Harbor Freight extends signature deadline by one day on holdouts from term loan lenders

By Sara Rosenberg

New York, Nov. 23 - Harbor Freight Tools extended the consent deadline for its repricing to 1 p.m. ET Tuesday from 5 p.m. ET Monday as a pretty large number of investors seemed to make a last ditch attempt to make this proposal go away.

"There were a lot of hold outs. Like $100 million on the term loan," a source said. "They're giving guys to 1 p.m. to get their signatures in. After today's deadline they'll invoke the clause that lets [the syndicate] buy back the paper at par. [But] they're thinking they won't have to buy back $100 million of paper. They expect more people would sign off on it today.

"People are scared to lose their loans. They're dying for paper," the source continued. "They figure guys will come to their senses and hang on to it at 225 and let it trade back up to 101 like all these other repricing deals are doing instead of losing it at par."

The repricing affects the company's $440 million term loan, lowering the spread to Libor plus 225 basis points from Libor plus 275 basis points.

Because investors were so upset with the original proposal, the syndicate, after soft circling with lenders, added 101 call protection in year one and a step up in pricing to Libor plus 250 basis points if leverage goes over 31/4x down the road.

Investors' main problem with the repricing was losing 50 basis points on paper they just got their hands on a few months ago, especially since the company was a new issuer at the time and has so far only reported one quarter of financial information to them.

The company launched the mark-to-market repricing through a conference call about a week and a half ago via Credit Suisse First Boston and UBS.

Harbor Freight Tools is a Camarillo, Calif. tool and equipment catalog retailer.

MGM Mirage closes

MGM Mirage closed on its amended and restated $7 billion senior credit facility consisting of a $5.5 billion five-year revolver and a $1.5 billion five-year term loan, although the facility does not actually become effective until the merger with Mandalay Resort Group is completed.

Banc of America Securities LLC and The Royal Bank of Scotland PLC were joint lead arranger, Banc of America Securities LLC, The Royal Bank of Scotland PLC, JPMorgan Securities Inc., Citibank North America Inc. and Deutsche Bank Securities Inc. were joint bookrunners.

JP Morgan Chase Bank, Citigroup USA Inc., Deutsche Bank, Bank of Scotland, Barclays Bank PLC, BNP Paribas, Commerzbank, Sumitomo Mitsui Banking Corp. and Wachovia Bank acted as co-documentation agents, Societe Generale acted as senior managing agent and Merrill Lynch and U.S. Bank acted as managing agents. Bank of America will act as the administrative agent.

Interest on the Las Vegas hotel and gaming company's facility can range from Libor plus 75 to 175 basis points.

Proceeds are available for financing the merger, refinancing debt of MGM and Mandalay, and for working capital and general corporate purposes.

"Completing this financing marks an important milestone as we combine two outstanding franchises to form a multi-faceted entertainment and hospitality company with an unmatched portfolio of resorts appealing to a broad spectrum of consumers," said Terry Lanni, chairman and chief executive officer, in a company news release.

"This historic financing package underscores the tremendous confidence our bank group has in our Company, our growth initiatives, as well as our ability to integrate the Mandalay assets," added Jim Murren, president, chief financial officer and treasurer, in the release. "This transaction provides us with the funds necessary to close the Mandalay transaction at extremely attractive rates and creates the foundation to begin exciting new real estate development projects such as CityCenter. We expect to close the Mandalay merger during the first quarter of 2005, once all required approvals are received."

Northwest Airlines closes

Northwest Airlines Inc. closed on its new $975 million credit facility (B1/B+) consisting of a $575 million term loan A (which was downsized from $675 million) with an interest rate of Libor plus 525 basis points (after reverse flexing from Libor plus 550 basis points) and a $400 million term loan B (which was upsized from $300 million) with an interest rate of Libor plus 675 basis points (after reverse flexing from Libor plus 750 basis points).

Both term loans contain call protection of 103 in year one, 102 in year two and 101 in year three.

JPMorgan and Citigroup were the lead banks on the deal, with JPMorgan on the left, and Deutsche Bank was involved as well. U.S. Bank, ABN Amro and Calyon served as agents on the loan.

Proceeds from the facility were used by the Eagan, Minn.-based airline company to refinance existing revolver debt. The company currently had a $725 million five-year revolver due October 2005 and a $250 million 364-day revolver due October 2004 renewable annually at the option of lenders.

"We are pleased that we have restructured our bank facility one year ahead of its maturity date. With the bank loan restructured, the final condition to our pilot agreement has now been satisfied and the $300 million in annual labor cost savings from pilots and management employees will go into effect on December 1," said Doug Steenland, president and chief executive officer, in a company news release.

"The positive response we received from our existing banks and from new investors indicates their recognition of Northwest's strong strategic position and industry leading performance and their confidence in our ability to continue to achieve cost reductions and return to profitability," Steenland added in the release.

El Paso closes

El Paso Corp. closed on its new $3 billion credit facility (B3) consisting of a $750 million institutional synthetic letter of credit facility (which was added to the deal last week) with an interest rate of Libor plus 275 basis points, a $1.25 billion five-year term loan B (upsized from an initial launch size of $750 million but always contained the ability to increase to up to $1.25 billion) with an interest rate of Libor plus 275 basis points (after reverse flexing from an initial price talk of Libor plus 325 to 350 basis points) and a $1 billion three-year revolver (downsized from $1.75 billion when the letter of credit facility was added) with an interest rate of Libor plus 275 basis points (after reverse flexing from initial price talk of Libor plus 350 basis points).

Citigroup and JPMorgan were the lead banks on the term loan and the letter of credit facility, with Citi left lead. JPMorgan and Citigroup were the lead banks on the revolver, with JPMorgan left lead.

Houston-based energy company, El Paso, used proceeds from the revolver and term loan to refinance its existing $2.5 billion revolver due June 30, 2005.

Covenants include a debt to EBITDA ratio not to exceed 6.5 to 1 at any time prior to Sept. 30, 2005, 6.25 to 1 at any time on or after Sept. 30, 2005 and prior to June 30, 2006, and 6 to 1 at any time on or after June 30, 2006 until maturity.

There's also an EBITDA to interest expense and dividends paid requirement that can not be less than 1.6 to 1 prior to March 31, 2006, 1.75 to 1 on or after March 31, 2006 and prior to March 31, 2007, and 1.8 to 1 on or after March 31, 2007 until maturity.

"These new facilities recognize the significant progress we have made in improving El Paso's financial strength," said Doug Foshee, president and chief executive officer, in a company news release. "They provide us with longer-term liquidity, greater flexibility, and a significantly lower cost than our previous bank facility.

"The market's strong response to this transaction allowed us to achieve significantly lower borrowing costs and upfront fees versus our original expectations. In addition, we will benefit from $2 billion of our new facilities having a five-year maturity. The new borrowings, when combined with our existing strong cash position, will allow us to prudently use these funds over time to address our near-term debt maturities and extend our maturity profile," Foshee added in the release.

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