Harrah's sets OID, only offers B-2; Goodman floats talk, attracts orders; LCDX, cash soften

By Sara Rosenberg

New York, Jan. 15 - Harrah's Operating Co. Inc. launched its credit facility on Tuesday morning, at which time lenders were told that only the term loan B-2 and the revolver are currently being syndicated, and the original issue discount on the B-2 was announced.

Also in the primary, Goodman Global Inc. came out with price talk on its credit facility as it too launched with a bank meeting during the morning hours, and the deal is already moving along nicely with a bunch of early commitments placed toward the institutional piece.

Moving to the secondary, LCDX and the cash market were both a touch weaker as they followed stocks lower after the release of economic data.

Harrah's held an extremely well-attended bank meeting on Tuesday morning to kick start syndication on its credit facility, and in connection with the launch, the original issue discount on the term loan B-2 (the only term loan piece being offered now) emerged, according to market sources.

The $3 billion term loan B-2 was launched at a discount of 961/2, sources said. As was already reported, price talk on the loan is Libor plus 300 basis points.

The term loan B-2 has soft call protection of 103 in year one, 102 in year two and 101 in year three.

Harrah's is also currently syndicating its $2 billion six-year revolver, which is also being talked at Libor plus 300 bps, sources remarked. The revolver will be undrawn at closing but will be subject to $225 million in estimated outstanding letters-of-credit.

The bank meeting saw attendance of over 600 people, one buyside source said. "Monster room at the Hilton. Packed house. Presentation went well. Generally well received," the source added.

Market players have previously told Prospect News that some positives working for the deal is that it's one of the premier casino assets in the world and, in general, the business is considered fairly recession proof.

Commitments are due from lenders on Jan. 29, and syndication is scheduled to close on Feb. 5.

Harrah's $9.25 billion senior secured credit facility (Ba2) also includes a $2.25 billion term loan B-1 that is prepayable at par and a $2 billion term loan B-3 that is non-callable for three years, with both of these tranches talked at Libor plus 300 bps as well.

Originally, it was expected that the total amount of seven-year term loan B debt would be $7 billion, but prior to launch, that was increased to $7.25 billion.

Bank of America and Deutsche Bank are the joint lead arrangers on the credit facility, and Bank of America, Citigroup, Credit Suisse, Deutsche, JPMorgan and Merrill Lynch will be joint bookrunners. Bank of America is the administrative agent, Deutsche is syndication agent, and Citigroup, Credit Suisse, JPMorgan and Merrill are co-documentation agents.

Covenants include a 4.75 maximum net senior secured first-lien debt leverage test.

Proceeds will be used to help fund the buyout of the company by Texas Pacific Group and Apollo Management, LP for $90.00 per share. The transaction has a total value of $31.25 billion, including the refinancing and rollover of existing debt.

Other buyout financing will come from $6.1 billion of equity, $1.5 billion of senior unsecured payment-in-kind toggle notes, $5.28 billion of senior unsecured cash pay notes and $6.5 billion of CMBS debt.

The senior unsecured cash pay notes were upsized from a previously expected amount of $4.53 billion, and the CMBS financing was downsized from $8 billion.

Based on the 12 months ended Sept. 30, pro forma for the transaction, subsidiary guaranteed debt to adjusted EBITDA is 6.9 times, net subsidiary guaranteed debt to adjusted EBITDA is 6.5 times and adjusted EBITDA to cash interest expense of subsidiary guaranteed debt is 1.6 times.

The pro forma ratio of total debt, which includes retained notes, to adjusted EBITDA is 8.9 times, the pro forma ratio of total debt, net of cash and cash equivalents, to adjusted EBITDA is 8.4 times and the pro forma ratio of adjusted EBITDA to cash interest expense is 1.3 times.

Harrah's is a Las Vegas-based provider of branded casino entertainment.

Goodman talk emerges, early interest seen

Goodman Global also held a bank meeting on Tuesday morning, launching its $1.1 billion senior secured credit facility to investors and outlining price talk, according to a market source.

The $800 million term loan B (Ba3/BB) was presented with talk of Libor plus 375 bps and an original issue discount of 981/2, the source said.

The $300 million ABL revolver was presented with talk of Libor plus 200 bps, the source continued. Upfront fees on the revolver are not yet available.

This bank meeting also saw strong attendance with standing room only, and over $200 million in orders had already been placed toward the term loan B by early afternoon, the source said.

The source explained that although the company's end consumers are ultimately in the housing sector, with over 70% of sales being to replacement buyers, there's stability to the business.

"[Also] they got $250 million of existing term debt. If [they] get a lot of existing guys to commit you have half of the deal done," the source remarked.

Of the $200 million in early orders, some came from existing lenders and some came from new lenders, the source added.

Commitments are due on Jan. 29.

Barclays Capital, Calyon and GE Capital are the lead banks on the deal, with Barclays the left lead on the term loan B and GE the left lead on the revolver.

Proceeds will be used to help fund the buyout of the company by Hellman & Friedman LLC for $25.60 in cash per share. The transaction is valued at $2.65 billion.

Other financing will come from $500 million of senior subordinated financing from vehicles managed by GSO Capital Partners and Farallon Capital Management, LLC, according to filings with the Securities and Exchange Commission.

On a gross basis, senior leverage is 3.4 times and total leverage is 5.2 times.

Goodman Global is a Houston-based manufacturer of residential and light commercial heating, ventilation and air-conditioning equipment.

LCDX, cash head lower

Switching to trading news, LCDX 9 and the cash market in general both felt weaker in sympathy with equities after certain economic data was released, according to a trader.

LCDX went out around 95.45 bid, 95.55 offered, down from Monday's levels of 95.70 bid, 95.80 offered, the trader said.

Cash was off by about an eighth of a point across the board, the trader added.

As for stocks, Nasdaq was down 60.71 points, or 2.45%, Dow Jones Industrial Average was down 277.04 points, or 2.17%, S&P 500 was down 35.30 points, or 2.49%, and NYSE was down 267.17 points, or 2.83%.

On Tuesday, the U.S. Census Bureau announced that U.S. retail and food services sales for December were $382.9 billion, a decrease of 0.4% from the previous month, but 4.1% above December 2006.

Also coming out on Tuesday was the Producer Price Index for December. According to the Bureau of Labor Statistics, the index for finished goods declined 0.1%, compared with a 3.2% rise in November and a 0.1% advance in October.

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