MEG cuts spread, ups fee; AWAS, Aearo Tech break; Movie Gallery falls; GM up as talks progress

By Sara Rosenberg

New York, March 21 - MEG Energy Corp. tweaked its credit facility, lowering the spread on the funded term loan amounts while increasing the ticking fee on the delayed-draw piece.

In trading, AWAS Aviation Holdings LLC and Aearo Technologies Inc. freed for trading, Movie Gallery Inc.'s term loan headed even lower as the company came out with preliminary 2006 results that were less than inspiring and General Motors Corp.'s revolver took a turn for the better as hope was revived on negotiations with Delphi Corp. and the United Auto Workers union.

MEG Energy reverse flexed pricing on its funded term loan B debt on Tuesday and, at the same time, increased the unused fee on the delayed-draw portion of the deal, according to a market source.

The $350 million funded seven-year term loan B is now priced with an interest rate of Libor plus 200 basis points, down from original price talk at launch of Libor plus 225 basis points, the source said.

Meanwhile, the $350 million delayed-draw term loan B saw its ticking fee raised to 100 basis points for the first year, 125 basis points for the six months thereafter and 150 basis points for the following six months, the source continued. Originally, the ticking fee was set at 75 basis points for the first year, 100 basis points for the six months thereafter and 125 basis points for the following six months.

Pricing on the delayed-draw piece, which is available for two years with seven-year final maturity, has also been reverse flexed to Libor plus 200 basis points from original price talk at launch of Libor plus 225 basis points, effective once the company draws on the tranche.

The funded and delayed-draw term loan B tranches were sold to investors as a strip, and the book has been oversubscribed for quite some time now.

MEG Energy's $750 million credit facility (Ba3/BB) also contains a $50 million three-year revolver with an initial interest rate of Libor plus 225 basis points and a 50 basis point undrawn fee. Pricing on this tranche was left unchanged throughout syndication.

Lehman and Credit Suisse are the lead banks on the credit facility, with Lehman the left lead.

Proceeds will be used to develop a steam assisted gravity drainage (SAGD) project. SAGD involves drilling pairs of horizontal wells. The upper wells are the steam injection wells and the lower wells are equipped as the bitumen production wells. Steam is continuously injected through the upper well bores to create steam chambers, which heat the formation. The heated bitumen, under the influence of gravity, then drains to the lower horizontal wells and is produced to the surface.

MEG Energy is an oil and gas company involved in oil sands development in northeast Alberta, Canada.

AWAS frees to trade

Moving on to trading, AWAS Aviation's $2.05 billion credit facility hit the secondary on Tuesday, with the $1.8 billion first-lien term loan quoted at par ¾ bid, 101¼ offered and the $250 million second-lien term loan quoted right around 102, according to traders.

The first-lien term loan is priced with an interest rate of Libor plus 175 basis points. This tranche was mainly looked at by banks as opposed to funds since the low spreads and the fact that it's not rated, basically took CLO buyers out of the mix.

The second-lien term loan is priced with an interest rate of Libor plus 600 basis points and contains call protection of 102 in year one and 101 in year two. During syndication, pricing on the tranche was reverse flexed from Libor plus 650 basis points on heavy oversubscription.

JPMorgan is the lead bank on the deal that will be used to help fund Terra Firma's purchase of AWAS from Morgan Stanley for $2.5 billion.

AWAS Aviation is a Seattle-based aircraft leasing company.

Aearo Tech tops 101

Aearo Technologies' credit facility also broke for trading during Monday's session, with the $360 million first-lien term loan (B2/B) quoted at 101½ bid and the $150 million second-lien term loan (Caa1/CCC+) quoted at 101 7/8 bid, according to a trader.

The first-lien term loan is priced with an interest rate of Libor plus 250 basis points, and the second-lien term loan is priced with an interest rate of Libor plus 650 basis points.

During syndication, the first-lien term loan was upsized by $20 million from $340 million and the second-lien term loan was downsized by $20 million from $170 million.

Aearo Technologies' $570 million credit facility also contains a $60 million revolver (B2/B) with an initial interest rate of Libor plus 250 basis points.

Bank of America, Goldman Sachs and Bear Stearns are the lead banks on the deal, with Bank of America the left lead.

Proceeds from the credit facility will be used to help fund Permira's leveraged buyout of the company.

Under the acquisition agreement, Permira will purchase Aearo Technologies for about $765 million from Bear Stearns Merchant Banking and other investors.

Aearo Technologies is an Indianapolis-based personal protection equipment company.

Movie Gallery slinks lower

Movie Gallery's term loan spent another day watching levels regress as preliminary 2006 financials surfaced and a delay in filing its annual report was announced, according to a trader.

The term loan closed the say quoted at 91 bid, 92 offered, down about a point from Monday's closing levels of 92 bid, 92½ to 93 offered, the trader said.

Tuesday's drop was the second consecutive day that the bank debt saw its bid/offer recede. On Friday, the term loan was quoted around 93 bid, 94 offered - meaning that levels had given up about a point during Monday's session as well.

On Tuesday morning, Movie Gallery filed an NT 10-K with the Securities and Exchange Commission explaining that it will be unable to file its annual report for the year ended Jan. 1 on time because of the integration of Hollywood Entertainment Corp., which it acquired during the quarter ended July 3, 2005, and the concurrent negotiation and preparation of the amendment to its senior credit facility.

The 10-K is expected to be filed before March 31.

In addition, Movie Gallery outlined preliminary, unaudited financial results for 2006 that included total revenue of $1.99 billion, operating loss of $476.4 million and a net loss of $556.3 million, or $17.65 per diluted share.

By comparison, in 2004, the company reported revenue of $791.2 million, operating income of $87.6 million and net income of $49.5 million, or $1.52 per diluted share.

Movie Gallery is a Dothan, Ala.-based operator of video retail stores.

GM stronger on talks

Also in trading, GM's revolver inched its way higher during market hours as hopes were renewed that a labor agreement with Delphi and the UAW may be close to getting done, according to a trader.

The revolver closed the session quoted at 83¼ bid, 84¼ offered, up about a quarter from previous levels, the trader said.

"There's news out there that GM may be able to provide retiree packages for a significant amount of employees going forward. The market took this as a positive step in talks with Delphi and the unions," the trader explained.

An agreement between GM, its biggest parts supplier Delphi and the union is very important since it would help avoid a strike that could shut down Delphi and eventually bring GM assembly lines to a stop.

Delphi has previously given the parties until March 30 to reach an agreement before asking courts to void union contracts.

GM is a Detroit-based designer, manufacturer and marketer of cars and light trucks.

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