Aramark upsizes, cuts institutional pricing; Ford, GM continue to trade up with better buyers

By Sara Rosenberg

New York, Jan. 12 - Aramark Corp. reworked its credit facility on Friday to increase the overall size of the deal, lower pricing on the synthetic letter-of-credit facility and term loan B tranches and accelerate the commitment deadline.

Meanwhile, in the secondary market, Ford Motor Co. and General Motors Corp. continued to see their term loans head higher as demand for the paper remains strong.

Aramark came out with a number of changes to its credit facility including, upsizing the massively oversubscribed term loan B tranche, reducing spreads on the strip of institutional bank debt and moving up the commitment due date, according to a market source.

With the modifications, the seven-year term loan B now carries a size of $4.15 billion, up from an original size of $3.66 billion, pricing on the paper was reverse flexed to Libor plus 225 basis points from original talk of Libor plus 250 bps, and a step down in pricing was added under which the spread can drop to Libor plus 200 bps based on the company meeting a leverage test that is still to be determined, the source said.

In addition, pricing on the company's $250 million seven-year synthetic letter-of-credit facility was also reverse flexed to Libor plus 225 bps from original talk at launch of Libor plus 250, and the step down to Libor plus 200 bps based on a leverage test was added to the tranche, the source continued.

Earlier this week it was said that Aramark's strip of institutional bank debt had already received more than $6 billion in orders, sparking speculation that a tightening in pricing was a strong possibility.

A bank meeting to officially launch the deal into syndication just took place on Jan. 8. However, sources had previously told Prospect News that commitments started pouring in even before the meeting took place.

Aramark's now $5 billion (up from $4.51 billion) credit facility (Ba3/B+/BB-) also includes a $600 million six-year revolver that is priced at Libor plus 200 bps. No changes were made to the revolver tranche, the source added.

When the deal was first announced, the term loan B was anticipated to carry a size of $3.755 billion; but, prior to launch, the tranche was downsized by $95 million as the company decided to keep more of its existing debt in place.

Commitments on the credit facility are due 5 p.m. ET Tuesday. This deadline was originally scheduled for 5 p.m. ET Wednesday but was moved up to reflect the strong market demand.

Goldman Sachs and JPMorgan are joint bookrunners, joint lead arrangers and co-syndication agents on the facility that will be used to help fund the buyout of Aramark by chairman and chief executive officer Joseph Neubauer and a group of investors.

Other buyout financing will come from $1.78 billion of high-yield bonds, which are expected to price on Tuesday. The bond offering was downsized from $2.27 billion on Friday in connection with the term loan B upsizing.

The bond deal is comprised of a $1.28 billion senior fixed-rate notes tranche talked at 8½% to 8¾% that was reduced from $1.7 billion and a $500 million senior floating-rate notes tranche talked at Libor plus 350 bps to 375 bps that was just added to the deal. The company's previously planned $570 million senior subordinated notes tranche has been eliminated from the capital structure.

When the transaction was first announced, the bond offering was expected to be sized at $2.47 billion but it was scaled back a few weeks ago as the sponsors decided to contribute an additional $200 million of equity.

Under the acquisition agreement, Neubauer and investment funds managed by GS Capital Partners, CCMP Capital Advisors and J.P. Morgan Partners, Thomas H. Lee Partners and Warburg Pincus LLC will acquire Aramark in a transaction valued at $8.3 billion, including the assumption or repayment of about $2 billion of debt.

The transaction is expected to be completed at the end of January.

Aramark is a Philadelphia-based professional services company that provides food, hospitality, facility management services as well as uniform and work apparel.

Ford, GM trade higher

The auto sector continued to see strong market technicals during Friday's session, with names like Ford and General Motors seeing positive momentum on their term loan debt, according to a trader.

Ford, a Dearborn, Mich.-based automaker, saw its term loan close the day at 101 1/8 bid, 101 3/8 offered, up from Thursday's levels of 101 bid, 101¼ offered, the trader added.

And, General Motors, a Detroit-based automaker, saw its term loan end the day at par 7/8 bid, 101 1/8 offered, up from Thursday's levels of par ½ bid, par ¾ offered, the trader said.

The trader attributed the strengthening to better demand for the companies' bank debt; however, there also has been some recent positive news coming out on the companies' turnaround progress.

On Friday, Ford said in a meeting with auto analysts in Detroit that it's ahead of schedule on its plan to return to profitability through job cuts and plant closings.

While, on Thursday, General Motors told securities analysts that it made considerable progress in its North America turnaround and outlined priorities for 2007 regarding its transformation.

General Motors achieved $9 billion of cost reduction on a running-rate basis by year-end 2006, exceeding its target of $6 billion, and achieved its U.S. retail sales target of 3 million units.

As for 2007, General Motors is concentrating on five key priorities - stay focused on the North America turnaround, continue to drive aggressively in emerging markets, maximize the benefits of running the business globally, build on its comprehensive advanced propulsion strategy and continue to improve business results, especially improved earnings and cash flow.

Keystone closes

Keystone Automotive Operations, Inc. closed on its new $325 million credit facility consisting of a $200 million five-year term loan B (B1/B) and a $125 million five-year asset-based revolver, according to a company news release.

Bank of America acted as the lead bank on the deal.

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

Keystone is a Pomona, Calif., distributor and marketer of specialty automotive accessories.

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