Reynolds one-on-ones see good feedback; ValleyCrest sets price talk; Auto sector slide continues

By Sara Rosenberg

New York, Sept. 20 - The Reynolds and Reynolds Co. has received a positive response toward its $2-billion-plus credit facility from potential lenders that have been approached on a one-on-one basis before next week's retails syndication bank meeting, and now that the general launch is nearing, a firmer structure on the transaction has surfaced.

Also in the primary, ValleyCrest Cos. came out with price talk on its in-market credit facility as the deal received its private ratings.

Switching to the secondary, auto names in general continued to weaken during Wednesday's market hours as investors are overwhelmed by the amount of troublesome news that has surrounded companies that operate in the sector over the past few weeks.

Reynolds and Reynolds has been talking to "big accounts" over the course of this week about its proposed $2.685 billion credit facility, and, through these conversations indications have been that some of these accounts are very interested, according to a market source.

The general market has not yet been approached about the transaction but will be soon as a bank meeting is scheduled for Sept. 27 to officially kick off the syndication process.

In addition, now that the retail launch is getting closer, a clearer breakdown on the tranching of the facility has emerged, the source continued.

The facility is comprised of a $150 million revolver, a $1.61 billion first-lien term loan, a $520 million second-lien term loan and a $405 million third-lien term loan, the source said.

Previous speculation on the structure - based on expected leverage through the first lien of 4 times, expected leverage through the third lien of 6.3 times and EBITDA of $400 million - was that the first-lien term loan would be sized around the $1.6 billion area, with the remaining approximately $935 million of term loan debt split between the second-lien and the third-lien loans.

The $150 million revolver size had already been revealed when the bank meeting date was announced last week.

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

Proceeds from the credit facility will be used to help fund the company's merger with Universal Computer Systems Inc.

Under the agreement, Universal Computer is buying Reynolds for $40.00 per share in cash, with the surviving Dayton, Ohio-based dealer services company to be named The Reynolds and Reynolds Co. The transaction is valued at $2.8 billion, including the assumption of Reynolds' $300 million of debt.

Equity financing for the merger of up to $420 million will come primarily from a group of investors led by Goldman Sachs Capital Partners, Vista Equity Partners and others.

The transaction is subject to approval by Reynolds' shareholders and regulatory clearances and is expected to close late this year or in early 2007.

Reynolds has scheduled a special meeting of shareholders for Oct. 23 to vote on the agreement.

ValleyCrest spread talk

ValleyCrest announced price talk on its in-market $345 million credit facility now that the transaction has received ratings that are being done privately, according to a market source.

The $60 million six-year revolver and $235 million seven-year first-lien term loan are both being talked at Libor plus 250 basis points, and the $50 million 71/2-year second-lien term loan is being talked at Libor plus 550 basis points, the source said.

Call premiums on the second-lien term loan are 102 in year one and 101 in year two, the source added.

Goldman Sachs and UBS are joint bookrunners on the deal, which launched with a bank meeting on Sept. 12, with Goldman the left lead.

Proceeds will be used to help fund the leveraged buyout of ValleyCrest by MSD Capital.

ValleyCrest is a Calabasas, Calif., provider of landscape services.

Auto sector heaviness persists

Autos in general continued to weaken during Wednesday's market hours as investors are overwhelmed by the amount of troublesome news that has surrounded companies that operate in the sector over the past few weeks.

Some names in particular that have been affected included Dura Automotive Systems Inc., Goodyear Tire & Rubber Co. and Lear Corp., according to a trader.

Dura, a Rochester Hills, Mich.-based parts maker, saw its second-lien term loan close the day quoted at 95 bid, 96 offered, down over a point from Tuesday's levels of 96½ bid, 97¼ offered, the trader said.

Goodyear, an Akron, Ohio, tire company, saw its second-lien term loan drop a quarter of a point to par 3/8 bid, par 7/8 offered and its third-lien term loan drop a quarter of a point to 101¼ bid, 101¾ offered, a second trader said.

Meanwhile, Lear, a Southfield, Mich., interior systems company, saw its term loan close the day at 97½ bid, 98½ offered, the second trader continued. By comparison, the term loan was being quoted at 98½ bid, 99 offered just last week.

Dura's second-lien loan specifically has been under a lot of scrutiny since speculation of a potential bankruptcy filing surfaced the other week, and along with the speculation came rumors that the company is having a hard time lining up debtor-in-possession financing on favorable terms.

Then, late Tuesday, Dura was informed that that it was in danger of being delisted from the Nasdaq Global Market, since its stock price has been below $1 per share for at least 30 consecutive days. But, the company has six months to fix the situation.

But there are other broader negatives weighing heavily on the auto sector, including the lukewarm reception to Ford Motor Co.'s recently announced restructuring plan that calls for layoffs and plant closures, and the subsequent downgrading of the Dearborn, Mich., automotive manufacturer's ratings.

On Tuesday, Moody's Investors Service cut Ford Motor Co.'s corporate family and senior unsecured ratings to B3 from B2 and Ford Motor Credit Co.'s senior unsecured rating to B1 from Ba3. The outlook is negative.

In addition, Standard & Poor's lowered its long-term corporate credit ratings on Ford Motor Co. and Ford Motor Credit Co. to B from B+ on Tuesday. The outlook is negative.

Another negative is DaimlerChrysler AG's announcement on Tuesday that its Chrysler Group will cut deliveries to dealers by 90,000 vehicles in the third quarter and by 135,000 for the entire second half of the year.

Although the market was expecting cuts from the Stuttgart, Germany, automotive company due to falling sales of trucks and SUVs, the level of delivery reductions surpassed expectations, a trader explained.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.