Novelis, NRG cut pricing on all tranches; Dollarama breaks around 101; Gate Gourmet lower

By Sara Rosenberg

New York, Dec. 15 - Novelis Inc. reverse flexed its credit facility on Wednesday, with pricing going down by 25 to 50 basis points depending on the tranche. Also able to reverse flex was NRG Energy Inc. as pricing was reduced on both its institutional and pro rata tranches and soft call protection was added.

Meanwhile, in the secondary, Dollarama broke for trading with the institutional paper quoted right around the 101 area, and Gate Gourmet Inc. slid back after spending the first half of the week recouping some losses.

Novelis lowered the interest rate on its in-market $2 billion senior secured credit facility (Ba2/BB-), cutting pricing on the $1.5 billion seven-year term loan B to Libor plus 175 basis points from Libor plus 225 basis points and on the $500 million five-year revolver to Libor plus 200 basis points from Libor plus 225 basis points, according to a market source.

This deal was yet another transaction that was somewhat expected to see pricing come in as the term loan B had already reached ample oversubscription by Dec. 3 - less than a week after launch - even though the commitment deadline wasn't until Dec. 13.

The term loan B, of which about $550 million will reside at a Canadian borrower, is being offered to investors at par.

Citigroup, Morgan Stanley and UBS are joint lead arrangers on the deal, with Citigroup the left lead.

Proceeds, combined with proceeds from a proposed $1.3 billion senior notes offering that won't kick off until next year, will be used to help fund the spinoff of Novelis from Alcan Inc.

Alcan shareholders will meet to consider approving the spinoff at a special meeting scheduled for Dec. 22.

Novelis is a rolled aluminum products company with 2003 revenues of $6.2 billion and 38 operating facilities in 12 countries. Alcan is a Montreal-based aluminum and packaging, and aluminum recycling company.

NRG reduces spread

NRG reverse flexed its $800 million seven-year term loan B, which includes a $350 million synthetic letter-of-credit facility, to Libor plus 187.5 basis points from Libor plus 250 basis points, according to a market source.

Furthermore, soft call protection of 101 for six months was added to the term loan B.

As for the $150 million three-year revolver, pricing was reverse flexed to Libor plus 250 basis points from Libor plus 275 basis points, the source said. The 50 basis point commitment fee and the 1% upfront fee were left unchanged.

Responses are due from lenders by noon Thursday.

The reduction in pricing was somewhat expected as more than $1.6 billion in orders were placed in the book within about three days of launching and about a week ahead of the commitment deadline.

And, some had even speculated that the deal could go the way of a blowout almost immediately following the bank meeting as investor interest appeared to be incredibly strong with more than 80 people attending in person and more than 80 people attending via telephone.

Credit Suisse First Boston and Goldman Sachs are the lead banks on the refinancing deal, with CSFB the left lead.

The $950 million credit facility (Ba3/BB) amends and restates the company's existing $950 million credit facility, providing NRG with lower interest rates and less restrictive loan covenants.

Closing on the new facility is anticipated to occur before year-end.

The Minneapolis wholesale power generation company has also recently priced $420 million of convertible perpetual preferred stock through a private placement to provide funds for the redemption of a portion of its outstanding 8% high-yield notes and to enable the company to use existing cash balances to repurchase 13 million shares of common stock held by investment partnerships managed by MatlinPatterson Global Advisors LLC.

Dollarama tops 101

Dollarama's term loan B opened for trading on Wednesday with levels of 10 1bid, 101¼ offered and traded just above 101 during the session, according to traders.

The U.S. dollar equivalent C$240 million term loan B is priced with an interest rate of Libor plus 225 basis points, after reverse flexing from Libor plus 250 basis points during syndication.

Citigroup and RBC are the lead banks on the deal, with Citigroup the left lead.

The credit facility also contains a C$75 million revolver and C$120 million term loan A.

Proceeds will be used to help fund Bain Capital's acquisition of Dollarama, a Montreal-based franchise retail chain of dollar stores.

Gate Gourmet weaker

Gate Gourmet's term loan B dipped by about half a point to the 96½ context on Wednesday after regaining some ground earlier this week, according to a market source.

On Tuesday, the paper was seen trading in the 97 context, compared to 96 bid, 97 offered on Monday and 95½ bid on Friday - where it moved immediately following a lender call in which the company expressed liquidity concerns and asked lenders for some leeway on payments and covenants. Prior to the call, the paper was quoted around 102.

More specifically, the call was held so that the company could ask lenders to defer loan amortization payments due Dec. 31 until April 1, 2005 and waive financial covenants for Dec. 31. The company also wants to defer interest payments on its mezzanine debt.

These requests and the seriousness of the company's liquidity problem have investors worried on many levels, leaving some believing that a Chapter 11 filing could potentially be in the future. Additionally, lenders are concerned that approving this proposal only buys the company some time and there's no guarantee that come April there will be enough liquidity to make required debt payments.

The company declined to comment to Prospect News on the matter saying, "As a principal, I am afraid Gate Gourmet does not give out any information on financial issues as we are a private company and not listed on any stock market."

Consents from lenders on the proposal are due Dec. 20.

Gate Gourmet is a Zurich, Switzerland-based airline catering company.

Hilb Rogal closes

Hilb Rogal & Hobbs Co. closed on its new $425 million senior secured credit facility (Ba3) consisting of a $175 million five-year revolver with an interest rate of Libor plus 175 basis points, a $50 million five-year term loan A with an interest rate of Libor plus 175 basis points, and a $200 million seven-year term loan B with an interest rate of Libor plus 225 basis points.

Wachovia Capital Markets LLC was the lead arranger and sole bookrunner on the deal, and Wachovia Bank, PNC Bank, SunTrust Bank and Bank of America are agents.

Proceeds from the facility were used by the Glen Allen, Va., insurance broker to refinance existing bank debt and are expected to fund, in part, future acquisitions and to provide for working capital and general corporate purposes.

"Disciplined, accretive acquisitions are a major element of the company's growth strategy," said Martin L. Vaughan III, chairman and chief executive officer, in a company news release. "We fund acquisitions with a combination of cash from operations, borrowings and common stock. This expanded credit facility provides HRH with resources to continue to grow and deepen our products, services, capabilities and reach."

Carrols closes

Carrols Corp. closed on its new $270 million senior secured credit facility (B1/B+) consisting of a $220 million six-year term loan B with an interest rate of Libor plus 250 basis points and a $50 million five-year revolver with an interest rate of Libor plus 300 basis points.

Originally, the term loan B was sized at $200 million but was increased by $20 million after the company downsized its senior subordinated notes offering by $20 million to $180 million. Furthermore, pricing on the term loan B was lowered from Libor plus 300 basis points during syndication.

Proceeds from the facility and the bonds were to be used to redeem $170 million outstanding principal amount of the company's 9½% senior subordinated notes due 2008, repay outstanding borrowings under the existing senior credit facility, and make a distribution to shareholders.

JPMorgan was the lead bank on the deal.

Carrols is a Syracuse, N.Y., restaurant company that operates Burger Kings, Taco Cabana restaurants and Pollo Tropical restaurants.

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