Nasdaq breaks atop par; secondary levels continue to fall; Reynolds American spread cut anticipated

By Sara Rosenberg

New York, May 17 - The Nasdaq Stock Market Inc. allocated its credit facility on Wednesday afternoon with the term loan bank debt then freeing for trading in the low-par context.

In other trading news, the market was once again categorized as an environment in which bank debt levels as a whole traded lower and activity was unremarkable, leaving many players feeling frustrated with the day's events.

Meanwhile, in the primary, talk is that Reynolds American Inc. is planning to lower the interest rate on its term loan B by 25 basis points as investors have been piling on to the deal in the short time it's been in market.

Nasdaq's credit facility hit the secondary late in the day Wednesday, with the $750 million six-year term loan B and the $434 million term loan C trading as a strip in the par 1/8 bid, par 3/8 offered area, according to a trader.

Both the term loan B and the term loan C are priced with an interest rate of Libor plus 175 basis points. Originally, the term loan C was called a delayed-draw loan but it actually ended up being funded during the syndication process.

The $1.259 billion senior secured credit facility (Ba3) also contains a $75 million five-year revolver.

Banc of America Securities LLC acted as lead arranger and bookrunner on the deal, which actually closed on April 11 and became effective on April 18.

Proceeds from the credit facility were used to replace the company's existing credit facility and to fund the purchase of a stake in London Stock Exchange plc.

Nasdaq is a New York-based provider of securities listing, trading, and information products and services.

Heaviness persists

The secondary loan market in general continued to weaken during Wednesday's session, making this recent trend appear as if there's no near-end in sight, according to a trader.

"In unison everything is down a quarter of a point today. You name it, it's down," the trader said when asked if any particular names seemed to take the brunt of the beating.

The overall market has been experiencing this heavy tone and lack of remarkable activity since the start of this week and, was even present in last week's market as well.

Reynolds American flex expected

Switching to the primary, Reynolds American is anticipated to lower pricing on its $1.55 billion six-year term loan B to Libor plus 175 basis points from original talk of Libor plus 200 basis points as more than $1.4 billion in orders have already come in since the deal launched last Thursday, according to a market source.

The reverse flex has not officially been announced as of yet, but accounts are being told to expect it, the source added.

The company's $500 million five-year revolver was also launched with opening price talk of Libor plus 200 basis points. No word has emerged yet as to whether pricing on this piece will end up lower as well, or if it will settle at original talk.

Under the company's originally outlined financing commitment, both the term loan B and the revolver were contemplated at Libor plus 225 basis points, but that was changed once the deal hit the market.

In addition, the original financing commitment called for a term loan B size of $1.7 billion, but that too was changed once the deal actually launched.

Financial covenants under the agreement include a maximum debt to EBITDA ratio, a minimum fixed charge coverage ration and a limitation on capital expenditures.

Lehman Brothers and JPMorgan are joint lead arrangers and joint bookrunners on the $2.05 billion senior secured credit facility (BBB-), with Lehman on the left. Citigroup and General Electric Capital Corp. have recently joined on to the deal as joint lead arrangers as well. Lehman and Citi are co-syndication agents, GECC is documentation agent and JPMorgan is administrative agent.

Proceeds from the term loan, along with proceeds from a $1.65 billion senior secured notes offering with seven-, 10- and 12-year maturities, and $375 million of available cash, will be used to fund the acquisition of Conwood.

Changing the credit facility structure was not the only modification that the company made in terms of its acquisition financings. Under the originally announced plan, the bond offering was set to be sized at $1.8 billion and the amount of available cash to be used was sized at $300 million.

The revolver, which is expected to be undrawn at close, will be available for working capital.

Under the acquisition agreement, Reynolds has agreed to pay $3.5 billion for the holding company that owns Memphis, Tenn.-based Conwood, the nation's second-largest manufacturer of smokeless tobacco products.

Pro forma for the acquisition, total debt to adjusted EBITDA will be 2.1x, adjusted EBITDA to cash interest expense will be 6.5x and total debt to total capitalization will be 41.4%.

On a stand-alone basis, for the last 12 months ended March 31, Reynold's total debt to adjusted EBITDA was 0.8x, adjusted EBITDA to cash interest expense was 16.4x and total debt to total capitalization was 18.7%.

The transaction, which is expected to close by the end of the second quarter, will require regulatory approval by the Federal Trade Commission.

Reynolds American is a Winston-Salem, N.C.-based manufacturer and marketer of cigarettes and other tobacco products.

The headquarters of the newly combined companies will be located in Memphis, and full integration is expected to be completed by the end of 2007.

Revlon postpones launch

Revlon Inc. has temporarily postponed the launch of its proposed $960 million credit facility due to scheduling issues, according to a market source.

The facility, which was previously expected to come to market on Monday of this week, consists of a $160 million six-year revolver talked at Libor plus 150 basis points and an $800 million seven-year term loan B talked at Libor plus 300 basis points.

Citigroup and JPMorgan are the lead banks on the deal, with Citi the left lead.

Proceeds will be used to refinance the company's existing credit facility.

Revlon is a New York-based manufacturer, marketer and seller of cosmetics, skincare, fragrances and personal care products.

Opti Canada closes

Opti Canada Inc. closed on its $450 million seven-year term loan B (Ba3/BB+) that is priced with an interest rate of Libor plus 175 basis points, according to a company news release.

During syndication, the tranche was upsized from $400 million and pricing came in at the low end of talk of Libor plus 175 to 200 basis points.

At close, about 66% of the term loan B is being funded, with the remaining amount delayed draw for six months. Originally, the deal was going to be about 50% funded and about 50% delayed draw but that changed with the increase in the tranche size.

RBC Capital Markets acted as the lead bank on the deal, with The Toronto-Dominion Bank, The Royal Bank of Scotland plc, The Bank of Nova Scotia and BNP Paribas (Canada) involved as well.

Proceeds from the term loan B are being used to repay a C$300 million six-month bridge loan that was used to repay a C$100 million facility bridge loan and to fund previously announced oil sands expenditures for the Long Lake Project and expansion phases.

Opti is a Calgary, Alberta-based company focused on developing the fourth integrated oil sands project in Canada, the Long Lake Project, in a 50/50 joint venture with Nexen Inc.

Sensus closes

Sensus Metering Systems Inc. completed the repricing of its $206.2 million term loan ($182 million U.S., $24.2 million European), under which the spread on the debt was lowered to Libor plus 200 basis points from Libor plus 250 basis points, according to a company news release.

The repricing amendment, which is effective as of May 12, also includes a one-year prepayment pricing protection mechanism, expands the options available to the company for investing its excess cash and provides increased flexibility under certain financial covenants.

Credit Suisse acted as the lead bank on the deal.

Sensus is a Raleigh, N.C., producer of water meters and automatic meter reading systems.

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