Hercules Offshore breaks; LCDX, cash market weakness persists; Advanced Medical steady on Bausch bid

By Sara Rosenberg

New York, July 6 - Hercules Offshore Inc.'s credit facility freed for trading in a really hushed Friday market, with levels on the term loan B quoted atop par.

In other trading news, LCDX and the cash market were once again lower on the day, and Advanced Medical Optics Inc.'s term loan B levels held steady on the heels of the company's bid for Bausch & Lomb.

Hercules Offshore's credit facility broke for trading on Friday, with the $900 million six-year term loan B quoted at par ¼ bid, par ½ offered on the open and then settling in to par 1/8 bid, par 3/8 offered by the end of the day, according to a trader.

"It traded around a few times during a quiet session," the trader added.

The term loan B is priced at Libor plus 175 basis points.

During syndication, pricing on the B loan was reverse flexed from original talk at launch of Libor plus 200 bps on strong investor interest.

And, prior to launch, the term loan B was expected to carry a size of $1.1 billion, but it was reduced because the company is generating a lot of cash.

Hercules Offshore's $1.05 billion credit facility (Ba3/BB) also includes a $150 million five-year revolver.

UBS is the lead bank on the deal. Other banks involved include Amegy Bank, Comerica Bank, Credit Suisse, Deutsche Bank, Jefferies Finance LLC and JPMorgan.

Financial covenants include maximum leverage and fixed-charge coverage.

Proceeds will be used to help fund the acquisition of Todco for an average total consideration equal to 0.979 of a share of Hercules Offshore and $16.00 in cash for each share of Todco common stock outstanding, or an estimated 56.9 million shares of Hercules Offshore and cash of $930.7 million. The transaction is valued at $2.3 billion.

In addition to financing the acquisition, proceeds from the facility will be used to repay in full and terminate Hercules' existing senior secured term loan facility and to refinance Todco's revolver.

Hercules Offshore is a Houston-based operator of jack-up drilling rigs and liftboats. Todco is a Houston-based provider of contract oil and gas drilling services.

LCDX, cash down

LCDX and the cash loan market were both softer on the day, a story that has been the trend for a while now, according to a trader.

LCDX went out at 96.90 bid, 97 offered, down from 97.10 bid, 97.20 offered on Thursday, the trader said.

During the day, levels had gotten as low as 96.75 bid, 96.85 offered on the index, but it rebounded late in the session as some buyers came in to the market.

"The entire market is moving lower so it's not just isolated to the index," the trader remarked.

Meanwhile, the cash market in general was about an eighth of a point to a quarter of a point softer on Friday.

"Light flows and low liquidity today doesn't help," the trader added.

Advanced Medical unchanged

Advanced Medical Optics' term loan B pretty much held firm at unchanged levels in a slow market on the back of news that the company put in a bid for Bausch & Lomb, according to a trader.

The term loan B was quoted at 99½ bid, par offered, the trader said.

Late in the day Thursday, news emerged that the company has offered to purchase Bausch & Lomb for $45 in cash and a fixed number of shares of Advanced Medical Optics' common stock having a value of $30 at the time of signing a definitive agreement.

The proposal values Bausch, a Rochester, N.Y., eye health company, at about $4.3 billion in equity value.

This buyout would be funded by a combination of bank debt and public debt, led by Goldman Sachs.

However, on May 16, Bausch entered into a buyout agreement with Warburg Pincus under which stockholders would get $65.00 per share in cash.

The Warburg transaction, which is valued at $4.5 billion, including about $830 million of debt, is backed by a debt financing commitment as well.

Currently, the Bausch board of directors, following the recommendation of a special committee comprised entirely of independent directors, has determined that the Advanced Medical Optics proposal is reasonably likely to result in a superior proposal, but a final determination will not be made until the proposal is fully evaluated.

Advanced Medical Optics is a Santa Ana, Calif., ophthalmic surgical devices and eye care products company.

Dollar General closes

Kohlberg Kravis Roberts & Co. LP, GS Capital Partners, Citi Private Equity and other equity co-investors completed their acquisition of Dollar General Corp. in a transaction valued at $7.3 billion, according to a news release.

To help fund the buyout, Dollar General got a new $3.3 billion senior secured credit facility consisting of a $1.7 billion first-out term loan (B2/B+) priced at Libor plus 275 bps, with an original issue discount of 97, a $600 million first-loss term loan (Caa1/CCC+) priced at Libor plus 275 bps, with an original issue discount of 95, and a $1 billion six-year asset-based revolver priced at Libor plus 150 bps, with a 37.5 bps undrawn fee.

During syndication, the company revised its seven-year term loan B by dividing it into the first-out piece and the first-loss piece, downsized the total term debt size from $2.43 billion, set pricing at the high end of initial talk of Libor plus 250 bps to 275 bps, and added the original issue discounts.

Goldman Sachs, Citigroup, Lehman Brothers and Wachovia acted as the joint lead arrangers and joint bookrunners on the credit facility. CIT Corp. acted as the administrative agent for the asset-based revolver.

In connection with the acquisition, the company successfully tendered for its $200 million 8 5/8% notes due June 15, 2010.

Dollar General is a Goodlettsville, Tenn., discount retailer.

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