Headwaters flexes up and down; Knoll breaks, trades up; demand still seen strong

By Paul A. Harris

St. Louis, Sept. 30 - Thursday's leveraged loan market saw pricing flex both ways on two tranches of the Headwaters Inc. $865 million credit facility.

Meanwhile Knoll Inc.'s $475 million term loan broke for trading.

In addition to Knoll, traders saw the existing paper of the Refco Group actively trading in the secondary market.

And sources seemed to concur on Thursday that there continues to be a strong demand for paper, especially reflected in a spate of recent repricings.

"Call protection certainly has some value that is showing up in the secondary market, because there have been so many repricings, one buy-side source said on Thursday

"People are very reluctant to pay any kind of significant premiums unless they have some kind of call protection."

Sensus Metering reprices term loan

One such repricing came from Sensus Metering Systems, which is launching a repricing of its $235 million institutional term loan (B2/B+) at Libor plus 250 basis points.

The deal, which closed in December 2003, originally priced at Libor plus 300 basis points.

Credit Suisse First Boston and Goldman Sachs & Co. are leading the repricing.

One source close to the deal said that Sensus' numbers have been quite strong during the past quarter.

Jostens, Knoll break for trading

Jostens IH Corp.'s term loan broke for trading Thursday and went as high as 102 before settling in around 101.50 bid, 101.75 offered.

The $870 million tranche, led by Credit Suisse First Boston as sole lead arranger with Deutsche Bank and Bank of America as co-syndication agents, was priced at Libor plus 250 basis points.

The facility also includes a $250 million five-year revolver at Libor plus 250 basis points with a 50 basis points commitment fee and a $150 million six-year term A at Libor plus 250 basis points.

Proceeds will be used to help fund KKR's creation of one large company from Jostens, Von Hoffmann Corp. and Arcade Marketing.

Elsewhere the $425 million term loan (BB-) of East Greenville, Pa., designer and furniture products and textiles manufacturer Knoll Inc. broke for trading and was spotted by one trader at 101.125 bid, 101.50 offered.

The deal, led by UBS and Goldman Sachs, was priced at Libor plus 300 basis points, with a 101 soft call against a refinancing.

The facility also includes a $75 million revolver at Libor plus 250 basis points.

Proceeds will be used to refinance existing debt and fund a modest dividend to existing shareholders.

Later in the session a trades said he saw the Knoll term loan "either side of a quarter" in what looked like a "locked market."

The source had the loan at 101.125 bid, 101.375 offered, "but it looks like it's locked at 101.25.

"We're seeing flow in all of our second lien paper and first lien paper with call protection," the trader added.

"Those are the two areas that are well bid in this market right now."

The trader also reported continuing activity in the $215 million seven-year term loan of Culligan US, which priced at Libor plus 250 basis points.

The source spotted the Northbrook, Ill. water products company's paper at 101.50 bid, 101.75 offered market.

Headwaters second-lien tightens, first-lien widens

Meanwhile on Thursday South Jordan, Utah-based fossil fuels technology firm Headwaters Inc. tightened the pricing to Libor plus 550 basis points from Libor plus 600 basis points on it $150 million second-lien term loan due September 2012 (B3/B-).

A source reported that the tranche is in high demand.

At the same time, pricing on the $640 million first-lien term loan due April 2011 (B1/B+) was increased to Libor plus 325 basis points, with a stepdown to Libor plus 300 basis if leverage is less than 3.75-times. The tranche had originally been talked at Libor plus 275 basis points.

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

Morgan Stanley and JP Morgan are leading the deal.

A buy-side source said that little can be inferred from the Headwaters tightening/widening scenario.

"People are getting credit specific and market specific and transaction specific," the investor said.

"People are digging into the actual credits a little further than they have historically.

"Some credits have traded off two or three points in the past couple of weeks based on announcements of missed earnings. And there is a little more volatility on the downside than people are accustomed to."

Refco trades

One trader told reported seeing "the usual go-go names moving around" trading on Thursday.

"You're seeing pretty strong bids for most of the paper that is out there," the trader said. "People continue to need paper so coupons continue to get compressed.

The trader reported seeing lots of "Refco [Group Ltd. LLC] paper" on the move Thursday, spotting the loan at 100 bid, 100.125 offered

"There's a good flow in that one today," the trader added.

"It doesn't seem like anything is going to change much. Most guys who are still buyers have a lot of cash. At the same time next week you have a couple of deals launching that are decent-sized.

Pantry completes repricing

The Pantry, Inc. said it completed the repricing of its senior secured credit facilities on Thursday.

The interest rate spread was cut by 50 basis points to 225 basis points on the company's term loan with a remaining balance of $317 million and $70 million revolving credit facility.

The Sanford, N.C., convenience store operator said the change will reduce annual interest expense by $1.6 million.

As part of the amendment, the incremental term loan which Pantry may use to fund an acquisition was increased to $75 million from $50 million and the limits on use of proceeds from possible equity offerings for acquisitions were made less restrictive.

"Not only will we reduce interest expense on an ongoing basis, but we will also increase our flexibility to pursue our long-term growth strategies," said Peter Sodini, The Pantry's president and chief executive officer, in a news release. "The more favorable terms are a direct reflection of our significantly improved earnings and free cash flow over the last two fiscal years."

Neff Rental $310 million loan

Finally on Thursday an informed source told Prospect News that Neff Rental Corp. is in the bank loan market with a $310 million credit facility via joint lead arrangers and joint bookrunners Credit Suisse First Boston and Bank of America with Credit Suisse First Boston on the left.

The facility is made up of a five-year $175 million revolver at Libor plus 225 basis points and with a 37.5 basis points commitment fee and a six-year $135 million second lien term loan at Libor plus 600 basis points.

A bank meeting was held Wednesday for the facility for the Miami-based equipment rental company.

AAi.FosterGrant closes

AAi.FosterGrant Inc. closed on its $115 million credit facility via Bear Stearns.

The loan was made up of a $15 million five-year revolver at Libor plus 450 basis points, a $90 million six-year term loan B at Libor plus 500 basis points and a $10 million term loan A at Libor plus 450 basis points.

The Smithfield, R.I., eyewear and jewelry company will use proceeds to help fund the acquisition of Magnivision Inc. from American Greetings Corp.

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