improved. Total debt to EBITDA was 4.3x at the end of '03. On an LTM basis as of the end of July it's 3.3x," the source added.

Citigroup is the lead bank on the deal. In order to pass, the amendment needs 51% lender approval. Consents are due on Oct. 1.

Amsted is a Chicago-based diversified manufacturer of industrial components serving primarily the railroad, vehicular, and construction and building markets.

Headwaters first-lien book builds

Headwaters Inc.'s first-lien term loan (B1/B+) has built a "pretty substantial book" since launching a week ago while the second-lien term loan (B3/B-) has been oversubscribed for a few days now, according to a market source.

The seemingly less enthusiastic response to the first-lien is not necessarily a comment on the deal but rather a difference in the way various investor bases react to new paper. For example, hedge funds - the primary investors in this second-lien term loan - tend to commit faster and take more risk. While, institutional lenders - the primary investors in the first-lien term loan - take more time to study the credit story and the acquisition story involved in this transaction, the source explained.

In fact, the second-lien term loan "had plenty of orders before the launch" even took place, the source added.

The first-lien term loan maturing in April 2011 is sized at $640 million and is talked at Libor plus 275 basis points. The second-lien term loan maturing in September 2012 is sized at $150 million and is talked at Libor plus 600 basis points.

Headwaters' $865 million credit facility also contains a $75 million five-year revolver (B1/B+) talked at Libor plus 250 basis points.

Morgan Stanley and JPMorgan are the lead banks on the deal, with Morgan Stanley listed on the left.

Amortization on the first-lien term loan is quarterly installments of 1% per year with the remaining balance due in three equal installments in November, February and April of the final year. The second-lien term loan does not have an amortization schedule but rather is due in one payment at maturity.

There are three covenants contained in the credit agreement - total debt to EBITDA, senior debt to EBITDA and fixed charge coverage.

Proceeds from the credit facility, which was funded before syndication kicked off, combined with balance sheet cash, were used to help fund the completed acquisition of Tapco Holdings Inc. from Fremont Partners for $715 million in cash and to repay outstanding senior debt.

The revolver is expected to be undrawn at closing.

At closing, Headwaters has about $972 million in long-term debt and a debt-to-EBITDA ratio of approximately 4.4, based on pro forma last-12-month results as of June 30.

Headwaters is a South Jordan, Utah, provider of technology and services that maximize the value of fossil fuels. Tapco is a Wixom, Mich., designer, manufacturer and marketer of building products and professional tools used in exterior residential remodeling and construction.

Tapco will become part of Headwaters Construction Materials, an expanding division of Headwaters that manufactures, distributes and sells manufactured stone, masonry mortars, blocks, stucco materials, and specialty molded siding accessories.

Bradley Pharmaceuticals upsizes

Bradley Pharmaceuticals Inc. increased the size of its in-market five-year revolver to $50 million from $25 million, according to a syndicate document. Pricing on the tranche remained at Libor plus 250 basis points.

The $75 million five-year term loan A with an interest rate of Libor plus 250 basis points remained untouched in terms of size and pricing.

Wachovia is the lead bank on the now $125 million credit facility, which will be used to refinance existing debt.

Bradley Pharmaceuticals is a Fairfield, N.J., specialty pharmaceutical company that acquires, develops and markets prescription and over-the-counter products.

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