Sealy circulates price talk on new term D; Calpine second lien heads up before coming back in

By Sara Rosenberg

New York, March 29 - Price talk surfaced on Sealy Mattress Corp.'s term loan D as the deal launched on Tuesday, with some investors unfazed by the new lower spread level that the company is seeking given the current market environment and the recent business performance.

Meanwhile, in the secondary, Calpine Corp.'s second-lien paper bounced around, trading up by about half a point and then settling back down to an unchanged level by the close.

Sealy's $565 million term loan D was launched with opening price talk of Libor plus 175 basis points and contains a step up in pricing to Libor plus 200 basis points if total leverage is above 51/2x, according to a buyside source.

Furthermore, the tranche contains 101 soft call protection for one year, the source added.

Proceeds from the term loan D will be used to replace the existing $465 million term loan and repay outstanding amounts under the existing $100 million senior unsecured term loan facility.

The existing $465 million term loan contains a pricing grid that can range from Libor plus 200 to 250 basis points based on leverage and ratings. Currently, pricing is set at Libor plus 200 basis points on this tranche.

"I think they've done pretty well," the buyside source said about Sealy's business performance, an opinion that is obviously shared by Moody's Investors Service given that the agency recently raised the company's ratings.

"Getting the upgrade means it's a pretty good company. And, 175 in this market for this story does not come as a big surprise," the buyside source added.

On March 15, Moody's upgraded Sealy's revolver and term loan to B1 from B2, unsecured term loan to B2 from B3 and senior subordinated notes to B3 from Caa1. At that time, the outlook was changed to stable from positive.

According to Moody's, the upgrades reflected Sealy's strong operating performance, successful major new product launches in both its Sealy Posturepedic and Stearns & Foster lines, the current industry forecast of continued strong demand growth and dominant market share, offset by high but improving leverage.

Commitments toward the term loan D are due from investors on April 8.

JPMorgan and Goldman Sachs are the lead banks on the Trinity, N.C., bedding manufacturer's deal, with JPMorgan the left lead.

Calpine gyrates

Calpine Corp.'s second-lien term loan saw some activity, especially during the first half of the day, with levels moving up by about half a point in the morning then coming back in by the end of the day.

The bank debt traded up to 86½ bid, 87¼ offered during the morning hours of Tuesday's session compared to previous closing levels of 86 bid, 86¾ offered, according to a trader.

However, by the end of the day, the paper came back in to basically close out the session at unchanged levels, a second trader added.

"It was probably just market technicals," the second trader explained.

Calpine is a San Jose, Calif.-based power company.

Quintiles repricing progresses

Quintiles Transnational Corp.'s term loan B repricing proposal is expected to "go through," according to a market source, as lead banks were rounding up final signatures on Tuesday's consent deadline.

Under the proposal, the company would lower pricing on its term loan B to Libor plus 175 basis points from Libor plus 425 basis points.

The reason for the significant price reduction request is that the company plans on repaying $150 million of the approximately $306 million term loan B upon the effectiveness of the amendment using proceeds from an already completed asset sale and excess cash flow.

Quintiles' existing term loan B debt contains soft call protection of 1%. With this amendment, existing lenders would get the 1% premium on the remaining portion of the term loan B after the paydown but not on the amounts that are being repaid since a repayment using asset sale proceeds and excess cash flow are not covered by the call protection provision.

The amendment would also relax financial covenants and increase the company's ability to make restricted payments.

Citigroup is the lead bank on the deal.

Quintiles is a Durham, N.C., provider of product development and commercial development solutions to the pharmaceutical, biotechnology and medical device industries.

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