Precision Drilling B loan filling up; Aquilex talk emerges; Earthbound Farm oversubscribed; GM, Ford rise

By Sara Rosenberg

New York, Nov. 25 - Precision Drilling Trust's term loan B has seen some really good momentum since the pricing changes were announced last week, and the hope is that the deal will be nicely circled out over the next few days.

Also on the new deal front, Aquilex Holdings LLC saw price talk surface on its proposed deal and Earthbound Farm's credit facility has received enough investor interest to get done, and now finalizing pricing and allocations are the top priorities.

Moving to the secondary, General Motors Corp. and Ford Motor Co. were both higher in trading on Tuesday, NRG Energy Inc. was better despite its board reiterating its disapproval of a merger with Exelon Corp., and while cash was unchanged to slightly stronger, LCDX 10 gained about a point.

Precision Drilling making good progress

Precision Drilling has received a strong showing of support from lenders since coming out with a more attractive spread and original issue discount on its $400 million 53/4-year term loan B last Friday, according to a market source.

"Over 75% filled at this point. Got a bunch of guys still working that just got started working because they got interested when pricing changed. New price point got a lot of people off the fence," the source said.

As a result of having some of these late starters, the book on the term loan B was left open past Monday's commitment deadline and is expected to stay open probably into next week being that the Thanksgiving holiday is this week, the source continued.

"Expect to fill out nicely by then," the source added.

Precision B loan terms

As was previously reported, pricing on Precision Drilling's term loan B is Libor plus 600 basis points, with an original issue discount of 80 and a 3.25% Libor floor.

At the end of last week, this new pricing was announced, but at the Nov. 4 launch, the deal was presented with a Libor spread of 500 bps.

An original issue discount on the term loan B didn't start circulating until Nov. 18, at which point it first emerged as being guided in the 86 area.

The Libor floor on the deal has been unchanged throughout the syndication process.

There was some chatter floating around on Tuesday that there might be a $75 million to $100 million carve-out under the term loan B that would carry pricing of Libor plus 750 bps with an original issue discount of 85, so as to attract certain type of investors.

However, the source told Prospect News that there's "nothing definite about that. It's possible, but have not determined any size, price, etc., so very speculative at this point."

Precision pro rata done

Meanwhile, Precision Drilling's $800 million of pro rata bank debt is already fully subscribed, helped along by a very successful early round of syndication to senior managing agents, the source remarked.

Both the $400 million five-year revolver and the $400 million five-year term loan A are currently being talked at Libor plus 400 bps.

According to a previous filing with the Securities and Exchange Commission, amortization on the term loan A is 5% in year one, 10% in years two and three, and 15% in year four, with the balance payable at maturity, and amortization on the term loan B is 1% per year, with the balance payable at maturity.

Financial covenants include a minimum interest coverage ratio of 3.0 to 1.0, a minimum fixed-charge coverage ratio of 1.05 to 1.0 in 2009 and 1.10 to 1.0 thereafter, and a maximum total leverage ratio of 3.0 to 1.0.

RBC Capital Markets and Deutsche Bank are the joint lead arrangers and bookrunners on the $1.2 billion senior secured credit facility (Ba1/BBB-), with RBC the administrative agent and left lead, Deutsche the syndication agent, and HSBC and TD Securities the co-documentation agents.

Precision funding acquisition

Proceeds from the Precision Drilling credit facility will be used to help fund the acquisition of Grey Wolf Inc. for $9.02 in cash or 0.4225 Precision trust units, subject to proration. The maximum amount of cash to be paid will be about $1.12 billion, and the maximum number of trust units to be issued will be about 42 million.

Other financing for the transaction will come from $400 of senior unsecured notes, which are backed by a commitment for a $400 million 12-month unsecured bridge loan. The bridge loan will be reduced by the amount of Grey Wolf's convertible securities that are not converted or redeemed at close.

Pro forma for the acquisition, Precision Drilling's senior leverage is 1.2 times and total leverage is 1.7 times. Equity will represent about 65% of the pro forma capital structure. On a pro forma basis for the 12 months ended June 30, combined revenue was $1.8 billion.

Completion is subject to Grey Wolf shareholder and customary regulatory approvals. The transaction is not subject to approval by Precision unitholders or financing.

In September, the Federal Trade Commission granted early termination of the Hart-Scott-Rodino waiting period in the proposed merger and the Grey Wolf special meeting of shareholders is scheduled for Dec. 9.

Precision is a Calgary, Alberta-based provider of high performance energy services to the oil and gas industry. Grey Wolf is a Houston-based provider of turnkey and contract oil and gas land drilling services.

Aquilex price talk

Aquilex came out with pricing guidance on its proposed credit facility as the deal is currently being talked to existing lenders, with plans for a broad syndication at a later time, according to a market source.

The $50 million term loan A is being talked at Libor plus 550 bps with an original issue discount of 95 and the $210 million term loan B is being talked at Libor plus 600 bps with an original issue discount of 94, the source said.

Both term loans have a 3% Libor floor.

RBC is the lead bank on the $310 million credit facility (Ba3/BB-), which also includes a $50 million revolver.

Previously, the deal was expected to be comprised of a $307 million first-lien term loan and a $50 million revolver, but the size and tranching was recently revised so as to improve the capital structure.

Aquilex using more mezzanine and equity

To make up for the $47 million in lost term loan funds that resulted from the change in structure, Aquilex will be getting additional mezzanine financing and equity for its buyout transaction.

The company is being purchase by Teachers' Private Capital from Harvest Partners, and the transaction is scheduled to close in December, subject to regulatory approvals.

Aquilex is an Atlanta-based provider of service, repair and overhaul services, and industrial cleaning services to the energy and power generation sectors.

Earthbound Farm fully circled

Also in the primary, Earthbound Farm's $135 million credit facility is currently oversubscribed and the lead bank is now working on finalizing pricing and giving out allocations, according to a market source.

Pricing is still being hashed out "because of the nature of some of the commitments" that were received, the source explained.

The anticipation is that pricing and allocations will firm up next week, the source added.

Earthbound Farm's facility consists of a $100 million term loan and a $35 million revolver.

Earlier on in syndication, the term loan was downsized from $150 million as a result of a decrease in the purchase price and an increase in the amount of mezzanine debt being used for the transaction.

RBC Capital Markets is the lead bank on the deal that will be used to fund the leveraged buyout of the company by Lindsey Goldberg.

Earthbound Farm is a San Juan Bautista, Calif.-based organic produce company.

GM, Ford rev higher

Switching to trading news, General Motors and Ford both saw their term loans gain some ground on Tuesday as there appeared to be some better buyers for the debt, according to a trader.

General Motors, a Detroit-based automotive manufacturer, saw its term loan quoted at 36½ bid, 38½ offered, up from 33 bid, 34 offered, the trader remarked.

And, Ford, a Dearborn, Mich.-based automaker, saw its term loan quoted at 37 bid, 39 offered, up from 33¼ bid, 34¼ offered, the trader continued.

"Read an article that if they take a government bridge loan, it would have to be senior, which means the bank debt would have to be repaid. I don't know if I believe that, but recovery, even if they file, is higher than where they're trading," the trader said in explanation of why the debt was stronger.

NRG Energy heads up

NRG Energy's strip of institutional bank debt was stronger on Tuesday, despite the company's board of directors once again coming out in opposition of Exelon's buyout proposal, according to a trader.

The company's term loan and letter-of-credit facility strip was quoted at 82½ bid, 85½ offered, up about two points on the day, the trader said.

Late Monday, NRG said that its board of directors voted unanimously again to reject Exelon's unsolicited proposal to exchange 0.485 of its shares for each share of NRG stock and recommended that stockholders not tender their shares into Exelon's offer.

On Nov. 12, Exelon launched its hostile takeover attempt of NRG after first approaching NRG with the proposal and getting turned down.

"The board of directors is unanimous in its belief that the Exelon offer is inadequate, dilutive, significantly undervalues NRG and does not fully reflect the underlying fundamental value of NRG's assets, operations and strategic plan, including our strong market position and future growth prospects," said Howard Cosgrove, chairman of NRG's board of directors, in a news release.

"The NRG board and management team believe that the company's standalone development plan will provide greater long-term value to our stockholders than Exelon's proposal. While NRG believes in consolidation, we are not advocates for pursuing scale for scale's sake. We have said before that we are a willing buyer or seller at the right price, utilizing a structure that makes sense. Exelon's proposal, however, achieves none of those criteria," Cosgrove added in the release.

NRG still pointing to financing as an issue

As before, another point of contention by NRG about Exelon's proposal is that the exchange offer may require refinancing of all or a significant amount of NRG's existing debt and Exelon has not yet publicly announced that it has committed financing for the offer.

When first announcing the purchase proposal, Exelon had said that the acquisition of NRG would create the largest power company in the United States, with sufficient financial and operating strength to address the nation's increasingly urgent energy needs.

Exelon pointed out that NRG is highly leveraged with over $8 billion of debt and a credit rating of Ba3/B+, and the hope was that the combination of the two companies would reduce the leverage associated with NRG's current business and enhance its credit rating - even though the proposal reduced Exelon's ratings.

NRG is a Princeton, N.J.-based owner and operator of diverse power generation portfolios and Exelon is a Chicago-based electric utility.

LCDX better, cash steady

LCDX 10 on Tuesday was noticeably stronger, while the cash market in general was unchanged to maybe up a point, depending on the name, according to a trader.

The trader went on to say that activity in cash was light as people are already taking off for the Thanksgiving holiday.

The index was quoted around 78.20 bid, 78.80 offered, up from Monday's levels of 77.25 bid, 77.75 offered, the trader said.

Equities, on the other hand, were mixed with Nasdaq down 7.29 points, or 0.50%, Dow Jones Industrial Average up 36.08 points, or 0.43%, S&P 500 up 5.58 points, or 0.66%, and NYSE up 61.60 points, or 1.16%.

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