Arby's term loan breaks on top of 101; Conseco heads to par on refinancing news

By Sara Rosenberg

New York, July 25 - Arby's Restaurant Group Inc. allocated its credit facility, with the institutional portion of the deal freeing up for trading in the lower 101 context. Meanwhile, Conseco Inc.'s term loan headed down to the par region as the company announced plans for a refinancing.

Arby's $620 million term loan opened for trading on top of 101 Monday and settled in around that area to close out the session quoted in the 101 bid, 101½ offered region, according to one trader. A second trader, however, had the paper quoted a little tighter at 101¼ bid, 101½ offered, while a third trader had the paper quoted even tighter at 101 1/8 bid, 101¼ offered.

The term loan traded as high as 101½ during Monday's market hours, according to the third trader.

The term loan, which was increased from $600 million last week, is priced at Libor plus 225 basis points with a step down to Libor plus 200 basis points when leverage is less than 31/2x. The step down was added during syndication on strong demand.

The increase in the amount of term loan debt is being used for the refinancing of some existing debt that the company was originally going to leave in place. As a result, leverage will stay the same.

Arby's $720 million senior secured credit facility (B1/B+) also includes a $100 million revolver with an initial interest rate of Libor plus 200 basis points and a 50 basis point commitment fee.

Citigroup, Bank of America and Credit Suisse First Boston acted as the lead banks on the deal.

Proceeds from the new credit facility were used to fund the acquisition of RTM Restaurant Group, which was completed Monday.

New York-based holding company Triarc Cos. Inc., parent of Arby's franchise trust - which is the franchisor of the Arby's restaurant system - acquired RTM for $175 million in cash plus approximately 9.7 million shares of its existing class B common stock, series 1, and options to purchase about 775,000 shares of the class B shares.

As part of the transaction, Triarc provided $135 million cash to fund the acquisition and will consolidate its restaurant operations, including RTM, under Arby's Restaurant Group, which will be based in Atlanta.

Proceeds from the credit facility were also used to refinance substantially all of Arby's and RTM's existing debt. This refinancing includes the repayment of about $234 million of RTM third-party debt and approximately $71 million of Arby's third-party debt as well as the defeasance of the Arby's Franchise Trust 7.44% insured non-recourse securitization notes, which will be redeemed in full on Aug. 22, and the payment of related prepayment penalties.

Arby's assumed about $400 million of RTM net debt, including about $184 million of RTM's capitalized lease obligations and financing obligations.

Conseco drops to par

Conseco's term loan fell to around the par context after the Carmel, Ind.-based insurance company revealed plans to repay some of its loan and refinance the remaining amount at a lower interest rate, according to market sources.

By comparison, prior to the refinancing news, the paper was quoted at par ¾ bid, 101¼ offered, one source added.

The company plans on launching its new $475 million term loan to existing lenders only via a conference call Tuesday afternoon.

The new term loan is being launched with opening price talk of Libor plus 225 basis points with a step down to Libor plus 200 basis points based on leverage, as compared to the existing term loan that is priced with an interest rate of Libor plus 350 basis points.

The new term loan will also have more relaxed financial covenants and increased flexibility to enter into capital markets transactions.

Conseco plans on issuing $300 million of convertible debentures in a private offering that will be used to pay down the remaining portion of the existing $767 million term loan.

Banc of America Securities LLC and J.P. Morgan Securities Inc. are lead arrangers and joint bookrunners on the new term loan transaction.

Fresenius shifts funds, cuts spread

Fresenius Medical Care AG recently shifted $500 million from its not-yet-launched term loan B into its term loan A and cut pricing on both its in-market pro rata tranches, according to a market source.

More specifically, the five-year term loan A was upsized to $2.0 billion from $1.5 billion and pricing on the paper was reduced to Libor plus 137.5 basis points from Libor plus 150 basis points, the source said.

Pricing on the $1 billion revolver (size unchanged) was also cut to Libor plus 137.5 basis points from Libor plus 150 basis points.

These pro rata tranches contained in the Fresenius deal were launched in Germany and the United States at the end of June with two separate bank meetings.

Meanwhile, the seven-year term loan B, which is not expected to launch into syndication until the fall, was reduced in size to $2.0 billion from $2.5 billion, the source added.

Bank of America and Deutsche Bank are the lead banks on the deal, with Bank of America the left lead.

Proceeds from the $5 billion credit facility will be used to finance the acquisition of Renal Care Group Inc. for about $3.5 billion, plus the assumption of about $500 million of Renal debt.

In addition to funding the acquisition, Fresenius will also use the new loan to replace its existing $1.2 billion credit agreement.

At closing, debt to EBITDA will be a little over 4x but the company hopes to bring that multiple down to 21/2x to 3x over the course of the next two to three years.

Under the acquisition agreement, Fresenius will pay $48.00 per Renal share in cash. The transaction, which is expected to close in the second half of the year, is subject to Renal Care shareholder approval and other customary closing conditions, including Hart-Scott Rodino.

Fresenius is a Bad Homburg, Germany-based dialysis products and services provider. Renal Care is a Nashville, Tenn.-based dialysis service provider.

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