Clear Channel to offer piece of B loan; Booz Allen may nix retail launch as deal oversubscribed

By Sara Rosenberg

New York, June 16 - Clear Channel Communications Inc. is expected to only launch a portion of its term loan B on Tuesday and talk is that the original issue discount could emerge in the low-90 context.

In other news, Booz Allen Hamilton Inc.'s U.S. Government Consulting Business could possibly choose not to launch its credit facility to retail investors as the pre-marketing stage as gone exceedingly well.

Market chatter is that Clear Channel will only offer about $3 billion to $4 billion of its $10.7 billion 71/2-year term loan B to investors at the Tuesday morning bank meeting that will officially launch the deal into syndication, according to sources.

One source added that although a specific dollar amount of how much of the B tranche will be offered will likely be announced at the launch, ultimately that amount will end up being driven by demand.

Furthermore, the rumor mill is that the original issue discount on the term loan B debt that is up for sale could materialize in the 90 to 91 region, sources continued.

Pricing on the term loan B is Libor plus 365 basis points with a step down to Libor plus 340 bps at less than 7:1 total leverage.

Clear Channel's roughly $16.77 billion senior secured credit facility also includes a $690 million six-year receivables-based revolver, a $1.425 billion six-year term loan A, a $2 billion six-year revolver (split into $1.85 billion in U.S. dollars and $150 million available in alternate currencies), a $705.6 million 71/2-year asset sale term loan C and a $1.25 billion 71/2-year delayed-draw term loan.

"I think it's just the B that will be offered but don't know for sure," one source remarked, and a second source agreed with that assumption.

The receivables-based revolver is initially priced at Libor plus 240 bps, but pricing can range from Libor plus 215 bps to 240 bps, depending on leverage. This tranche has a 37.5 bps commitment fee.

The term loan A and the revolver are initially priced at Libor plus 340 bps, but pricing can range from Libor plus 290 bps to 340 bps, depending on leverage. The revolver has a 50 bps commitment fee.

And, the term loan C and the delayed-draw term loan are priced at Libor plus 365 bps with a step down to Libor plus 340 bps at less than 7:1 total leverage. The delayed-draw term loan has a 182.5 bps commitment fee.

Based on filings with the Securities and Exchange Commission it was expected that the receivables-based revolver could be sized at $1 billion and that the term loan A could be sized at $1.115 billion. However, those filings did say that if availability under the receivables-based revolver is less than $750 million due to borrowing base limitations, the term loan A would be increased by the amount of such shortfall and the maximum availability under the receivables facility will be reduced by a corresponding amount.

Covenants under the facility include a maximum consolidated senior secured net debt to adjusted EBITDA ratio requirement.

Citigroup, Deutsche Bank and Morgan Stanley are the joint lead arrangers and bookrunners on the deal, with Citi the administrative agent, Deutsche and Morgan Stanley the syndication agents, and Credit Suisse, RBS and Wachovia the co-documentation agents.

Proceeds will be used to help fund the buyout of Clear Channel by Bain Capital Partners LLC and Thomas H. Lee Partners LP for $36.00 in cash or stock per share in a transaction valued at about $17.9 billion. The purchase price was lowered from $39.20 per share in connection with the settlement agreement.

Other financing is coming from $980 million of 10¾% senior unsecured notes, $1.33 billion of 11% cash pay/11¾% PIK senior unsecured toggle notes and equity.

The debt financing and the equity financing that will be used for the buyout have already been placed in escrow accounts as a result of a settlement reached between the company, the equity sponsors and the banks in connection with lawsuits, under which Clear Channel accused the banks of refusing to execute necessary documents in an effort to cause the buyout to collapse.

Of the total delayed-draw funds, $750 million can be used to purchase or repay Clear Channel's outstanding 7.65% senior notes due 2010 and the remainder will be available to purchase or repay Clear Channel's outstanding 4.25% senior notes due 2009.

The buyout of Clear Channel is expected to close by the end of the third quarter, subject to shareholder approval, which will be sought at a meeting on July 24.

Clear Channel is a San Antonio media and entertainment company specializing in "gone from home" entertainment and information services.

Booz could forego retail meeting

Booz Allen U.S. Government Business is mulling whether to hold a retail bank meeting for its $810 million credit facility being that enough early round investors piled into the deal to make a retail launch somewhat unnecessary, according to sources.

In fact, the credit facility is already oversubscribed just from the pre-marketing stage, sources remarked.

The deal consists of a $100 million revolver talked at Libor plus 400 bps, a $250 million term loan A talked at Libor plus 400 bps and a $460 million seven-year term loan B talked at Libor plus 475 bps.

The term loan A and the term loan B are both being guided with an original issue discount of 97, and the term loan B has a 3% Libor floor.

Based on how well the deal has been received, there is some speculation that pricing might come in; however, nothing concrete has emerged, sources added.

Proceeds from the credit facility will be used to help fund the buyout of the company by Carlyle Group for $2.54 billion.

Originally, the credit facility was targeted to launch to retail investors with a bank meeting on June 11, but that launch never ended up taking place.

Timing of the retail launch is tied up in the timing of the closing of the buyout, one source had previously told Prospect News in explanation of why the hoped for bank meeting did not take place. The buyout has to close at the end of a month, so it could either close at the end of June or at the end of July. It's hoped that the close won't go past July.

Bank of America, Credit Suisse and Lehman Brothers are the joint lead arrangers and joint bookrunners on the deal.

Other acquisition financing will come from $550 million of eight-year mezzanine debt.

Leverage through the bank deal will be around the low-3s and total leverage will be around the mid-5s.

The transaction is subject to shareholder and regulatory approvals and other customary closing conditions.

The U.S. government business, based in McLean, Va., has more than 18,000 employees in 80 offices worldwide, generating annual net revenues in excess of $2.7 billion.

Krotz widens OID

Krotz Springs increased the original issue discount on its $245 million six-year first-lien term loan (B1/B+) to 96 from 98, according to a syndicate document.

Pricing on the term loan was left unchanged at Libor plus 550 bps with a 3.25% Libor floor, the document added.

Krotz Springs' $720 million credit facility also includes a $50 million letter-of-credit facility (B1/B+) to support substantial hedging that is priced at Libor plus 550 bps and a $425 million ABL revolver.

Credit Suisse is arranging the term loan and letter-of-credit facility, and Wachovia provided the revolver commitment.

Proceeds will be used to help fund Alon USA Energy, Inc.'s acquisition of the Krotz refinery from Valero Energy Corp. for $333 million in cash plus an amount for working capital, including inventories, to be determined at closing. The equity contribution for the deal totals $105 million.

The credit facility is non-recourse to Alon.

There is a 100% cash flow sweep feature under the credit facility.

The revolver, which has a $75 million accordion feature, will be used to support working capital needs.

Alon said previously that it expects that the transaction will generate strong free cash flow that should enable substantial delevering of the debt within three years.

Total leverage at Krotz (opco debt) will be 0.9 times.

The transaction is expected to close during the latter portion of the second quarter or early in the third quarter, following satisfaction of customary conditions, including regulatory approvals.

Krotz Springs is an 85,000 barrel-per-day refinery located in Louisiana. Alon is a Dallas-based refiner and marketer of petroleum products.

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