Affinion unsecured loan trades up; Movie Gallery rises on store consolidation; LCDX, cash lower

By Sara Rosenberg

New York, Sept. 25 - Affinion Group Inc.'s PIK toggle unsecured term loan headed higher on Tuesday as investors are awaiting a paydown and Movie Gallery Inc.'s first-lien term loan was better on news of store closures.

In other trading news, LCDX and cash were a touch weaker as investors now seem to be directing most of their attention to the primary market.

Affinion's PIK toggle unsecured term loan was stronger during Tuesday's trading hours on news that investors can expect a repayment with proceeds from a proposed initial public offering of common stock, according to a trader.

The PIK toggle loan was quoted at 97 bid, 98 offered, up from previous levels of 94 bid, 96 offered, the trader said.

Affinion said in an S-1/A filed with the Securities and Exchange Commission Monday that it will use about $355.9 million of its IPO proceeds to repay the $350 million PIK toggle term loan in full and to pay accrued and unpaid interest.

Of the remaining IPO proceeds, $83.7 million will be used to repay its term loan B, $35.4 million will be used to redeem all outstanding series A redeemable exchangeable preferred stock from Apollo Investment Fund V, Affinion Group Holdings B and Wyndham, $10 million will be used to pay the termination fee under a consulting agreement with Apollo and $5 million will be used for estimated fees and expenses.

Any remaining proceeds from the IPO will be used for general corporate purposes.

The company currently estimates that total net IPO proceeds will be approximately $490 million, assuming an IPO price of $16.00 per share.

Affinion is a Norwalk, Conn., provider of marketing services and loyalty programs.

Movie Gallery trades stronger

Movie Gallery's first-lien term loan moved up in trading on the back of the company's store consolidation announcement, according to a trader.

The first-lien loan was quoted at 92 bid, 93 offered, up about half a point from previous levels, the trader said.

On Tuesday morning, Movie Gallery revealed that it is closing roughly 520 underperforming and unprofitable Movie Gallery and Hollywood Video stores.

This move is part of the company's efforts to conserve cash and reduce its cost structure so as to address the financial and industry challenges it has been experiencing.

"Closing these stores was a difficult, but necessary decision to help protect the future of this company. These stores are being closed after evaluating a number of factors, including store profits and the terms of the leases at each location. This action will allow us to focus our resources on the approximate 4,000 stores that have a stronger operating performance and prospects for future growth," Joe Malugen, chairman, president and chief executive officer, said in the release.

Movie Gallery is a Dothan, Ala.-based video rental company.

LCDX, cash head lower

LCDX and the cash market in general were both softer on Tuesday as people seem to be focusing more on new issues than on trading, according to traders.

The index went out around 97.25 bid, 97.40 offered, down from Monday's levels of 97.55 bid, 97.65 offered, traders said.

And cash was down by about an eighth to a quarter of a point, traders continued.

"There's just not a whole lot of volume," one trader added.

One new issue that drew attention away from the secondary was Telesat as it held what was described as a well-attended bank meeting on Tuesday morning to launch its proposed approximately $2.209 billion credit facility.

Morgan Stanley, UBS and JPMorgan are the lead arrangers and bookrunners on the deal, with Morgan Stanley and UBS as senior lead arrangers and Morgan Stanley on the left. Morgan Stanley is administrative agent on the credit facility, UBS is syndication agent and Bank of Nova Scotia, JPMorgan and Citigroup are joint documentation agents.

The facility consists of a $150 million five-year Canadian dollar equivalent revolver, a $469 million five-year Canadian dollar equivalent term loan A, a $1.44 billion seven-year term loan B and a $150 million delayed-draw term loan B, the source said.

Proceeds will be used to help fund the acquisition of Telesat Canada by a joint venture company formed by Loral Space & Communications Inc. and the Public Sector Pension Investment Board. This new company will be one of the world's largest operators of telecommunications satellites.

Also still on everybody's mind is First Data Corp., which is now heard to be oversubscribed on the $5 billion seven-year term loan B-2 on cash commitments alone.

With the B-2 moving so well, investors are waiting to see if any overhang in commitments will trickle into the $3 billion seven-year term loan B-3 that has not been launched into syndication as of yet.

"Once they figure out what to do with the finance commitments, then they'll figure out what to do with the B-3. The banks don't really want finance commitments," one source remarked.

Including finance commitments, the term loan B-2 is rumored to have about $10 billion in orders on the books.

The term loan B-2 is priced at Libor plus 275 basis points, with an original issue discount of 96 and call protection of 103 in year one, 102 in year two and 101 in year three.

The term loan B-2 includes a euro-denominated sub-tranche that is expected to be sized at $1 billion, but the final size will depend on demand.

First Data's $15 billion credit facility (Ba3/BB-/BB) also includes a $2 billion six-year revolver, a $5 billion seven-year term loan B-1 and a $3 billion seven-year term loan B-3, with all three of these tranches priced at Libor plus 275 bps as well.

The revolver has a 50 bps commitment fee.

The term loan B-1 is prepayable at par, and the term loan B-3 is non-callable for 3.25 years.

Credit Suisse, Citigroup, Deutsche Bank, Goldman Sachs, HSBC, Lehman Brothers and Merrill Lynch are the lead banks on the deal.

Proceeds are being used to help fund Kohlberg Kravis Roberts & Co.'s buyout of the company for $34.00 in cash per share.

The transaction, which has a total value of about $29 billion, was completed on Monday.

First Data is a Greenwood Village, Colo., provider of electronic commerce and payment services for businesses.

Flextronics moving along

Flextronics International Ltd.'s term loan debt is "going well" in terms of syndication with orders from investors coming in to the books, according to a market source.

"People who know the company like it," the source added.

The company's $2.5 billion in senior unsecured term loan debt (Ba1/BB+) consists of a $500 million five-year term loan B-1 and a $2 billion seven-year term loan B-2, with both tranches talked at Libor plus 225 bps.

The term loan B-2 carries 101 soft call protection for one year. The term loan B-1 does not carry any call protection.

Citigroup is the lead bank on the deal, which launched with a bank meeting on Friday.

Proceeds from the term loan will be used to help fund the acquisition of Solectron Corp. for $3.6 billion.

Under the acquisition agreement, each share of Solectron common stock will be converted into the right to receive, at the election of each holder, 0.345 of a Flextronics share or a cash payment of $3.89, subject to the limitation that not more than 70% and no less than 50% of Solectron shares will be converted into shares of Flextronics. The total cash payment can range from around $1.06 billion to around $1.77 billion.

In addition to funding the cash payment, proceeds from the term loan will be used to refinance Solectron's debt, if required.

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

Biomet closes

The Blackstone Group LP, Goldman Sachs & Co., Kohlberg Kravis Roberts & Co. LP and TPG Capital completed their buyout of Biomet Inc. for $46 in cash per common share, according to a news release.

To help fund the buyout, Biomet got a new approximately $4.35 billion senior secured credit facility consisting of a $2.34 billion 71/2-year term loan B (B1/B+) priced at Libor plus 300 bps, with 101 soft call protection for one year, an €875 million 71/2-year euro term loan B (B1/B+) priced at Euribor plus 300 bps, with 101 soft call protection for one year, a $350 million six-year asset-based revolver (Ba2/BB-) and a $400 million six-year cash-based revolver (B1/B+).

During syndication, the U.S. term loan B was downsized from $2.6 billion while the euro term loan B was upsized from around $1 billion equivalent, pricing on the term loan B tranches was flexed up from original guidance of Libor/Euribor plus 225 bps to 250 bps and the soft call protection was added.

Bank of America and Goldman Sachs acted as joint lead arrangers on the deal; Bank of America, Goldman, Bear Stearns, Lehman and Merrill Lynch acted as joint bookrunners; and Wachovia acted as co-manager.

Biomet is a Warsaw, Ind., maker of musculoskeletal medical products.

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