Advantage Sales upsizes, frees to trade; Metaldyne increases term loan; El Paso drops on repayment fears

By Sara Rosenberg

New York, Dec. 22 - Advantage Sales and Marketing Inc. increased the size of its holdco pay-in-kind loan and then freed the deal up for trading atop par, and Metaldyne Corp. announced plans to upsize its term loan tranche.

In other news, El Paso Corp.'s bank debt fell in quiet trading on Friday as investors seem to be expecting a paydown from the company's latest asset sale announcement.

Advantage Sales and Marketing upsized its PIK loan to $175 million from $150 million due to oversubscription, and following this change, the loan allocated and broke for trading, according to a market source.

The loan was being quoted at par ½ bid on the break, the source said.

Pricing on the deal is set at 12% PIK, in line with original price talk at launch, and it carries call premiums of 102 in year one and 101 in year two.

UBS and Citigroup are the lead banks on the deal.

Proceeds are being used to fund a dividend to shareholders.

Advantage is an Irvine, Calif., sales and marketing agency.

Metaldyne upsizes

Metaldyne announced on Friday that it plans on increasing its seven-year term loan (B2/B) to $435 million from $420 million to reduce the amount that will be drawn under its $150 million five-year asset-based revolver (Ba3/BB-) at close, according to an 8-K filed with the Securities and Exchange Commission Friday.

The term loan is priced at Libor plus 375 basis points, the low end of original guidance of Libor plus 375 to 400 bps, and the asset-based revolver is priced at Libor plus 200 bps with unused fees that can range from 25 to 50 bps.

Metaldyne's now $670 million credit facility also includes a $25 million seven-year delayed-draw term loan (B2/B) and a $60 million five-year deposit-linked synthetic supplemental letter-of-credit facility (B2/B), with both of these tranches priced at Libor plus 375 bps as well after firming up at tight end of talk of Libor plus 375 to 400 bps.

The delayed-draw term loan will be available for drawing for 59 days after the closing date for the purpose of funding the purchase of senior notes in a tender offer.

Financial covenants under the term loan, delayed-draw loan and letter-of-credit facility include a maximum total leverage ratio, a minimum interest coverage ratio and limitations on capital expenditures.

Financial covenants under the revolver include a springing minimum fixed charge coverage ratio if excess availability falls below $40 million at any time.

JPMorgan and Citigroup are the joint lead arrangers on the deal, and JPMorgan, Citigroup and Deutsche Bank are the bookrunners. JPMorgan is administrative agent, Citigroup is syndication agent and Deutsche is documentation agent.

Proceeds from the credit facility will be used to help back Asahi Tec Corp.'s $1.13 billion acquisition of the company and to replace Metaldyne's existing revolver, letter-of-credit facility, term loan debt and off-balance sheet accounts receivable securitization facility.

The financing is structured so that Asahi Tec and Metaldyne do not guarantee each other's debt and will not be subject to restrictions on each other's debt.

Pro forma for the transaction, Metaldyne's total leverage will decrease to 4.6 times from 5.1 times and interest coverage will increase to 2.2 times from 1.8 times.

Asahi Tec, a Shizuoka, Japan-based chassis and powertrain component supplier, is buying Metaldyne from Heartland Industrial Partners LP and CSFB Private Equity.

Metaldyne is a Plymouth, Mich., supplier of powertrain and chassis systems and components.

El Paso slides as paydown anticipated

El Paso's letter-of-credit facility gave up about three quarters of a point on Friday morning after the company revealed plans to sell its ANR Pipeline Co. and 50% interest in Great Lakes Gas Transmission, prompting fears of a near-term paydown, according to a trader.

The letter-of-credit facility closed the day quoted at par bid, par ½ offered, down from previous levels of par ¾ bid, 101¼ offered, the trader said.

El Paso didn't specifically say what it plans to do with the proceeds from the asset sales; however, it was mentioned that the transaction will result in a significantly improved balance sheet and financial flexibility, and the elimination of any discount on its common stock due to leverage.

The assets are being sold to TransCanada Corp. and TC PipeLines, LP for $4.135 billion, including the assumption of $744 million of debt. However, El Paso expects its after-tax cash proceeds to be roughly $3.3 billion when accounting for about $1 billion of tax loss carryovers remaining after the close.

"The sale of ANR Pipeline, our Michigan storage assets and our interest in Great Lakes is a transformational event for El Paso," said Doug Foshee, president and chief executive officer, in the release. "Coupled with the restructuring efforts over the last three years, this transaction immediately elevates our credit statistics to a level that is at or very near an investment grade level, one of our primary long-term objectives.

"We also preserve our earnings outlook and our position as North America's largest interstate natural gas pipeline franchise with approximately 43,000 miles of pipelines."

Closing of the transaction is subject to customary conditions and regulatory approvals and is expected to occur during the first quarter of 2007.

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

Riverdeep closes

HM Rivergroup plc, a newly formed Irish public limited company, completed its acquisitions and merger of Houghton Mifflin Co. and Riverdeep Interactive Learning Ltd. from Thomas H. Lee Partners, Bain Capital Partners, The Blackstone Group and management, according to a news release.

To help fund the transaction Houghton, Mifflin Riverdeep Group plc closed on a new $1.87 billion credit facility (Ba3/B) consisting of a $250 million six-year revolver priced at Libor plus 275 bps with a 50 bps commitment fee and a $1.62 billion seven-year term loan B priced at Libor plus 275 bps.

During syndication, the term loan B was upsized from $1.57 billion so as to give the company incremental liquidity. There were more than $3.5 billion in orders for the term loan B.

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

Riverdeep is a Dublin, Ireland, provider of CD-ROM and internet-based educational products for the K-12 market. Houghton Mifflin is a Boston-based educational publisher.

With the transactions now completed, HM Rivergroup will change its name to Houghton Mifflin Riverdeep Group plc.

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