Capital Auto, American Reprographics break; Eddie Bauer dips on covenant issues; LPL downsizes

By Sara Rosenberg

New York, Dec. 16 - Capital Automotive REIT allocated and freed for trading Friday, with its massive term loan quoted wrapped around the mid-par context. American Reprographics Co.'s first-lien term loan add-on also freed for trading during the session withlevels wrapped right around 101.

In other secondary happenings, Eddie Bauer Holdings Inc. saw its term loan fall off in trading as warnings of potential non-compliance problems, and on top of that, a stock downgrade fueled investor concerns.

Meanwhile, in the primary market, Linsco/Private Ledger (LPL Financial Services) downsized its term loan B as the company decided to upsize its bond offering, and pricing guidance was revised on the B tranche as well.

Capital Automotive's credit facility broke for trading, with levels on the $1.95 billion five-year term loan B quoted at par 3/8 bid, par 5/8 offered pretty steadily throughout the session, according to traders.

The term loan B is priced with an interest rate of Libor plus 175 basis points and contains call protection of 102 in year one and 101 in years two and three that relates to refinancings. Prepayments made from an initial public offering, asset sales and/or excess cash flow are not covered by the call protection.

During syndication, the term loan was upsized by $530 million from $1.42 billion as the company decided to pull its proposed $500 million bond offering, and at the same time, pricing was flexed up from Libor plus 150 basis points and the call premiums were added.

The extra $30 million of liquidity that was raised through the term loan B upsizing is basically just for extra cash on the balance sheet.

Capital Automotive's $2.2 billion credit facility (Ba1/BB+) also contains a $250 million four-year revolver that is priced with an interest rate of Libor plus 175 basis points. Pricing on this tranche was also raised during syndication from initial price talk of Libor plus 150 basis points.

Lehman acted as the lead bank on the deal that is being used to help fund DRA Advisors LLC's acquisition of Capital Automotive.

Under the terms of the agreement, holders of the company's common shares are receiving $38.75 per share payable in cash. The total transaction value is about $3.4 billion, including the assumption of debt and preferred shares.

Capital Automotive is a McLean, Va., specialty finance company for automotive retail real estate.

American Reprographics add-on breaks

American Reprographics $157.5 million (Ba3/BB-) first-lien term loan add-on freed for trading on Friday as well, with levels quoted at par ¾ bid, 101¼ offered, according to traders.

The add-on is priced with an interest rate of Libor plus 175 basis points.

Proceeds are being used to repay second-lien debt.

American Reprographics is a Glendale, Calif.-based reprographics company.

Eddie Bauer falls below par

Eddie Bauer's senior secured term loan gave up a couple of points during Friday's session after a SunTrust equity analyst downgraded the company's stock to neutral from buy as a result of potential covenant violations soon, according to a fund manager.

The term loan was being quoted realistically in the mid-to-high 98 bid range, 99 to par offered range, depending on the dealer that was asked. Prior to the stock downgrade and covenant news, the term loan was being quoted around 101.

"I still haven't seen any real markets yet. I'd say a realistic market is going to be 98½ bid, 99¼ offered. One dealer that isn't involved in the deal said he heard the market was 97½ bid, 98½ offered, but that [seems inaccurate to me]. I heard from the agent on the deal that he has sellers in the 99 to 100 context. I would guess his bid is high-98s," the fund manager said.

"An amendment to the covenants shouldn't cause a 4 point drop, especially if the company is going to have to pay an amendment fee and probably increase pricing on the loan in order to get covenant relief," the fund manager added.

Late Thursday, the company warned in a form 10 filed with the Securities and Exchange Commission, that it likely will be unable to meet the fixed charge coverage and leverage ratio covenants under its term loan as of the end of the first quarter of 2006.

Initial discussions have already started between the administrative agent and the company to modify these covenants.

Eddie Bauer is a Redmond, Wash., provider of casual wear clothing, accessories and home furnishings.

LPL cuts size, changes price talk

Linsco/Private Ledger (LPL Financial Services) reduced the size of its term loan B to $750 million from $900 million as it decided to issue $550 million of 10-year senior subordinated notes instead of $400 million of notes as was originally planned, according to a market source.

Furthermore, price talk on the term loan B was revised to a range of Libor plus 300 to 325 basis points from a range of Libor plus 250 to 300 basis points, the source said.

But, even though the term loan B tranche was originally talked in this Libor plus 250 to 300 basis points context, it has always been implied to some investors that the deal would most likely price closer to the Libor plus 300 basis points area than to the mid-200 area, the source added.

LPL's now $900 million credit facility (B2/B) also contains a $100 million revolver and a $50 million term loan A.

Morgan Stanley and Goldman Sachs are the lead banks on the deal.

Proceeds will be used to help finance the acquisition of a majority equity interest in LPL by Hellman & Friedman LLC and Texas Pacific Group. Following the transaction, LPL's founders and employees will retain about 40% of the company's equity.

Completion of the transaction, which is expected by year-end, is subject to customary closing conditions, including regulatory approval.

LPL is a San Diego-based independent brokerage firm.

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