VeriFone sets talk; Stolle flexes second lien; United Sub mulls tweaks; Orthofix breaks; Transeastern dives

By Sara Rosenberg

New York, Sept. 27 - VeriFone Holdings Inc. came out with official price talk on its credit facility as the deal was launched with a bank meeting on Wednesday and Stolle Machinery Co. LLC reverse flexed pricing on its second-lien term loan.

In other primary happenings, United Subcontractors Inc. is considering making some changes to its credit facility structure, including possibly reducing the size of its second-lien term loan.

Meanwhile, in the secondary, Orthofix International NV's credit facility freed for trading, Transeastern's bank debt plummeted as the financial position of the company has investors worried, Primedia Inc.'s term loan inched higher on asset sale news, Hexion Specialty Chemicals Inc.'s institutional debt traded up as investors took advantage of its discounted price and Fidelity National Information Services Inc.'s term loan B retreated slightly on market technicals.

VeriFone released price talk on its proposed $540 million senior secured credit facility (B1/BB-) as syndication officially kicked off with a bank meeting during Wednesday's market hours, according to a source.

The $40 million six-year revolver was launched with price talk of Libor plus 150 basis points and the $500 million seven-year term loan B was launched with price talk of Libor plus 200 basis points, the source said.

By comparison, VeriFone had previously disclosed in various filings with the Securities and Exchange Commission that it expected the revolver at Libor plus 150 basis points and that it expected the term loan at Libor plus 175 basis points.

JPMorgan and Lehman Brothers are the lead banks on the deal.

Proceeds will be used to help fund the acquisition of Lipman Electronic Engineering Ltd., a Rosh Haayin, Israel-based provider of electronic payment systems, and refinance VeriFone's existing bank debt.

Debt to EBITDA will approximate 3 times at closing.

Under the purchase agreement, Lipman shareholders will receive for each Lipman share 0.5 shares of VeriFone common stock and $14.304 in cash, adjusted for a special dividend. The amount of the special dividend has not been finally determined but will likely exceed $23 million. Alternatively, Lipman shareholders may elect to receive either $29.07 in cash, or 0.9844 shares of VeriFone stock for each Lipman share, each adjusted for the special dividend. The cash and stock elections are subject to proration such that VeriFone will issue 13.3 million shares of VeriFone stock and pay about $382 million in cash, adjusted for the special dividend.

All in all, the acquisition is valued at $793 million based on VeriFone's share price at the close of trading on April 7.

Closing is subject to VeriFone and Lipman shareholder approval, regulatory approval and other customary conditions.

The deal already received clearance from the U.S. Department of Justice, and shareholder approval has been obtained.

Closing is expected to take place on Nov. 1 following the expiration of a 30-day waiting period required by Israeli law.

Following the acquisition, San Jose, Calif.-based VeriFone will become the largest global provider of electronic payment services.

Stolle cuts second-lien spread

Stolle Machinery lowered pricing on its $50 million seven-year second-lien term loan (Caa1/B) to Libor plus 600 basis points from original talk at launch of Libor plus 675 basis points, and the tranche is still oversubscribed at that pricing level, according to a market source.

The second-lien loan carries call premiums of 102 in year one and 101 in year two.

Recently, Stolle announced first-lien reverse flexes, as well as some shifting of funds, and at that time, it was said that the second-lien loan would be flexed down, but the new margin was still to be determined.

During the previous round of changes, the second-lien term loan was downsized to $50 million from $60 million, the six-year first-lien term loan B (Ba3/BB-) was upsized to $125 million from $115 million, pricing on the first-lien term loan B and the $25 million five-year revolver (Ba3/BB-) was lowered to Libor plus 250 basis points from Libor plus 275 basis points, and a step down was added to the first-lien term loan B under which pricing can drop to Libor plus 225 basis points at 4.0 times total leverage.

The revolver carries a 50 basis point commitment fee.

When the $200 million deal was first launched around mid-September, it was said to have sparked some positive buzz and early interest as investors were impressed that the company has more than an 85% market share in its business.

Goldman Sachs and Credit Suisse are joint lead arrangers on the deal that will be used to help fund the leveraged buyout of Stolle by Littlejohn & Co.

Stolle is a Denver-based producer of capital equipment, spare parts and services for the rigid packaging industry.

United Subcontractors contemplating changes

United Subcontractors is considering some modifications to its credit facility, including the possibility of shrinking the second-lien term loan tranche and replacing those funds with some other form of junior capital, according to a fund manager.

Furthermore, investor speculation is that the syndicate will need to increase pricing on the first-lien and possibly the second-lien piece, and there may even be the addition of an original issue discount before the deal is done, the fund manager added.

No official changes on the transaction have been announced.

Currently, the facility consists of a $300 million first-lien term loan (B2/B) talked at Libor plus 275 to 300 basis points, a $15 million synthetic letter-of-credit facility (B2/B) talked at Libor plus 275 to 300 basis points and a $200 million second-lien term loan (Caa1/CCC+) talked at Libor plus 750 to 800 basis points.

The company's $550 million credit facility also includes a $35 million revolver (B2/B) that is being talked at Libor plus 275 basis points.

As of last week, it was already being rumored by the market that the first- and second-lien bank debt would at least end up at the high end of pricing guidance given the industry the company is in and its dependence on home building.

Goldman Sachs is the lead bank on the deal.

Leverage through the first lien would be around the mid-2 times area, and leverage through the second lien would around the mid-4 times area.

Proceeds will be used to fund a $125 million dividend payment to Wind Point Partners and to refinance existing debt.

United Subcontractors is a Salt Lake City-based installer of residential and commercial insulation systems and provider of related products and services.

Wenner Media trims pricing

Wenner Media LLC lowered pricing on its $300 million term loan B to Libor plus 175 basis points from original talk at launch of Libor plus 200 basis points, according to a market source.

The company's $325 million senior secured credit facility also includes a $25 million revolver.

JPMorgan is the lead bank on the deal that will be used to help fund Wenner Media's purchase of the 50% of Us Weekly magazine it currently does not own from Walt Disney Co.

Wenner Media is a New York-based magazine publisher.

MultiPlan adds OID

MultiPlan Inc. has added an original issue discount of 99¾ to its $360 million term loan add-on (B2/B+), according to a market source.

The add-on is being talked at Libor plus 225 basis points.

Bank of America and Goldman Sachs are the lead banks on the deal that will be used to fund the acquisition of Private Healthcare Systems, Inc.

MultiPlan is a New York-based independent preferred provider organization network. Private Healthcare is a Waltham, Mass., provider of network and medical management services.

Fresh Start shift funds

Fresh Start Bakeries Inc. moved $25 million out of its second-lien term loan and into its first-lien term loan, and reverse flexed pricing on the downsized second-lien tranche, according to a market source.

The first-lien term loan is now sized at $240 million, up from an original size of $215 million, the source said. Pricing on the paper was left unchanged at Libor plus 250 basis points.

Meanwhile, the second-lien term loan is now sized at $55 million, down from an original size of $80 million, and pricing was reduced to Libor plus 575 basis points from original talk at launch of Libor plus 600 basis points, the source added.

Fresh Start Bakeries' $335 million credit facility also includes a $40 million revolver.

JPMorgan is the lead bank on the deal that will be used to fund the acquisition of Pennant Foods and to refinance existing debt.

Fresh Start Bakeries is a Brea, Calif., supplier of bakery and food products to the McDonald's system and the food industry.

Exco book building

Exco Resources Inc.'s $750 million five-year second-lien term loan is seeing its book build at Libor plus 550 basis points, the high end of recently revised talk of Libor plus 500 to 550 basis points, according to an informed source.

Before the pricing revision, talk on the second lien was Libor plus 450 basis points.

In addition, earlier on in the syndication process, two covenants were added to the deal - a cash flow sweep and a capital expenditures requirement.

Exco's $1.5 billion senior secured credit facility also includes a $750 million four-year revolver with pricing ranging from Libor plus 100 to 175 basis points based on utilization. Initial pricing on the revolver will be Libor plus 175 basis points.

The revolver was already launched to senior managing agents in late July.

JPMorgan and Credit Suisse are leading the second-lien term loan, with JPMorgan the left lead. JPMorgan is the lead bank on the revolver. Goldman Sachs and Bear Stearns are co-managers.

The credit facility is being borrowed by a wholly owned unrestricted subsidiary of Exco to fund the acquisition of Winchester Energy Co. Ltd. from Progress Energy, Inc. for $1.2 billion in cash, subject to purchase price adjustments. The debt will be non-recourse to Exco Resources.

Credit statistics for the transaction include first-lien net debt to EBITDA of 2.5 times and net debt to EBITDA of 5.4 times.

Exco's existing amended and restated revolving credit facility will remain in place following this transaction.

The acquisition is expected to close on Oct. 2, subject to customary conditions to closing and governmental clearance.

Exco is Dallas-based independent energy company.

Orthofix frees to trade

Switching to the secondary, Orthofix broke for trading on Wednesday with the $330 million term loan quoted at par bid, par ½ offered, according to a trader.

The term loan is priced with an interest rate of Libor plus 175 basis points. During syndication, pricing on the tranche was reverse flexed from original talk of Libor plus 200 basis points on strong investor demand.

Orthofix's $375 million credit facility (Ba3/BB-), which actually closed a few days ago, also contains a $45 million revolver with an interest rate of Libor plus 175 basis points.

Wachovia and Citigroup acted as the lead banks on the deal that was used to fund the acquisition of Blackstone Medical, Inc.

Orthofix is a Curacao, the Netherlands-based diversified orthopedic products company.

Transeastern tumbles

Transeastern, the joint venture between Technical Olympic USA, Inc. and Falcone Group, saw its bank debt plunge lower on Wednesday as investors are concerned over the company's financial position and capital structure, according to a market source.

The term loan closed the day quoted at 79 bid, 81 offered, with trades going off at the 80 level during the session, the source said. By comparison, the last time the paper traded, which was on Friday, the trading level was around 98 to 99.

"The company had a call on Monday to update lenders on how poorly the business has been doing. Liquidity is very tight. They're going to have to amend but they haven't put anything formal out yet. I think they have some technical defaults now so they may have to ask for waivers," the source said.

"They're might be talk of bankruptcy but I don't think these guys are going to voluntarily file. The debt is recourse to Technical Olympic and Technical Olympic wouldn't want them to file for bankruptcy. But, bankruptcy might be the best thing for bank debt holders," the source continued.

"Monday, after the call, people were trying to figure out what was going on. The only people who knew were the lenders and Deutsche, the lead bank. Today, though, the company made the news public so everyone got their hands around it and that's why it crashed. Also, right after the news was made public, Moody's put out a release," the source added.

On Wednesday, Technical Olympic publicly announced that it met with the lenders to the Transeastern joint venture to update them on the financial position of the joint venture and the Florida housing market conditions.

The company said that when the Transeastern joint venture was formed in August 2005, it had more than 3,000 homes in backlog and projected 2006 deliveries of about 3,500 homes.

"Since that time, the Florida housing market has become more challenging, characterized by weak demand, an over supply of new and existing inventory homes, increased competition, and an overall lack of buyer urgency," said Antonio B. Mon, president and chief executive officer of Technical Olympic in the news release.

"These well-documented conditions have caused elevated cancellation rates and downward pressure on margins, due to increased sales incentives and higher advertising and broker commissions. Although we anticipated a gradual slowdown in the Florida housing market, these conditions have been more severe than anticipated and have negatively impacted the joint venture's ability to meet its projections," Mon added in the release.

The company went on to say that Transeastern's revised sales and delivery projections are not adequate to support its existing capital structure.

Transeastern is exploring various options to fix the liquidity problem, including requesting waivers from its lenders regarding potential defaults and permitting future advances under the revolver, and restructuring land bank obligations.

In reaction to the announcement, Moody's Investors Service placed all of the ratings of Technical Olympic under review for possible downgrade.

On Monday, Standard & Poor's revised its outlook on Technical Olympic to negative but affirmed the company's ratings.

Technical Olympic is a Hollywood, Fla.-based builder and seller of single family homes.

Primedia up on asset sale

Primedia's term loan was very active at stronger levels on Wednesday as the company announced that it sold substantially all of the assets of its Crafts Group to Enthusiast Media LLC, an entity formed by affiliates of Sandler Capital Management, for about $132 million in cash, according to a trader.

Although there was no mention of what the asset sale proceeds will be used for, the market viewed the news as a positive since it strengthens the company's cash position, the trader explained.

The term loan closed the day quoted at 99 bid, 99½ offered, up from previous levels of 98¾ bid, 99¼ offered, the trader added.

Primedia is a New York-based targeted media company.

Hexion trades higher

Hexion's strip of term loan and letter-of-credit facility debt was stronger by about a quarter of a point during the session as investors are viewing it as a good buying opportunity, according to a trader.

The bank debt closed the day at 99 bid, 99½ offered, up from prior levels of 89¾ bid, 99¼ offered, the trader said.

"It's still a discount asset - south of par. People are just taking advantage of the lower levels there," the trader explained.

Hexion is a Columbus, Ohio, thermoset resins producer.

Fidelity National softens

Fidelity National Information Services' term loan B was a touch weaker during Wednesday's market hours basically because it's viewed as low coupon paper and has therefore been under some pressure recently, according to a trader.

The term loan B closed the day at par bid, par ¼ offered, down about an eighth of a point, the trader said.

Fidelity National is a Jacksonville, Fla.-based provider of technology to the financial services and real estate industries.

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