Aeroflex, Cooper-Standard set talk; R.J. O'Brien tweaks deal; ComPsych breaks; Market weakness pressures autos

By Sara Rosenberg

New York, July 10 - Aeroflex Inc. and Cooper-Standard Automotive Inc. came out with price talk on their new deals as the transactions were launched to investors during the Tuesday session.

Also in the primary, R.J. O'Brien & Associates Inc. made some more changes to its credit facility, increasing pricing for a second time, revising the first-lien original issue discount and adding another year of call protection to the second-lien tranche.

Over in the secondary, ComPsych Investments Corp.'s credit facility freed up for trading, with the term loan quoted atop par, and general market softness took its toll on the auto sector, with names like Lear Corp., Ford Motor Co. and General Motors Co. all taking a dive.

Aeroflex held a bank meeting on Tuesday at 10 a.m. ET at the Waldorf in New York to kick off syndication on its proposed $560 million senior secured credit facility (B1/B+), and in connection with the launch, price talk on the transaction was announced, according to a market source.

Both the $500 million term loan and the $60 million revolver were presented to lenders with talk in the Libor plus 275 basis points area, the source said.

The credit agreement contains a total leverage covenant.

Originally, the deal was going to be covenant-light, but the syndicate decided to add the leverage test prior to Tuesday's meeting, which had been rescheduled from June 28.

Goldman Sachs is the lead bank on the deal, which will be used to help fund the buyout of the company by Veritas Capital for $1.1 billion. Stockholders will receive $14.50 per share in cash.

Other financing will come from $370 million of senior subordinated unsecured high-yield securities, according to filings with the Securities and Exchange Commission.

"It does appear that this should get done relatively unscathed on the loan side," a buyside source remarked.

"Of course there is no OID ... for now! The way things have been going though, this can change. But [the] credit story [is] much better than Dollar General, ServiceMaster, etc. Perhaps they have to go to L+300. We'll see.

"Should be interesting to see how they do on the high-yield side. Aeroflex will be the first LBO high-yield financing since the spate of pulled deals in late June. There is a limit to how many the banks want to be wearing," the buyside source added.

Based on pro forma adjusted EBITDA for the last 12 months ended March 31, senior secured leverage is 4.2 times and total leverage is 7.3 times. Net-of-cash leverage comes down 0.3 times on each.

Closing is subject to the approval of Aeroflex's stockholders and other customary conditions. A stockholder meeting to vote on the transaction is set to take place on July 26.

Aeroflex is a Plainview, N.Y., provider of high technology services to the aerospace, defense, cellular and broadband communications markets.

Cooper-Standard guidance emerges

Also on the pricing front, Cooper-Standard Automotive released talk of Libor plus 250 bps on its proposed €87 million term loan E as it held a conference call on Tuesday at 1 p.m. ET to launch the loan to lenders, according to a market source.

Deutsche Bank and Lehman Brothers are the lead banks on the deal.

Proceeds will be used to fund an acquisition of specific assets in Europe.

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

R.J. O'Brien reworks deal again

R.J. O'Brien & Associates made another round of modifications to its credit facility, this time flexing first- and second-lien term loan pricing higher once again, changing the first-lien original issue discount and making second-lien term loan call premiums juicier, according to a market source.

The $385 million seven-year first-lien term loan (B2/B-) is now being talked at Libor plus 300 bps, up from revised talk of Libor plus 275 bps and original talk at launch of Libor plus 250 bps, the source said.

In addition, the original issue discount on the first-lien term loan, which was added during syndication, was changed to 98.5 from 99, the source continued.

Meanwhile, the $150 million eight-year second-lien term loan (B3/CCC) is now being talked at Libor plus 675 bps, up from revised talk of Libor plus 650 bps and from original talk at launch of Libor plus 600 bps, the source remarked.

Furthermore, call premiums on the second-lien term loan were changed to 103 in year one, 102 in year two and 101 in year three, from just 102 in year one and 101 in year two.

The second-lien term loan is being issued at a discount of 99, a feature that was added the other week.

R.J. O'Brien's $585 million senior secured credit facility also includes a $50 million six-year revolver (B2/B-).

Other changes that were made to this transaction earlier on in the syndication process included the addition of a total leverage ratio to the first- and second-lien debt, the removal of the super-priority from the revolver and the elimination of the PIK toggle feature on the second-lien debt.

The total leverage covenant under the revolver and first-lien term loan opens at 9.25 times, with steps down by one turn annually starting Dec. 31, 2008 until 2011, when the test hits 5.0 times.

And, the total leverage covenant under the second-lien term loan is set a quarter of a turn back from the first-lien ratio, meaning it opens at 9.5 times.

Under the PIK option that was removed from the second-lien term loan, pricing would have stepped up by 75 bps if PIK were elected.

Lehman Brothers and Deutsche Bank are the joint lead arrangers on the deal.

Proceeds will be used to help fund the acquisition of the company by Spectrum Equity Investors and Technology Crossover Ventures. The O'Brien family will retain a substantial minority ownership in the company.

R.J. O'Brien is a Chicago-based futures brokerage firm.

ComPsych frees to trade

Moving to the secondary market, ComPsych Investments' credit facility broke for trading, with the $150 million term loan quoted at par bid, par ½ offered, according to a trader.

The term loan is priced at Libor plus 275 bps.

ComPsych's $160 million senior secured credit facility also includes a $10 million revolver.

UBS is the lead arranger on the deal, which will be used to repay existing debt and to pay a dividend to shareholders.

ComPsych is a Chicago-based provider of employee-assistance programs to companies, offering behavioral health, work-life, wellness and critical intervention services.

Autos fall with market softness

Also in trading, general weakness in the cash market was once again the prevalent trend, and as a result, the auto sector - including Lear, Ford and General Motors - took a noticeable hit, according to a trader.

Lear, a Southfield, Mich.-based supplier of automotive seating, electronics and electrical distribution systems, saw its term loan B end the day at 96¾ bid, 97¼ offered, down from 97 bid, 98 offered, the trader said.

Ford, a Dearborn, Mich.-based automaker, saw its term loan end the day at 99¼ bid, 99¾ offered, down from 99¾ bid, par 1/8 offered.

And, General Motors, a Detroit-based automaker, saw its term loan end the day at 99½ bid, par offered, down from 99 7/8 bid, par 3/8 offered, the trader continued.

"The cash market was down about another eighth to a quarter of a point, dependent on the names, so you saw autos come in," the trader explained. "Might have something to do with the coming Chrysler deal as well."

Chrysler Corp. LLC, a producer and seller of Chrysler, Dodge and Jeep vehicles, and Chrysler Financial Services LLC, a provider of financial services for vehicles in the NAFTA region, are currently in market with $20 billion in credit facilities, and rumor has it that investors aren't overly thrilled with the transactions, sources said.

Chrysler Corp.'s credit facility is a $12 billion deal that consists of a $10 billion first-lien term loan B (B1/B+/BB+) that is talked at Libor plus 325 bps and is non-callable for one year, then at 101 in year two, and a $2 billion second-lien term loan (Caa1/B-/BB+) that is talked at Libor plus 600 bps and is non-callable for one year, then at 103 in year two and 101 in year three.

Chrysler Financial's credit facility is an $8 billion deal that consists of a $2 billion ABL revolver (B1/BB-) that is talked at Libor plus 275 bps, a $4 billion first-lien term loan B (B1/BB-/BBB-) that is talked at Libor plus 275 bps, with 101 call protection for one year, and a $2 billion second-lien term loan (B2/CCC+/BB) that is talked at Libor plus 500 bps, with call protection of 102 in year one and 101 in year two.

JPMorgan, Goldman Sachs, Citigroup, Bear Stearns and Morgan Stanley are the lead banks on the deals, with JPMorgan the left lead. On the Chrysler Corp. deal, Goldman is listed second and Citi is third. On the Chrysler Financial deal, Citi is listed second and Goldman is third.

Proceeds are being used to fund the buyout of the companies by Cerberus from DaimlerChrysler AG.

LCDX falls

Once again, LCDX was lower on the day in reaction to the very soft secondary market, according to a trader.

The index went out at 96.30 bid, 96.40 offered, down from opening levels of 96.70 bid, 96.80 offered, and from Monday's closing levels of 97 bid, 97.10 offered, the trader said.

Freeport-McMoRan closes

Freeport-McMoRan Copper & Gold Inc. closed on its new $2.45 billion term loan A, according to a news release.

The term loan A is priced at Libor plus 125 bps.

Proceeds were used to repay the company's term loan B.

Freeport-McMoRan is a Phoenix-based copper, gold and molybdenum mining, exploration and production company.

Bicent closes

Bicent Power LLC, a new company formed by energy industry executive Paul Prager and Natural Gas Partners VIII, LP completed its acquisition of the domestic independent power production business unit of MDU Resources Group, Inc. in a transaction valued at $636 million, according to a news release.

To help fund the acquisition, Bicent got a new $610 million senior secured credit facility consisting of a $30 million revolver (Ba3/BB-), a $120 million letter-of-credit facility (Ba3/BB-), a $330 million first-lien term loan (Ba3/BB-) and a $130 million second-lien term loan (B1/B-).

Price talk on the first-lien debt was Libor plus 200 bps and price talk on the second-lien debt was Libor plus 400 bps.

Barclays Capital and Goldman Sachs acted as the lead banks on the deal, with Barclays the left lead on the first-lien debt and Goldman the left lead on the second-lien debt.

Bicent is an owner, operator and acquirer of coal-fired, natural gas-fired and wind power generation plants.

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