TXU sees positive momentum; Allison wraps sell down; Flextronics, GSI break; LCDX stronger

By Sara Rosenberg

New York, Oct. 12 - TXU Corp.'s massive credit facility has been attracting a lot of attention from investors ahead of its Monday launch, so much so that there's talk of orders already piling in.

In other news, Allison Transmission wrapped syndication of a $500 million block of term loan B debt and is expecting to allocate this latest sale on Monday.

Moving to the secondary, Flextronics International Ltd. and GSI Group Inc. both saw their credit facilities free up for trading on Friday at levels above their original issue discounts, and LCDX series 8 and 9 were both higher with equities.

TXU's $24.5 billion senior secured credit facility has been a primary focus for market players, especially now that a bank meeting has been scheduled for Monday to officially kick off syndication on the deal - and all this attention is translating into early orders, according to a market source.

"I'm hearing that guys are throwing $100 million plus orders at 99 or better and I've even heard that some guys have offered to buy it at par at Libor plus 350," the source said.

"Ever since First Data, I've been hearing guys say that they really like TXU. It's a utility related credit and has hard assets. First Data did well. I think there's more comfort in having [TXU] type of collateral so there's an awful lot of enthusiasm in terms of the feedback," the source continued.

The facility consists of a $16.45 billion seven-year term loan, a $4.1 billion seven-year final maturity delayed-draw term loan, a $1.25 billion seven-year letter-of-credit facility and a $2.7 billion six-year revolver.

According to an 8-K filed with the Securities and Exchange Commission Thursday, at close on Wednesday, all tranches under the deal were priced at Libor plus 350 basis points, the revolver has a commitment fee of 50 bps and the delayed-draw term loan has an undrawn fee of 125 bps for the first year and 150 bps after that.

But, market sources are saying that official price talk, which should emerge at launch, could be different than the Libor plus 350 bps closing pricing.

"They're trying to assimilate all this [feedback] and figure out where to launch it," the source remarked.

The source went on to say that there's always the possibility that only a portion of the term loan will be marketed at first, as was the case with First Data Corp., and that maybe there will be some sub-tranches, like First Data, but that's all just speculation at this point.

First Data had divided its $13 billion in seven-year term loan B debt, which was all priced at Libor plus 275 bps, into a $5 billion term loan B-1 offered at a discount of 96 and prepayable at par, a $5 billion term loan B-2 offered at 96 with call protection of 103 in year one, 102 in year two and 101 in year three, and a $3 billion term loan B-3 offered at 97 and non-callable for 3.25 years.

At first, First Data was only syndicating its term loan B-2, but upon strong market reception it was decided that the term loan B-1 and term loan B-3 should be marketed as well. However, not all of the term loan debt was allocated.

Citigroup, JPMorgan, Goldman Sachs, Lehman Brothers, Morgan Stanley and Credit Suisse are the joint lead arrangers and bookrunners on the TXU deal, with Citi administrative agent, JPMorgan syndication agent, and Credit Suisse, Goldman, Lehman and Morgan Stanley co-documentation agents.

Texas Competitive Electric Holdings Co. LLC is the actual borrower under the facility.

There is a $2 billion accordion feature.

Under the facility, the company must maintain a maximum secured leverage ratio beginning on Sept. 30, 2008 of 7.25 to 1.00.

Proceeds from the credit facility were used to help fund the recently completed leveraged buyout of the company by an investor group led by Kohlberg Kravis Roberts & Co. and Texas Pacific Group for $69.25 per share. The transaction was valued at $45 billion.

In addition, the company got a senior secured cash collateral posting facility, the size of which is capped by the mark-to-market exposure of Texas Competitive Electric and its subsidiaries on a portfolio of commodity swaps and futures transactions.

Other LBO financing came from a $5 billion senior unsecured cash-pay bridge loan with initial pricing of Libor plus 325 bps at Texas Competitive Electric, a $1.75 billion senior unsecured toggle bridge loan with initial pricing of Libor plus 350 bps at Texas Competitive Electric, a $2.5 billion senior unsecured cash-pay bridge loan with initial pricing of Libor plus 400 bps at TXU and a $2 billion senior unsecured toggle bridge loan with initial pricing of Libor plus 425 bps at TXU.

TXU is a Dallas-based energy company.

Allison block successfully sells

Allison Transmission completed the sale of an additional $500 million of its already funded $3.1 billion term loan B to some institutional accounts at an original issue discount of 981/4, according to a market source.

This block of term loan B debt is anticipated to allocate on Monday, the source added.

Originally, the banks were going to sell the term loan B debt at 971/2, but the discount was tightened on Thursday as a result of the strong momentum seen in the company's $550 million eight-year cash-pay senior notes that priced at par to yield 11%. On Friday, the company returned to the bond market to price $550 million of eight-year senior toggle notes at par to yield 11¼%.

Previously, the banks sold off $500 million of the Allison term loan B debt at a discount of 96¼ and, before that, about $1 billion was sold off at a discount of 96.

Pricing on the paper is set at Libor plus 275 bps.

The term loan B had originally been launched to investors with a bank meeting on July 18 but was pulled on July 23 due to poor market conditions. During the brief time that it was in the retail syndication process, price talk was Libor plus 250 bps, with an original issue discount of 991/2.

Citigroup, Lehman Brothers and Merrill Lynch acted as the lead banks on the deal, which had been funded in August to help finance the buyout of the company by the Carlyle Group and Onex Corp.

Allison Transmission is a Speedway, Ind., designer and manufacturer of automatic transmissions for on-highway trucks and buses, off-highway equipment and military vehicles.

Bausch & Lomb oversubscribed

Bausch & Lomb Inc.'s term loan tranches are heard to be 5½ times oversubscribed at initial terms, a market source told Prospect News on Friday.

The debt is comprised of a $1.1 billion 71/2-year U.S. term loan, a $575 million 71/2-year euro equivalent term loan and a $300 million 71/2-year delayed-draw until Dec. 31, 2009 term loan, with all tranches talked at Libor/Euribor plus 325 bps and offered at a discount of 981/2.

Bausch & Lomb's $2.475 billion senior secured credit facility (B1/BB-) also includes a $500 million six-year revolver talked at Libor plus 325 bps.

The facility has a total net leverage covenant.

Credit Suisse, Bank of America, Citigroup and JPMorgan are the lead banks on the deal.

Proceeds will be used to help fund the buyout of the company by Warburg Pincus for $65.00 per share in cash. The transaction is valued at $4.5 billion, including about $830 million of debt.

The company will also be getting $400 million of senior notes, $175 million of senior PIK toggle option notes, $175 million of senior subordinated notes and $1.857 billion in equity.

For the last 12 months ended June 30, the company generated revenue of $2.4 billion and pro forma adjusted EBITDA of $346.5 million.

Pro forma for the transaction, senior secured leverage is 4.8 times, total leverage is 7.1 times and net leverage is 6.7 times.

The total purchase price for the transaction, including fees and expenses, represents approximately 12.5 times pro forma last-12-months adjusted EBITDA.

Bausch & Lomb is a Rochester, N.Y., eye health company.

Flextronics frees to trade

Switching to trading news, Flextronics' unsecured term loan debt hit the secondary on Friday, with the $500 million five-year tranche quoted at 99½ bid, par offered and the $784 million funded seven-year tranche quoted at 99 3/8 bid, 99 7/8 offered, according to a trader.

The five-year B-1 is priced at Libor plus 225 bps, was sold at a discount of 99¼ and carries no call protection.

The funded seven-year B-2 is priced at Libor plus 225 bps, was sold at a discount of 99 and carries 101 soft call protection for one year.

Flextronics' $1.759 billion of unsecured term loan debt (Ba1/BB+/BB+) also includes a $475 million 90-day delayed-draw tranche, with seven-year final maturity. The delayed-draw loan, upon funding, will be priced at Libor plus 225 bps and have the same call protection as the funded seven-year B-2. This delayed-draw loan was not syndicated to the market.

During syndication, the total size of the term loan B-2 (which includes funded and delayed-draw) was reduced to $1.259 billion from $2 billion after the cash payment for the already completed Solectron Corp. acquisition was determined. Solectron stockholders were entitled to elect to receive either 0.345 of a Flextronics ordinary share or $3.89 in cash for each share of Solectron common stock, subject to proration due to minimum and maximum limits on the amount of stock consideration and cash consideration.

Citigroup acted as the lead bank on the deal.

Flextronics is a Singapore-based electronics manufacturing services provider. Solectron is a Milpitas, Calif.-based provider of complete product lifecycle services.

GSI breaks

Also freeing up for trading Friday was GSI Group's credit facility, with the $305 million first-lien term loan (B1/B) quoted at 97½ bid, according to a trader.

The first-lien term loan is priced at Libor plus 300 bps and was sold at a discount of 97.

When the deal was launched in July, the first-lien term loan was talked at Libor plus 250 bps, but pricing was flexed up and the discount was added when investors were recently re-approached about the transaction.

GSI's $475 million credit facility also includes a $50 million six-year revolver (B1/B) and a $120 million second-lien term loan priced at Libor plus 500 bps that was provided by the Woodbridge Co.

Proceeds were used to fund the already completed acquisition of a majority stake in the company by Centerbridge Capital Partners LP from Charlesbank Capital Partners and to refinance existing debt.

GSI is an Assumption, Ill., provider of agricultural equipment and services.

LCDX trades up

LCDX continued to inch its way higher on Friday in sympathy with the strength in the stock market, according to a trader.

The series 9 LCDX ended the day around 100.40 bid, 100.50 offered, up from Thursday's levels of 100.25 bid, 100.35 offered, the trader said.

The series 8 LCDX ended the day around 97.95 bid, 98.05 offered, up from Thursday's levels of 97.85 bid, 97.95 offered, the trader added.

As for stocks, Nasdaq closed up 33.48 points, or 1.21%, Dow Jones Industrial Average closed up 77.96 points, or 0.56%, S&P 500 closed up 7.39 points, or 0.48%, and NYSE closed up 56.24 points, or 0.55%.

U.S. Xpress closes

Mountain Lake Acquisition Co. completed its tender offer for all outstanding shares of class A common stock of U.S. Xpress Enterprises Inc. for $20.10 per share, according to a news release.

To help fund this transaction, U.S. Xpress got a new $235 million senior secured credit facility (B1/B+) consisting of a $50 million five-year revolver and a $185 million term loan B.

Pricing on the revolver is tied to a leverage grid, with the initial rate in the Libor plus 300 bps range. There is a 50 bps commitment fee on the tranche.

Pricing on the term loan is Libor plus 400 bps, and the paper was sold with an original issue discount of 96.

SunTrust acted as the lead bank on the deal.

Leverage is around 4.2 times.

The facility has a full covenant package that includes a total leverage test, an interest coverage test and asset coverage.

The financing for this acquisition had been revised from initial plans due to changes in the leveraged finance market since the original June 22 announcement date.

Under the initial commitment letter, the company was going to get a $432 million credit facility via SunTrust, consisting of a $50 million five-year revolver expected at Libor plus 275 bps, a $92 million seven-year synthetic letter-of-credit facility expected at Libor plus 275 bps, a $40 million seven-year delayed-draw synthetic letter-of-credit facility expected at Libor plus 275 bps, a $190 million seven-year term loan B expected at Libor plus 275 bps and an up to $60 million eight-year second-lien term loan expected at Libor plus 625 bps.

U.S. Xpress is a Chattanooga, Tenn., truckload carrier. Mountain Lake is a company formed by Patrick E. Quinn and Max L. Fuller for this acquisition.

Topps closes

Michael Eisner's the Tornante Co. LLC and Madison Dearborn Partners, LLC completed their buyout of the Topps Co. Inc. for $9.75 in cash per share, according to a news release.

To help fund the buyout, Topps got a new $120 million senior secured credit facility consisting of a $95 million seven-year term loan and a $25 million six-year revolver.

Other buyout financing came from a $45 million senior subordinated unsecured eight-year term loan.

Deutsche Bank was the lead bank on the deal.

Topps is a New York-based creator and marketer of sports and related cards, entertainment products and confectionery.

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