UTGR price talk emerges; Key Energy cuts institutional spreads, adds soft call

By Sara Rosenberg

New York, July 22 - Price talk on UTGR Inc.'s credit facility surfaced as the deal began its first full day of its retail syndication process. Meanwhile, Key Energy Services Inc. cut pricing on its institutional tranches and added soft call protection to its term loan tranche.

UTGR, also known as BLB, came out with opening price talk in the Libor plus 225 basis points area on both its $125 million five-year revolver (B1/B+) and $245 million six-year term loan (B1/B+), and opening price talk of Libor plus 400 to 425 bps on its $125 million seven-year second-lien term loan (B2/B-), according to a market source.

The $495 million deal, which launched via a bank meeting late in the day Thursday, is being led by Merrill Lynch, Deutsche Bank and JPMorgan, with Merrill Lynch the left lead.

Proceeds are being used to support BLB Investors LLC's already completed acquisition of Wembley plc's U.S. operations, including UTGR, and will be used to fund construction costs of expanding and renovating Lincoln Park, an existing racetrack with slot machines.

The acquisition was approved by Wembley's shareholders after last Friday's passage of legislation by the state of Rhode Island that provided BLB with a long-term arrangement with respect to revenue sharing and an adjustment to such revenue sharing in the event that Rhode Island approves the establishment of a casino.

BLB Investors is comprised of Kerzner International Ltd., Starwood Capital Group Global LLC and Waterford Group LLC.

Key Energy cuts spread

Key Energy Services reduced pricing on both its $400 million seven-year delayed-draw term loan and its $85 million five-year pre-funded letter-of-credit facility to Libor plus 275 bps from Libor plus 300 bps, according to a market source.

Furthermore, 101 soft call protection for one year was added to the delayed-draw term loan tranche, the source added.

The term loan is delayed draw for seven months.

Pricing on the $65 million five-year revolver was left unchanged at Libor plus 275 bps.

The revolver has an unused fee of 50 bps and the term loan has an unused fee of 100 bps.

Pricing on the back-stop facility will step up by 50 bps on Dec. 31, 2005 and June 30, 2006 if Key Energy has not provided audited and unaudited financial statements. It will also increase by 25 bps if more than $275 million of term loans are outstanding.

Once the loans are rated, pricing will be set by a grid. If the deal is rated Ba3 or higher and BB- or higher, the revolver will be priced at Libor plus 200 bps and the term loan and letter-of-credit facility will be priced at Libor plus 225 bps. If the deal is rated Ba3, B1 and/or B+, BB-, the revolver will be priced at Libor plus 225 bps and the term loan and letter-of-credit facility will be priced at Libor plus 250 bps. And, if the deal is rated B1 or lower and B+ or lower, the revolver will be priced at Libor plus 250 bps and the term loan and letter-of-credit facility will be priced at Libor plus 275 bps.

Proceeds will be used by the company if it elects or is required to refinance any or all of its senior secured credit facility, its 6.375% senior notes due 2013 or its 8.375% senior notes due 2008.

On June 7, the company announced that the trustee for its 6 3/8% senior notes due 2013 and 8 3/8% senior notes due 2008 has delivered a notice of default.

The default relates to the financial reporting covenants and Key Energy's failure to file its 10-K annual report for the year ending Dec. 31, 2003 by a May 31, 2005 deadline.

The company has 60 days to cure the default or obtain a waiver, meaning that after Aug. 5, the trustee or holders of 25% of the notes can accelerate the debt, so closing on the back-stop credit facility must occur before that time.

Under the terms of the facility, Key Energy will be required to meet financial covenants setting a minimum interest coverage ratio of at least 3.0:1 and maximum total leverage ratio of not more than 3.5:1 until the period ending March 31, 2006; 3.0:1 for the period ending March 31, 2006 until the period ending Sept., 30, 2006; and 2.75:1 for the period ending Sept. 30, 2006 and later.

Lehman Brothers is the lead bank on the Midland, Texas, rig-based, onshore well service company's $550 million credit facility.

Calpine stronger

Calpine Corp.'s second-lien bank debt was about a point to a point and half stronger with levels closing out the day at 83½ bid, 84½ offered, according to traders.

On Friday morning, the San Jose, Calif.-based power company announced that reached an agreement with Siemens Westinghouse to restructure its long-term relationship in order to reduce operating expenses and improve power plant performance.

The restructuring includes a five-year arrangement to purchase Siemens parts and services, provides greater operating and turbine maintenance flexibility and enhances Calpine's position as a cost-competitive power producer. It also resolves outstanding issues between the companies and offers extended warranties for Calpine turbines in construction and in storage.

Calpine also plans on restructuring its remaining long-term services agreements with Siemens for added operating and maintenance flexibility and expects to complete this process by the end of the year.

Carrizo closes

Carrizo Oil & Gas Inc. closed on its new $150 million five-year second-lien term loan that carries an interest rate of Libor plus 600 bps.

The term loan was originally launched with a size of $125 million and price talk of Libor plus 700 bps, but the deal was upsized and reverse flexed during syndication.

Credit Suisse First Boston acted as lead arranger and sole bookrunner on the deal. Co-arrangers were First Albany, Harris Nesbitt, Hibernia Southcoast Capital, Jefferies & Co., Keybanc Capital Markets and Suntrust Capital Markets.

Proceeds were used to retire the $52.9 million of outstanding obligations under the company's senior subordinated notes and senior secured subordinated notes and repay the $18.5 million outstanding debt under its first-lien credit facility.

The remaining $73.1 million of net proceeds from the second-lien loan will be used to partially fund the company's capital expenditures program, including its drilling programs in the Barnett Shale and onshore Gulf Coast areas, and for general corporate purposes.

Carrizo will continue to maintain its first-lien credit facility, currently with a $10 million undrawn borrowing base.

"We are very pleased by the level of support and confidence received from the debt capital markets, evidenced by this financing," said Paul F. Boling, vice president and chief financial officer, in a company news release.

"This new financing provides significant funding for our capital expenditures program, including the continued aggressive development of our Barnett Shale play, where we now have five drilling rigs running and over 60,000 net acres. Also, the term loan greatly simplifies our capital structure and more importantly enhances our financial flexibility in the future by allowing for the continued growth in our borrowing base availability under the first-lien credit facility as we significantly grow the underlying oil and gas reserve value from our drilling program."

Carrizo is a Houston-based explorer, developer, and producer of natural gas and oil.

Mylan closes

Mylan Laboratories Inc. closed on its $500 million credit facility (Ba1/BBB-), containing a revolver tranche and term loan tranche with an interest rate of Libor plus 150 bps.

The term loan was initially launched with price talk of Libor plus 175 bps but was reverse flexed during syndication.

Merrill Lynch was the lead bank on the deal that was used to help fund the company's' Dutch auction self-tender for common shares and a $250 million share repurchase program.

The revolver is available for general corporate purposes.

Mylan is a Canonsburg, Pa., pharmaceutical company.

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