Tribune slides on company performance concerns; Royalty Pharma sets talk, OID; Husky Injection upsizes

By Sara Rosenberg

New York, Dec. 6 - Tribune Co.'s term loan B dropped off in trading on Thursday as news of a planned bridge loan reduction sparked nervousness over the company's financial performance, and LCDX rose with equities.

In other news, Royalty Pharma came out with the official price talk and discount on its term loan B add-on as the deal was launched during the session and Husky Injection Molding Systems Ltd. increased the size of the revolver under its in-market credit facility.

Tribune's term loan B came under quite a bit of pressure during trading hours after the company announced plans to repay some of its bridge loan commitment because investors read the move as a tip off that financials are poor, according to a trader.

The term loan B ended the day at 92½ bid, 94 offered, down from 93½ bid, 94½ offered on Wednesday, the trader said.

"It's off a point because people are trying to get out. Definitely some selling pressure," the trader remarked.

On Thursday morning, the Chicago-based media company revealed that it plans to reduce its $2.1 billion bridge loan commitment to $1.6 billion through the use of $500 million of available cash.

The bridge facility backs a proposed bond offering that is part of the company's second-step financing for its going-private transaction.

In the first stage of the public-to-private transaction, which was completed a few months ago, Tribune completed a cash tender offer for 126 million shares at $34 per share and refinanced its existing credit facilities.

In the second stage, Tribune is buying all the remaining outstanding shares of the company.

The transaction is expected to close before the end of the year following satisfaction of the remaining closing conditions, including the receipt of a solvency opinion and completion of the committed financing.

In order for the company to be able to complete the second stage of the public-to-private transaction, a leverage condition must be met. If the leverage condition is not met, the second stage is "dead," the trader said.

As a result of the company deciding to reduce its bridge facility amount, people started to assume that this reduction was necessary in order for the leverage condition to be met, and if that's the case, then the next financials that get released by the company will likely be negative, the trader explained.

"People view the change in the size of the bridge as a negative. Leverage is lower [because of the paydown] so that's good but the company is doing crappier and crappier so that's bad. It's kind of a double-edged sword," the trader said, adding that the expectation is that leverage is not really down because numbers won't be good.

LCDX up with stocks

LCDX 9 headed higher in trading as equities posted gains, according to traders.

The index went out at 97.00 bid, 97.10 offered, up from around 96.75 bid, 96.85 offered, traders said.

"There was a buyer out there on the index this afternoon," one trader added.

As for stocks, Nasdaq closed up 42.67 points, or 1.60%, Dow Jones Industrial Average closed up 174.93 points, or 1.30%, S&P 500 closed up 22.33 points, or 1.50%, and NYSE closed up 142.55 points, or 1.44%.

Royalty Pharma price talk, OID

Moving to the primary, Royalty Pharma held a bank meeting on Thursday afternoon to kick off syndication on its proposed $700 million term loan B add-on (BBB-), and in connection with the launch, official price talk and an original issue discount level were announced, according to a buyside source.

The term loan B add-on was presented to lenders with price talk of Libor plus 225 basis points and an original issue discount of 99, the source said.

Prior to the actual launch, the spread guidance that was circulating around the market for the add-on was Libor plus 200 bps to Libor plus 225 bps.

In connection with the add-on, the company will increase pricing on its existing term loan B debt to Libor plus 225 bps from current pricing of Libor plus 150 bps, the source added.

Bank of America is the lead bank on the add-on, which will be used for acquisition financing.

Royalty Pharma is a New York-based acquirer of revenue-producing intellectual property, principally royalty interests in marketed and late-stage biopharmaceutical products.

Husky increases revolver

Husky Injection Molding Systems upsized its in-market revolving credit facility as a result of market demand, resulting in a $25 million increase to the company's total deal size, according to a market source.

The revolver is now sized at $110 million, up from an original size of $85 million, while pricing was left unchanged at Libor plus 325 bps, the source said.

Husky Injection Molding's now $520 million (up from $495 million) credit facility also includes a $410 million term loan that is priced at Libor plus 325 bps and was sold to investors at an original issue discount of 991/2.

RBC Capital is the lead bank on the deal.

Proceeds will be used to help fund the buyout of the company by Onex Corp. for C$8.235 for each share held by all shareholders other than Robert and Elizabeth Schad and their holding company and for C$8.10 per share for the shares held by the Schads and their holding company. The total transaction value is about C$960 million.

On Thursday, Husky Injection Molding's shareholders approved the buyout. The transaction is subject to final approval of the Ontario Superior Court of Justice, which is expected to be sought on Monday.

Allocations on the credit facility are expected to go out sometime before the buyout closes on Dec. 13.

Husky Injection Molding is a Bolton, Ont., supplier of injection molding equipment and services to the plastics industry.

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