Hanesbrands sets talk; VNU adds OIDs; Northwest resets launch; Donnelley, Kodak active on earnings

By Sara Rosenberg

New York, Aug. 1 - Hanesbrands Inc. came out with price talk on its credit facility as the deal was launched to investors Tuesday and VNU NV made some more changes to its in-market credit facility, adding original issue discounts to the term loans and putting a new covenant into the credit agreement.

In other primary news, Northwest Airlines Inc. revised timing on its credit facility, pushing the launch off to next week from the end of this week.

Meanwhile, in the secondary, R.H. Donnelley Corp.'s term loan inched higher on the heels of Monday's late-day earnings announcement, and Eastman Kodak Co.'s bank debt was very active at unchanged levels after it too released financials.

Hanesbrands released price talk on its proposed $2.6 billion senior secured credit facility as the deal was presented to lenders with a bank meeting during market hours and ratings emerged, according to a source.

The $500 million five-year revolver (Ba2/BB-) and the $350 million six-year term loan A (Ba2/BB-) were both launched with opening talk of Libor plus 175 basis points, the $1.3 billion seven-year term loan B (Ba2/BB-) was launched with opening talk of Libor plus 200 basis points and the $450 million 71/2-year second-lien term loan (Ba3/B-) was launched with opening talk of Libor plus 375 basis points, the source said.

The second-lien term loan is non-callable for one year, then at 102 in year two and 101 in year three, the source added.

Merrill Lynch and Morgan Stanley are joint lead arrangers on the deal, with Merrill the left lead.

Proceeds from the credit facility will be used to help fund the company's spinoff from Sara Lee Corp., including the payment of a $2.4 billion dividend to Sara Lee. The businesses to be spun off into Hanesbrands include Hanes, Champion, Playtex, Bali, Just My Size, barely there and Wonderbra. Following the spinoff, Winston-Salem, N.C.-based Hanesbrands will operate as a stand-alone, publicly traded, global apparel company.

In addition to the senior secured credit facility, the company will also be getting a $500 million one-year bridge loan facility that will be funded for the time being.

The bridge loan is expected to be taken out with proceeds from a $500 million senior notes offering that will likely come to market some time in the third quarter.

Morgan Stanley and Merrill Lynch are joint leads on the bridge loan/bond offering, with Morgan Stanley on the left.

VNU offers term loan discount

VNU came out with another group of changes to its multi-billion dollar credit facility on Tuesday, including discounting the issue price on the term loans and adding an interest charge covenant to the credit agreement, according to a market source.

Both the $4.625 billion seven-year U.S. dollar term loan B and the €450 million seven-year euro-denominated term loan B are now being sold to investors with an original issue discount of 991/2, the source said. Originally, the tranches were being offered at par.

Just last week, VNU had made a different grouping of modifications to the credit facility, such as moving some funds out of its U.S. dollar term loan B and into its euro term loan B, and flexing pricing higher on the U.S. piece.

The U.S. term loan B had been downsized from $4.7125 billion, and pricing was increased to Libor plus 275 basis points from original talk at launch of Libor plus 250 basis points.

On the flip side, the euro term loan B had been upsized from €380 million. Pricing on this tranche remained at Euribor plus 250 basis points throughout the syndication process.

VNU's credit facility (B1/B+) also contains a $687.5 million six-year multi-currency revolver that is priced at Libor plus 250 basis points.

Citigroup, Deutsche Bank and JPMorgan are the lead banks on the deal, with Citi the left lead.

Proceeds from the credit facility are being used to help back the acquisition of VNU by Valcon Acquisition BV, a company controlled by a private equity group consisting of affiliated funds of AlpInvest Partners NV, The Blackstone Group LP, The Carlyle Group, Hellman & Friedman LLC, Kohlberg Kravis Roberts & Co. LP and Thomas H. Lee Partners LP.

VNU is a Netherlands-based information and media company.

Northwest reschedules meeting

Northwest Airlines has pushed off the bank meeting to launch its proposed $1.375 billion debtor-in-possession financing facility to Monday from this coming Friday because of scheduling conflicts with management availability, according to an informed source.

However, some investors are hypothesizing that the delay might also have something to do with flight attendants rejecting the proposed labor contract this past Monday and the likelihood of a strike, a buyside source told Prospect News.

Flight attendants rejected their second tentative agreement with the company by a margin of 3,266 to 2,637. Northwest, under a previously approved motion, has the ability to impose new terms if no contract was reached. But, the union has said that if contract changes are imposed without the flight attendants' consent, the union can call for an all-out strike.

The rumor is the short amount of time that the company gains by pushing the launch into next week may "buy them enough time to put together a new slide presentation and offering memorandum," the buyside source said.

Official word on the matter though is that the labor dispute has nothing to do with the rescheduling of the bank meeting but rather it really is just a matter of availability, the informed source reiterated.

Citigroup and JPMorgan are the lead banks on the DIP, with Citi the left lead.

The facility consists of a $1.225 billion term loan and a $150 million revolver, with both tranches talked at Libor plus 250 basis points.

The DIP will be convertible into a permanent five-year exit financing facility upon the company's emergence from Chapter 11.

Once the DIP is converted into an exit facility, pricing may stay at Libor plus 250 basis points if the appraised market value of the collateral to the sum of the amount of the term loans, the commitments, the amount of all hedging exposure secured by the collateral and the amount of the pari passu obligations which is not replaced or cash collateralized is greater than 1.75x. However, pricing can move up to Libor plus 300 basis points if that ratio falls below 1.75x.

Of the total proceeds, $975 million will be used to repay amounts owed under the existing DIP facility, and, at the company's option, $150 million will be used to replace or provide cash collateral for the first-lien obligations.

With this refinancing, the company's total cost of borrowing will be about 350 basis points lower than the existing facilities, liquidity will be increased, and because the DIP is convertible into an exit facility, Northwest will save about $900 million in debt repayment through 2010 due to a longer amortization period.

Financial covenants include a minimum ratio of trailing four-quarter consolidated EBITDAR to consolidated fixed charges of 1.15 to 1.00 for the fiscal quarter ended Dec. 31, 2006, 1.20 to 1.00 for the fiscal quarter ending March 31, 2007, 1.30 to 1.00 for the fiscal quarter ending June 30, 2007, 1.40 to 1.00 for the fiscal quarter ending Sept. 30, 2007, and 1.50 to 1.00 for each fiscal quarter thereafter.

Under the covenants the Eagan, Minn.-based airline company must also maintain a minimum cash liquidity of $750 million at all times.

TelePacific oversubscribed

TelePacific Communications' first- and second-lien term loans are heard to be oversubscribed at this point, with the expectation being that pricing will end up in line with current talk, according to a buyside source.

The $175 million first-lien term loan (B2/B-) is said to be just under 1.5x oversubscribed at pricing of Libor plus 450 basis points, and the $100 million second-lien term loan is said to be 2x oversubscribed at pricing of Libor plus 825 basis points, the source remarked.

The second-lien term loan contains call protection of 103 in year one, 102 in year two and 101 in year three.

TelePacific's $305 million senior secured credit facility also contains a $30 million revolver (B2/B-) talked at Libor plus 450 basis points.

Credit Suisse and Bank of America are the joint lead arrangers on the deal.

Proceeds will be used to fund the acquisition of Mpower Holding Corp. for $1.92 in cash per Mpower share, which equates to a total equity value of about $204 million on a fully diluted basis.

TelePacific, an Investcorp portfolio company, is a Los-Angeles-based provider of business telecommunications network solutions to small-to-medium sized businesses in California and Nevada. Mpower is a Pittsford, N.Y.-based broadband communications provider.

Sorenson first lien may be flailing

Sorenson Communications $660 million first-lien term loan is heard to be "struggling a little," leaving some to think that there may be a change in pricing before the deal wraps up, according to a market source.

The first-lien term loan is being talked at Libor plus 300 basis points.

"The company has no assets," the source said in explanation of why the deal may be seeing some resistance.

Meanwhile, Sorenson's $300 million second-lien term loan is heard to be fully subscribed at this point, the source added. This tranche is being talked at Libor plus 700 basis points and carries call protection of 102 in year one and 101 in year two.

Sorenson's $980 million credit facility also contains a $20 million revolver that is being talked at Libor plus 300 basis points.

In addition, the company is getting a $100 million mezzanine pay-in-kind holding company loan that is being talked at Libor plus 900 basis points and also carries call protection of 102 in year one and 101 in year two.

Goldman Sachs and RBS Securities are joint bookrunners on the deal, with Goldman administrative agent on the first-lien loan and RBS administrative agent on the second-lien loan.

Proceeds from the debt financings will be used for a dividend recapitalization.

Sorenson Communications is a Salt Lake City-based provider of video relay services and equipment for the deaf and hard-of-hearing community.

Donnelley trades up

Switching to trading, R.H. Donnelley's term loan was a touch stronger during Tuesday's market hours, with attention directed to the name due to the release of second-quarter numbers late in the day Monday, according to a trader.

The term loan closed the session quoted at 99¼ bid, 99¾ offered, up a quarter of a point on the day, the trader said.

For the second quarter, the company reported free cash flow of $194.3 million, advertising sales were $724.7 million, down 3.5% from the prior year, GAAP net revenue was $432.3 million compared to $233 million last year and net loss was $79.8 million, or $1.15 per share, compared with a net gain of $20 million, or $0.44 per share, for the same quarter in 2005.

In addition, the company increased its expected EBITDA margin to 54.5% and cash flow expectation to at least $725 million for full-year 2006 due to higher-than-anticipated net synergies in the first year of the Dex integration, but lowered the outlooks on advertising sales to at least $2.64 billion and net revenue to at least $2.68 billion for the full year.

Donnelley is a Cary, N.C.-based print and online directory publisher.

Kodak trades around

Kodak's bank debt saw a lot of activity on Tuesday after the release of second-quarter numbers, although levels were unchanged throughout the session, according to a trader.

The bank debt closed the day quoted at 99 7/8 bid, par 1/8 offered, the trader said.

For the second quarter, sales totaled $3.36 billion, a decrease of 9% from $3.686 billion in the second quarter of 2005, and net loss was $282 million, or $0.98 per share, compared with a net loss of $155 million, or $0.54 per share, in the year-ago period.

The company also reaffirmed its 2006 goals, including the expectation that net cash provided by operating activities will be $800 million to $1 billion and that loss from continuing operations will be $500 million to $850 million.

Kodak is a Rochester, N.Y.-based digital imaging products, services and solutions company.

GM softens

In other trading news, General Motors Corp.'s bank debt was weaker on Tuesday, with levels dropping by about half a point to 94 bid, 94½ offered, according to a trader.

On Tuesday, the Detroit-based automotive company announced July numbers, including that total sales were down 19.5% compared with the same period last year.

However, the company sold 410,332 new cars and trucks in July, which was its best retail and second-best monthly sales performance year to date.

Bankruptcy Management closes

Charlesbank Capital Partners completed its leveraged buyout of Bankruptcy Management Solutions Inc. in partnership with management and Ocwen Financial Corp., according to a company news release.

To help fund the LBO, Bankruptcy Management got a new $360 million senior secured credit facility consisting of a $15 million five-year revolver (B1/B) at Libor plus 275 basis points with a 50 basis point commitment fee, a $220 million six-year first-lien term loan (B1/B) at Libor plus 275 basis points with a step down to Libor plus 250 basis points if leverage falls below 4x, and a $125 million seven-year second-lien term loan (B3/CCC+) at Libor plus 625 basis points with call protection of 102 in year one and 101 in year two.

During syndication, the first-lien term loan was upsized from $200 million and pricing was reverse flexed from original talk at launch of Libor plus 300 basis points with the addition of the step down, the second-lien term loan was downsized from $145 million and pricing was reverse flexed from original talk at launch of Libor plus 650 basis points, and pricing on the revolver was reverse flexed from original talk at launch of Libor plus 300 basis points.

JPMorgan Chase, Credit Suisse Securities and SunTrust Bank acted as the lead banks on the deal.

Bankruptcy Management is an Irvine, Calif., provider of bankruptcy case management solutions to Chapter 7 trustees.

Verso closes

Verso Papers Holdings LLC completed its leveraged buyout of International Paper's Memphis, Tenn.-based coated and supercalendered papers business for about $1.4 billion, with Apollo Management as the sponsor, according to a company news release.

To help fund the transaction, Verso got a new $485 million credit facility (Ba2/BB) consisting of $200 million six-year revolver with an interest rate of Libor plus 200 basis points and a 50 basis point commitment fee, and a $285 million seven-year term loan B with an interest rate of Libor plus 175 basis points.

During syndication, pricing on the term loan was reverse flexed from original talk at launch of Libor plus 200 basis points.

Credit Suisse acted as the lead arranger on the deal.

El Paso closes

El Paso Corp. closed on its new $1.75 billion credit facility consisting of a $500 million letter-of-credit facility with an interest rate of Libor plus 200 basis points and a $1.25 billion three-year revolver with an interest rate of Libor plus 175 basis points and a 37.5 basis point unused fee, according to a company news release.

Citigroup and JPMorgan acted as the lead banks on the deal, with JPMorgan the administrative agent.

Proceeds were used to refinance existing debt, including the company's $965 million term loan that carried an interest rate of Libor plus 275 basis points.

El Paso is a Houston-based provider of natural gas and related products.

Aleris closes

Aleris International Inc. completed its acquisition of the downstream aluminum business of Corus Group plc, according to a company news release.

To help fund the purchase, Aleris got a new $1.4 billion credit facility consisting of a $750 million ABL revolver at Libor plus 150 basis points, a $400 million dollar-denominated term loan (Ba3/BB-) at Libor plus 250 basis points and a $250 million euro-denominated term loan (Ba3/BB-) at Libor plus 275 basis points.

Deutsche and Citigroup acted as the lead banks on the deal, with Deutsche the left lead.

Aleris is a Beachwood, Ohio, manufacturer of rolled aluminum products, aluminum recycler and producer of specification alloys.

Shackleton closes

Shackleton Re Ltd. closed on its new $110 million credit facility, according to a news release, consisting of a $60 million two-year first-event U.S. hurricane term loan B (BB) at Libor plus 800 basis points and a $50 million two-year second-event U.S. hurricane and California earthquake term loan C (BB+) at Libor plus 750 basis points.

Both term loans are non-call for life. The term loan C was issued to investors at a discount of 99, a feature that was added during syndication.

Also during syndication, the term loan B was upsized from $50 million and the term loan C was downsized from $125 million as the reinsurer found protection in other forms and therefore didn't need the funds.

In addition, a $125 million two-year term loan A (BB) was eliminated from the capital structure and instead the company raised the funds through a $125 million 18-month floating-rate first-event California earthquake bond A tranche with pricing of Libor plus 800 basis points.

Pricing on the term loan B ended up at the high end of original price talk at launch of around the Libor plus 750 to 800 basis points area.

And, pricing on the term loan C ended up at the high end of revised guidance of Libor plus 700 to 750 basis points, and up 50 basis points from original talk at launch that was in the Libor plus 700 basis points area.

Goldman Sachs acted as the lead bank on the deal.

Shackleton is a special-purpose Cayman Islands exempted company licensed as a restricted class B insurer in the Cayman Islands.

The loans were done for Endurance Specialty Insurance Ltd. This new reinsurance is designed to enhance Endurance's ability to manage risk related to large natural catastrophes in the United States.

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