Harland Clarke up on amendment; SLS breaks; Pep Boys falls short, buyout in question

By Sara Rosenberg

New York, May 1 - Harland Clarke Holdings Corp.'s term loan jumped higher in trading on Tuesday as the company launched an amendment and extension proposal, Chrysler Group LLC's term loan inched up with positive monthly sales results, and SLS Las Vegas' term loan freed up.

In more loan happenings, the buyout of Pep Boys - Manny, Moe & Jack may have hit a snag, as rumors are circulating that the buyer may be looking to get out of the deal as a result of poor first-quarter numbers, and if that happens, the company's proposed credit facility would not happen.

Also on the primary front, Brickman Group Ltd. and Compass Minerals International Inc. released price talk as their transactions were launched during the session, and Arch Coal Inc. announced plans for a new covenant-light term loan.

Harland Clarke rises

Harland Clarke's term loan was better in the secondary market with news of a proposed amendment and extension that launched with a call on Tuesday, according to a trader.

The term loan was quoted at 96 bid, 98 offered, up from 95½ bid, 96½ offered, the trader said.

Under the amend and extend, the company is looking to push out the maturity on $1 billion of its $1.719 billion senior secured term loan by three years to June 2017. The minimum term loan extension is 50%.

Pricing on the extended term loan is talked at Libor plus 525 basis points with no Libor floor, compared to non-extended pricing of Libor plus 250 bps, and lenders are being offered a 5 bps amendment fee as well as a 20 bps extension fee.

Consents are due on May 7.

Harland Clarke plans paydown

As part of the amendment offer, Harland Clarke is planning $300 million of senior secured notes and will use proceeds from the offering to repay 30% of the extended term loan borrowings

In order to sell the notes, the company needs to amend its existing credit agreement to allow for the new debt. Also, the amendment will permit future term loan and revolver extensions, provide room for a new incremental facility to refinance the non-extended term loan and revise restricted payments, the acquisitions basket and the EBITDA definition.

Credit Suisse Securities (USA) LLC is the lead bank on the deal.

The company had tried an extension last year, but it was pulled due to insufficient interest. At that time, lenders were offered an extended term loan due June 2017 at pricing of Libor plus 425 bps.

Harland Clarke is a San Antonio, Texas-based provider of integrated payment, marketing and security services and retail products.

Chrysler revs higher

Chrysler's term loan saw an improvement in trading levels as the company released April sales numbers that showed a 20% increase on a year-over-year basis, according to one trader.

The term loan was quoted at 101 7/8 bid, 102 1/8 offered, up from 101¾ bid, 102 offered, the trader said. However, a second trader had the debt only up on the offer side, putting levels at 101 7/8 bid, 102¼ offered, versus 101 7/8 bid, 102 1/8 offered on Monday.

For the month of April, Chrysler had U.S. sales of 141,165 units, compared to 117,225 units in the comparable 2011 period.

The results included total car sales of 49,603, up 37% from 36,075 last year, and total truck sales of 91,562, up 13% from 81,150 in the prior year.

Chrysler is an Auburn Hills, Mich.-based automotive company.

SLS starts trading

Also in the secondary, SLS Las Vegas' $300 million five-year term loan B (B2/B-) began being quoted, with levels seen at 97½ bid, 98½ offered, according to a trader.

Pricing on the loan is Libor plus 1,100 bps with a 2% Libor floor, and it was sold at an original issue discount of 95. The debt is non-callable for three years, then at 106 in year four and 103 in year five.

During syndication, pricing was increased from Libor plus 850 bps, the discount widened from 98 and call protection was revised from non-callable for two years, then at 102 in year three and 101 in year four.

J.P. Morgan Securities LLC led the deal that is being used to fund the renovation of the SLS Las Vegas (formerly the Sahara Hotel and Casino). Closing on the loan was announced on Tuesday.

SLS Las Vegas is a Las Vegas-based hotel and casino operator.

BWIC surfaces

A $322 million Bid Wanted in Competition was announced on Tuesday, and bids are being sought after by 11 a.m. ET on Wednesday, according to a trader.

The portfolio includes over 100 names, including Cengage Learning, Cinemark USA, Davita Inc., Fairpoint Communications, Harland Clarke, HCA, J. Crew Group, Las Vegas Sands, Pinnacle Foods, Realogy, Sensata Technologies, Supervalu, VNU International and West Corp., the trader added.

Pep Boys buyout uncertain

Some investors are worried that the purchase of Pep Boys by Gores Group may not go through as the company reported disappointing earnings and said in an 8-K filing that Gores is looking into whether those results constitute a material adverse effect or a violation of covenants contained in the merger agreement, sources said.

The filing went on to say that Gores is continuing its review of Pep Boys to determine the root causes of the downturn and to determine its course of action with respect to the buyout.

A few months ago, Gores had agreed to buy Pep Boys for $15 per share in cash, with the transaction having a total enterprise value of about $1 billion.

To fund the buyout, the company said it would get $489 million in equity and an $875 million senior secured facility, comprised of a $325 million asset-based revolver, a $425 million first-lien term loan and a $125 million second-lien term loan. Credit Suisse Securities (USA) LLC and Barclays Capital Inc. are leading the term loans, and Wells Fargo Securities LLC and Barclays are leading the revolver.

Pep Boys results

For the first quarter, Pep Boys preliminary results include net income that is expected between zero and $2 million, or zero to $0.04 per share, compared to net income of $12.4 million, or $0.23 per share, in the first quarter of 2011.

Sales for the quarter are expected between $524 million to $526 million, versus sales of $513.5 million last year.

And operating income for the quarter is expected between $7 million and $9 million, compared to $26.3 million in the prior year.

Pep Boys is a Philadelphia-based automotive aftermarket chain.

Brickman talk emerges

In other news, Brickman Group launched with a call on Tuesday its $539 million term loan, which includes a proposed $12.3 million incremental loan, and with the launch, price talk was announced, according to market sources.

The debt is talked at Libor plus 425 bps with a 1.25% Libor floor and an original issue discount of 99½ to 99¾ and includes 101 soft call protection for one year, sources said.

Proceeds will be used to reprice an existing $526.7 million term loan B from Libor plus 550 bps with a 1.75% Libor floor, fund the 101 paydown price to existing B loan lenders and pay for fees and expenses associated with the repricing.

When done in 2011, the existing term loan B was sold at an original issue discount of 99.

Lead banks, Barclays Capital Inc. and Bank of America Merrill Lynch, are seeking commitments by May 9.

Brickman is a Gaithersburg, Md.-based commercial landscaping company.

Compass Minerals guidance

Also launching was Compass Minerals' $150 million term loan that is being talked at Libor plus 175 bps, according to a market source.

J.P. Morgan Securities LLC is the lead bank on the deal that will be used to refinance existing term loan borrowings.

Compass Minerals is an Overland Park, Kan.-based producer and marketer of inorganic mineral products.

Arch Coal coming soon

Arch Coal joined this week's calendar, setting a bank meeting for Thursday to launch a $1 billion covenant-light term loan that will have an at least five-year maturity, according to market sources.

Bank of America Merrill Lynch, PNC Capital Markets LLC, Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, Union Bank of California, RBS Securities Inc. and BMO Capital Markets Corp. are the lead banks on the deal.

Proceeds will be used to fund the tender offer that expires on May 29 for $450 million of 6¾% senior notes due 2013 at Arch Western Finance LLC, repay revolver debt and provide additional liquidity.

The company has already reached an agreement on an amendment to its existing senior secured revolver to allow for the new term loan. Also, the amendment will reduce borrowing capacity to $1 billion in exchange for relief from certain financial covenants over the next two years.

Arch Coal is a St Louis-based coal producer and marketer.

Physiotherapy closes

The buyout of Physiotherapy Associates by Court Square Capital Partners from Water Street Healthcare Partners and Wind Point Partners has been completed, according to a news release.

To help fund the transaction, the company got a new $125 million credit facility (Ba2/BB-) that consists of a $100 million six-year term loan B and a $25 million five-year revolver, both priced at Libor plus 475 bps with a 1.25% Libor floor. The debt was sold at an original issue discount of 98.

During syndication, the coupon was reduced from Libor plus 500 bps and the floor tightened from 1.5%.

Jefferies & Co., GE Capital Markets and RBC Capital Markets LLC led the deal.

Physiotherapy Associates is an Exton, Pa.-based provider of outpatient rehabilitation services.

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