Amscan reworks structure, adding second lien; IAP ups second-lien spread; USI ups first-lien pricing

By Sara Rosenberg

New York, Dec. 13 - Amscan Holdings Inc. is looking to revamp its credit facility structure by adding a second-lien term loan to the capital structure, and IAP Worldwide Services Inc. increased price talk on its second-lien term loan as ratings came in a little lower than expected.

In other primary news, the rumors proved true as United Subcontractors Inc. came out with official word that pricing on its first-lien term loan B had been flexed higher, and, on top of the pricing change, the syndicate decided to add soft call protection to the deal.

Amscan is looking to reduce the size of its first-lien term loan tranche and add a second-lien term loan to the deal, according to a market source who said that the syndicate has begun calling accounts to discuss the changes but no official posting has gone up on Intralinks as of yet.

Under the proposed changes, the first-lien term loan (B2/B) would be cut to a size of $325 million from its current size of $420 million, with price talk remaining at Libor plus 300 basis points, the source said.

The second-lien term loan being layered into the capital structure would be sized at $65 million, the source continued. Price talk on the second-lien tranche would be set at Libor plus 500 basis points and investors would be offered some sort of original issue discount, although details on the OID are still to be determined.

The second-lien loan is expected by investors to contain call protection; however, nothing has really been announced as of yet. "They wouldn't get it done without it," the source said. "Call protection is very standard on all second-lien deals. I would imagine the Amscan second will have 102/101 call protection."

Amscan's now proposed $475 million credit facility - down from $505 million - would still contain an $85 million revolver (B2/B) talked at Libor plus 300 basis points, the source added.

Goldman Sachs and Bank of America are the lead banks on the deal that will be used to help back the leveraged buyout of Party City Corp. by Berkshire Partners LLC and Weston Presidio - who already own Amscan.

To compensate for the $95 million first-lien downsizing and only $65 million second-lien addition, the sponsor would contribute an additional $30 million of equity (on top of the already committed $132 million equity contribution) in some form that is still to be determined, the source explained.

Interestingly, when the LBO was first announced, the original $540 million loan commitment letter called for a first-lien/second-lien structure, comprised of a $400 million seven-year first-lien term loan, a $65 million eight-year second-lien term loan and a $75 million six-year revolver.

It wasn't until the deal got closer to launch that the structure was changed to an all first-lien debt deal.

Under the terms of the LBO agreement, Party City shareholders will receive $17.50 per share in cash for each share of common stock outstanding for total consideration of about $360 million.

The acquisition, which is expected to close by year-end, is subject to financing, shareholder approval and other customary conditions, including regulatory approvals.

Party City is a Rockaway, N.J., party goods chain. Amscan is an Elmsford, N.Y., designer, manufacturer and distributor of decorative party goods.

IAP second-lien flexes up

IAP Worldwide Services increased pricing on its $225 million second-lien term loan to Libor plus 750 basis points from Libor plus 575 basis points as ratings came in lower than originally expected at Caa1/B-, according to a buyside source.

Call protection on the second-lien tranche remained at 102 in year one and 101 in year two, the source added.

Price talk on IAP's $100 million revolver (B1/B+) and $350 million first-lien term loan (B1/B+) was left unchanged at Libor plus 300 basis points.

Goldman Sachs and Deutsche Bank are the lead banks on the $675 million credit facility, with Goldman the left lead.

Proceeds from the facility will be used to refinance existing debt and to fund a dividend payment.

IAP Worldwide Services is a Cape Canaveral, Fla., provider of logistic services to public and private sector companies and government agencies.

United Subcontractors makes flex official

United Subcontractors increased pricing on its $295 million first-lien term loan (B2/B+) to Libor plus 275 basis points from original price talk at launch of Libor plus 250 basis points - a move that was already expected by investors on Monday, according to a market source.

Furthermore, the syndicate added 101 soft call protection for one year to the first-lien term loan tranche, the source added.

There were no other changes to the credit facility, meaning price talk on the $65 million second-lien term loan (Caa1/B-) remains at Libor plus 650 basis points and price talk on the $40 million revolver (B2/B+) remains at Libor plus 250 basis points.

Some investors had previously been expecting some sort of change in pricing to the second-lien term loan based on speculation that syndication on the tranche was struggling; however, this rumored flex up has not come to fruition as of yet.

Citigroup is the lead bank on the $400 million credit facility that will be used to refinance existing debt and fund a dividend payment.

United Subcontractors is a Salt Lake City-based installer of residential and commercial insulation systems and provider of related products and services.

Pinnacle cuts spread

Pinnacle Entertainment Inc. recently reverse flexed pricing on its $200 million six-year funded term loan to Libor plus 200 basis points from Libor plus 225 basis points, according to a market source.

Pricing on the company's $450 million five-year revolver and $100 million delayed-draw term loan that is available for 18 months with a six-year final maturity remained unchanged at Libor plus 225 basis points, the source added.

Ticking fees (also unchanged) on the delayed-draw term loan are 75 basis points for the first 12 months and 100 basis points thereafter.

Lehman Brothers and Bear Stearns are joint lead arrangers on the $750 million credit facility (B1/BB-/BB), with Lehman the left lead.

Proceeds will be used to refinance existing bank debt and to fund development of the company's casino projects in St Louis.

Pinnacle Entertainment is a Las Vegas-based owner and operator of gaming entertainment facilities.

Calpine trades up

Calpine Corp.'s second-lien bank debt was stronger by about 1 to 1.5 points on Tuesday, with levels closing out the session at 77½ bid, 79 offered compared to the previous day's close of 76 bid, 77½ offered, according to a trader.

Late in the day Monday, the San Jose, Calif.-based power company announced that turnaround specialist Robert P. May was appointed as its new chief executive officer.

May most recently served as non-executive chairman of the board of HealthSouth from July 2004 to October 2005 and as interim president and chief executive officer of Charter Communications from January 2005 to August 2005.

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