Masonite cuts B loan spread; Fender firms pricing ahead of allocations; Resorts International breaks

By Sara Rosenberg

New York, March 22 - Masonite International Corp. lowered pricing on its term loan B by 25 basis points on Tuesday on strong oversubscription. And, Fender Musical Instruments Corp. firmed up pricing on its credit facility - with pricing on the first-lien term loan coming in at lower-than-expected levels - as the deal gets ready to allocate.

In the secondary, Resorts international Holdings LLC freed up for trading on Tuesday, with the first- and second-lien term loans seen in the upper 101s from the break until close.

Masonite reverse flexed pricing on its $1.175 billion term loan B to Libor plus 200 basis points from Libor plus 225 basis points, according to a market source. The tranche was originally talked at Libor plus 225 to 250 basis points but pricing was then moved to the low end of talk because of how well the deal was going.

"It's over three times oversubscribed at L+225 so it makes sense to try to push the coupon down by 25 basis points," the source said. "They're hoping for people to come back today. I'm not hearing about anybody dropping. Not much grumbling either so it looks like this will happen."

The deal has had a number of factors working in its favor, including Masonite being an existing issuer, the business being one that is easy to understand and the amount of equity being contributed by Kohlberg Kravis Roberts & Co. as part of this leveraged buyout financing package.

Masonite's $350 million revolver is still talked at Libor plus 250 basis points, the source added.

The term loan is being offered to investors at par, and the revolver carries upfront fees of 125 basis points for commitments of $25 million and 100 basis points for commitments of $15 million.

In addition to the $1.525 billion credit facility (B2/BB-), Masonite will be getting $825 million of bonds and equity to fund KKR's purchase of the company.

The bond offering is coming in two tranches - $300 million eight-year senior floating-rate notes and $525 million 10-year senior subordinated notes. Price talk on the bonds surfaced Tuesday with the floating-rate notes talked in the Libor plus 325 basis points area and the fixed-rate notes talked at 9% to 9¼%. The roadshow for the notes ends Wednesday.

The Bank of Nova Scotia (left lead and administrative agent) and Deutsche Bank are co-lead arrangers on the credit facility, Deutsche and UBS Securities are co-syndication agents, and SunTrust and Bank of Montreal are agents.

Deutsche Bank Securities, UBS Investment Bank and Scotia Capital are joint leads on the bonds.

Masonite International is a Mississauga, Ont.-based building products company.

Fender pricing

Fender Musical Instruments has firmed up pricing on its $170 million first-lien term loan (B1/B+) at Libor plus 225 basis points and $100 million second-lien term loan (B3/B-) at Libor plus 450 basis points, according to a market source.

Allocations are expected to go out on Wednesday.

When the deal was first launched, accounts were told that the first-lien term loan would be priced around Libor plus 250 basis points and the second-lien term loan would be priced around Libor plus 450 basis points, a fund manager said.

The $320 million credit facility also contains a $50 million revolver (B1/B+).

Goldman Sachs is the lead bank on the recapitalization deal.

Fender is a Scottsdale, Ariz., manufacturer of guitars, amplifiers and related equipment.

Resorts breaks in upper 101s

Resorts International's new deal started trading on Tuesday, with the $635 million first-lien term loan quoted early on at 101½ bid, 102 offered, moving to 101 5/8 bid, 101 7/8 offered and then closing out the session at 101 5/8 bid, 102 offered, according to traders.

The $350 million second-lien term loan was quoted in the "same context" as the first-lien term loan throughout the trading day, one market source added.

Resorts' first-lien term loan B (B2/B+) is priced with an interest rate of Libor plus 250 basis points. Opening price talk on the tranche had been Libor plus 325 basis points. Prior to the March 3 bank meeting the tranche was talked in the Libor plus 325 to 350 basis points range but the syndicate opted to launch it at the low end of talk because of strong investor interest.

Resorts' second-lien term loan (B3/B-) is priced with an interest rate of Libor plus 575 basis points. Initial price talk had been Libor plus 700 basis points, then price talk was revised to Libor plus 600 basis points and then it was revised again to the final spread.

As for sizing, the first-lien term loan B was originally $585 million but was increased by $50 million after the second-lien term loan was decreased by $50 million from $400 million.

Resorts' $1.06 billion credit facility also contains a $75 million revolver (B2/B+).

Deutsche Bank and Goldman Sachs are joint bookrunners on the deal, with Deutsche the left lead.

Resorts, an affiliate of Colony Capital LLC, will use the proceeds from the credit facility to help fund the acquisition of four casinos - two properties from Harrah's Entertainment Inc. and two properties from Caesars Entertainment Inc.

Colony, a Los Angeles-based real estate investment fund, will acquire Harrah's East Chicago and Harrah's Tunica for about $627 million and Caesars' Atlantic City Hilton and Bally's Tunica for approximately $612 million.

Data Transmission Network closes

Data Transmission Network Corp. closed on its new $175 million senior secured credit facility (B2/B+) consisting of a $155 million term loan B with an interest rate of Libor plus 300 basis points and a step down to Libor plus 275 basis points under certain conditions, and a $20 million revolver.

The term loan was initially launched with price talk of Libor plus 325 basis points but was reverse flexed with the addition of the step down during syndication.

Goldman Sachs was the lead bank on the deal that is being used to refinance existing bank debt and some junior subordinated debt.

"This refinancing represents another step forward in the successful development and continued growth of DTN. It will allow us to make the investments necessary to better serve our clients and grow the company," said Robert Gordon, chief executive officer, in a company news release. "The recapitalization of the company's debt strengthens our balance sheet and significantly reduces our cost of capital. It will also provide the company with increased flexibility and greater borrowing capacity to support future growth plans.

"As a result, we will have improved our ability to make strategic investments in information, technology and analytics to keep us at the top of our industry."

Data Transmission Network is an Omaha, Neb., provider of real-time information to agriculture, refined fuels, commodities trading and weather-impacted businesses.

Allied Waste closes

Allied Waste Industries Inc. closed on its new $3.425 billion credit facility (B1/BB/BB-) consisting of a $1.35 billion seven-year term loan B with an interest rate of Libor plus 200 basis points, a $500 million institutional letter-of-credit facility with an interest rate of Libor plus 200 basis points and a $1.575 billion five-year revolver with an interest rate of Libor plus 300 basis points.

The term loan B was downsized from $1.45 billion after the company completed a mandatory convertible preferred stock offering that was upsized to $600 million from $500 million. Furthermore, pricing on the tranche came down from Libor plus 225 basis points on strong investor demand.

The letter-of-credit facility was upsized from $450 million and reverse flexed from Libor plus 225 basis points during syndication.

Lastly, the revolver was downsized from $1.55 billion during syndication and flexed up from Libor plus 275 basis points.

JPMorgan and Citigroup were the lead banks on the deal, with JPMorgan the left lead.

Proceeds from the credit facility, along with proceeds from a completed common stock issuance, mandatory convertible preferred stock issuance and senior notes issuance, were used by the Scottsdale, Ariz., waste services company to repay the remaining $195 million of 10% senior subordinated notes due 2009, repay $125 million of 9.25% senior notes due 2012, repay the $600 million 7.625% senior notes due January 2006, repay the $70 million 7.875% senior notes due March 2005 and fully repay amounts outstanding under the existing credit facility.

Financial covenants contained in the new credit agreement are an improvement over the previous financial covenants, according to a company news release that came out Monday evening.

Minimum interest coverage is now 1.85x for the quarters ending March 31 and Dec. 31, 1.95x for the quarters ending March 31, 2006 and June 30, 2006, 2.00x for the quarters ending Sept. 30, 2006 and Dec. 31, 2006, 2.10x for the quarter ending March 31, 2007, 2.15x for the quarter ending June 30, 2007, 2.20x for the quarters ending Sept. 30, 2007 and March 31, 2008, 2.25x for the quarters ending June 30, 2008 and Sept. 30, 2008, 2.30x for the quarter ending Dec. 31, 2008, 2.40x for the quarters ending March 31, 2009 and June 30, 2009, 2.55x for the quarters ending Sept. 30, 2009 and Dec. 31, 2009, and 2.75x for the quarter ending March 31, 2010 and thereafter.

Maximum leverage is now 6.50x for the quarters ending March 31 and Dec. 31, 6.25x for the quarters ending March 31, 2006 and June 30, 2006, 6.00x for the quarters ending Sept. 30, 2006 and Dec. 31, 2006, 5.75x for the quarters ending March 31, 2007 and June 30, 2007, 5.50x for the quarters ending Sept. 30, 2007 and Dec. 31, 2008, 5.25x for the quarters ending March 31, 2009 and June 30, 2009, 5.00x for the quarters ending Sept. 30, 2009 and Dec. 31, 2009, and 4.50x for the quarter ending March 31, 2010 and thereafter.

"We are pleased with the successful completion of the refinancing of the credit facility, which was the final piece of our multifaceted financing plan," said Pete Hathaway, executive vice president and chief financial officer, in the release.

"We now have a clear path to execute our operational initiatives with minimal debt maturities over the next three years, ample room under our revised covenants and over $1 billion of available capacity under our revolver. We will also reduce our annual cash interest payments by almost $60 million, partially offset by $38 million of new dividends, for a net annual benefit of over $20 million."

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