EnergySolutions floats talk; Pinnacle Foods repricing sees resistance; Movie Gallery run-up continues

By Sara Rosenberg

New York, May 12 - EnergySolutions price talk started to make its way around the market as the deal is gearing up for its upcoming retail syndication launch. Also in the primary, Pinnacle Foods Group Inc.'s recently launched repricing proposal is seeing opposition from some investors who believe the transaction to be a bit too aggressive.

In secondary happenings, Movie Gallery Inc.'s term loan B continued to head higher on Friday as investors were still reacting to the company's recent positive financial numbers.

EnergySolutions price talk began floating around as the company is getting ready for its Tuesday bank meeting that will officially kick off syndication on the deal, according to a market source.

The $75 million revolver, $25 million synthetic letter-of-credit facility and $600 million term loan B are all currently expected to be launched with opening price talk of Libor plus 225 basis points, the source said.

Citigroup is the lead bank on the $700 million credit facility that will be used to fund the acquisition of Duratek Inc. and refinance existing debt.

Under the acquisition agreement, EnergySolutions will purchase Duratek for $22 per share in cash. The total transaction consideration is approximately $396 million, including the assumption of Duratek's outstanding debt.

In connection with the transaction, the company's $170 million second-lien term loan will be amended to allow for the acquisition, but all other terms will remain unchanged.

EnergySolutions is a Salt Lake City-based national energy services company. Duratek is a provider of safe, secure radioactive materials disposition and nuclear facility operations for commercial and government customers.

Pinnacle repricing sees pushback

Pinnacle Foods' request for a repricing amendment is being met with some resistance as investors have been voicing concern over the aggressive nature of the cut, according to a market source.

Under the proposal, which launched earlier this past week, Pinnacle is attempting to reduce the interest rate on its term loan B by 125 basis points to Libor plus 200 basis points from Libor plus 325 basis points on a credit that is rated B1/B+.

In return for the reduction in spread, Pinnacle is offering lenders 101 soft call protection on the term loan B paper.

"The lender call was heated. It's a huge ask and people are not happy with that," the source said.

"Compared to everything else it's probably fair based on the B1/B+ ratings," a second source remarked.

"But, given that there's been some pushback [in the general market] and it's coming down from 325 basis points, maybe it's a bit aggressive. Bet it steps up to 225 basis points before all is said and done," the second source added.

JPMorgan and Deutsche Bank are the lead banks on the amendment request.

Pinnacle Foods is a Cherry Hill, N.J., branded food products company.

Movie Gallery trades up

Switching to the secondary, Movie Gallery's term loan B ended the week on a high note as the paper continued to strengthen on follow through from the company's latest earnings, according to a trader.

The term loan B closed out the session quoted at 97 bid, 98 offered, up half a point from Thursday's closing levels of 96½ bid, 97½ offered, the trader said.

On Thursday morning, Movie Gallery announced first quarter numbers that showed a nice improvement on a year-over-year basis.

For the quarter, the Dothan, Ala.-based movie rental company reported total revenues of $694.4 million compared to total revenues of $233.8 million in the same period last year.

Net income for the quarter totaled $40.3 million, or $1.27 per diluted share, compared to net income of $18.4 million, or $0.58 per diluted share, in the first quarter of 2005.

And, adjusted EBITDA was $116.8 million for the first quarter compared to adjusted EBITDA of $39.5 million last year.

Immediately following the earnings news, Movie Gallery's term loan B spiked to as high as 97½ bid before settling in by day's end to 96½ bid, 97½ offered. By comparison, on Wednesday, the bank debt had closed out the session quoted at 94¼ bid, 95¼ offered.

Kraton closes

Kraton Polymers LLC closed on its new $385 million senior secured term loan due 2013 (B1/B+) with an interest rate of Libor plus 200 basis points

During syndication, the term loan was upsized from $365 million and pricing came in at the tight end of talk of Libor plus 200 to 225 basis points.

Goldman Sachs acted as the sole lead arranger on the deal.

In addition, the company amended its existing revolving credit facility to extend the maturity to May 12, 2011 and provide a $20 million accordion feature.

Proceeds from the term loan are being used to refinance the company's existing $263 million term loan and fund a cash tender offer for any and all of its parent company's, Polymer Holdings LLC, outstanding $150 million 12% senior discount notes.

Kraton Polymers is a Houston-based specialty chemicals company.

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