Precision Drilling breaks; Rite Aid up with numbers; Cooper-Standard tweaks amendment

By Sara Rosenberg

New York, Dec. 18 - Precision Drilling Trust's credit facility allocated and freed up for trading on Thursday, with the term loan B tranches quoted above their original issue discount levels in light volume.

Also in trading, Rite Aid Corp.'s term loan headed higher as the company's earnings yielded some positive results, and the cash market and LCDX 10 were better despite stocks being down.

In other news, Cooper-Standard Automotive Inc. added an amendment fee to its proposal that would allow for the repurchase of term loan debt, and revised the minimum buyback amount and the timeline in which the repurchases can be made.

Precision Drilling frees to trade

Precision Drilling's credit facility hit the secondary market on Thursday afternoon, with the term loan B-1 and the term loan B-2 both seen above the discount prices at which they were sold to investors during syndication, according to a trader.

The $325 million 53/4-year term loan B-1 was quoted at 80½ bid, 82½ offered, and the $75 million 53/4-year term loan B-2 was quoted at 85½ bid, 87½ offered, the trader said.

The term loan B-1 is priced at Libor plus 600 basis points with a 3.25% Libor floor and was sold at an original issue discount of 80, and the term loan B-2 is priced at Libor plus 800 bps with a 3.25% Libor floor and was sold at an original issue discount of 85.

During syndication, the term loan B-2 was carved out of what was originally going to be a single $400 million term loan B tranche, pricing on the term loan B-1 was increased from Libor plus 500 bps with discount guidance in the 86 area, and pricing on the term loan B-2 was increased from Libor plus 725 bps.

When the term loan B-2 was first announced, the size was up in their air, with the estimation being that it would be in the range of $75 million to $100 million.

The term loan B-2 was done for certain CLO investors that couldn't get involved in the deal at a discount of 80.

Precision deal also includes pro rata

In addition to the term loan B debt, Precision Drilling's $1.2 billion senior secured credit facility (Ba1/BBB-) also contains a $400 million five-year revolver and a $400 million five-year term loan A.

Pricing on the pro rata tranches is Libor plus 400 bps, in line with original talk.

Covenants under the credit facility includes a minimum interest coverage ratio of 3.0 times, a minimum fixed-charge coverage ratio of 1.0 times in 2009 through 2010 and 1.05 times thereafter, and a maximum total leverage ratio of 3.0 times.

During syndication, some adjustments were made to the terms of the credit agreement including, among other things, the amortization and the excess cash flow sweep.

Under the changes, amortization on the $400 million 53/4-year term loan B was increased to 5% per year from the previously proposed 1% per year.

The excess cash flow sweep was increased to 75% when the company's consolidated leverage ratio is greater than 2.0 times, 50% when leverage is greater 1.25 times, 25% when leverage is greater than 0.75 times, and 0% when leverage is less than 0.75 times.

Also, limitations were placed on cash distributions, including that the company must be in compliance with all financial covenants, including the fixed-charge ratio, which picks up distributions.

And, a capital expenditures restriction was added, limiting expansion capital expenditures to a level of 50% above the base case projections before consideration of the excess EBITDA adjustment, the source added.

Precision less than two times leveraged

At the close of this transaction, which is expected to take place on Dec. 23, Precision Drilling's total senior secured debt will be 1.12 times, total debt will be 1.67 times and total capitalization will be 4.09 times.

RBC Capital Markets and Deutsche Bank are the joint lead arrangers and bookrunners on the credit facility, with RBC the administrative agent and left lead, Deutsche the syndication agent, and HSBC and TD Securities the co-documentation agents.

Proceeds from the 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 million 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.

Completion is still subject to Grey Wolf shareholder approval. The Grey Wolf special meeting of shareholders is scheduled for Dec. 23 after being pushed out from an original date of Dec. 9 because of a clarifying amendment that was made to the acquisition agreement.

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.

Rite Aid rises

Rite Aid's term loan gained some ground during the trading session as the company's third-quarter numbers showed an increase in EBITDA and the company "said they're going to be cash flow positive," a trader told Prospect News.

The term loan was quoted at 55 bid, 59 offered, up three points from previous levels, the trader remarked.

For the fiscal third quarter ended Nov. 29, adjusted EBITDA improved 8.5% on year-over-year basis to $252 million, or 3.9% of revenues, from $232.3 million, or 3.6% of revenues, last year.

The company reported a net loss of $243.1 million, or $0.30 per diluted share, for the quarter, compared to last year's third quarter net loss of $84.8 million, or $0.12 per diluted share. Contributing to the loss was a significant increase in non-cash charges, which more than offset the positive impact of a $44.7 million reduction in integration expense and a $19.7 million increase in adjusted EBITDA year over year.

Revenues for the quarter were $6.47 billion versus revenues of $6.5 billion in the comparable period last year.

"With the Brooks Eckerd integration complete, our team has been totally focused on delivering profitable sales and taking unnecessary costs out of the business, and it showed," said Mary Sammons, chairman and chief executive officer, in a news release.

"Same store sales were up, with pharmacy sales in core Rite Aid stores especially strong despite an industrywide slowdown in prescription growth. Our gross profit rate improved, and our cost savings initiatives intensified in the quarter. Improving operational efficiency is a top priority, and we expect to see even greater benefits from these initiatives going forward," Sammons added in the release.

Rite Aid revises some guidance

Also on Thursday, Rite Aid lowered its fiscal 2009 same store sales guidance and increased its expected net loss, while confirming its total sales and adjusted EBITDA estimates - as a result of current sales trends, a weaker economy, the closing of underperforming stores and planned expense reductions.

Same store sales are now expected to improve 0.5% to 1.5% over fiscal 2008 as compared to previous guidance of a 1.5% to 3% increase.

Net loss for fiscal 2009 is now expected to be between $593 million and $773 million, or a loss per diluted share of $0.74 to $0.95, compared to previous guidance of $445 million to $535 million, or a loss per diluted share of $0.56 to $0.67.

Meanwhile, total sales for the year are still expected to be between $26 billion and $26.5 billion.

And, adjusted EBITDA is still expected to be between $950 million and $1.025 billion for fiscal 2009.

Rite Aid is a Camp Hill, Pa.-based operator of a chain of retail drugstores.

Cash, LCDX strengthen

The cash market in general and LCDX 10 were both higher on the day even though equities were not, according to a trader.

The cash market was up around one to two points as better buyers stepped in, and the index was quoted around 76.70 bid, 77.10 offered, the trader said, up from 75.70 bid, 76.10 offered.

Nasdaq closed down 26.94 points, or 1.71%, Dow Jones Industrial Average closed down 219.35 points, or 2.49%, S&P 500 closed down 19.14 points, or 2.12%, and NYSE closed down 152.04 points, or 2.64%.

Cooper-Standard revises amendment

In more loan happenings, Cooper-Standard Automotive decided to modify its amendment proposal by adding a 5 bps amendment fee, changing the minimum size per buyback and shortening the timeframe in which the repurchases can be made, according to a market source.

The amendment is seeking lender consent for the repurchase of some term loan debt by the company at levels below par.

Under the changes, there is a minimum size per buyback of $25 million, as opposed to $10 million as was originally proposed.

Also, the company now only has 18 months for the repurchases instead of two years, the source added.

The maximum total amount of term loan debt that can be bought back was left unchanged at $150 million.

Deutsche Bank is leading the amendment process.

Cooper-Standard is a Novi, Mich., manufacturer and marketer of systems and components for the global automotive industry.

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