Movie Gallery B loan trades up on rumors; El Pollo Loco adds pricing step down

By Sara Rosenberg

New York, June 5 - In an otherwise illiquid and quiet secondary loan market, Movie Gallery Inc. saw its term loan B levels rise as rumors about potential paydowns and acquisition potential floated around the marketplace.

Meanwhile, in the primary, El Pollo Loco Holdings Inc. added a step down in pricing to its term loan tranche that becomes effective once the company meets a specified leverage test.

Movie Gallery's term loan B felt stronger during Monday's session as a number of rumors swirled through the market, ranging from the company potentially being an acquisition target to new non-bank debt financing being worked on that would result in a paydown, according to traders.

"I heard they might be doing real estate financing that could potentially pay down the banks," one trader remarked.

Others, heard the acquisition buzz but said that it was all speculation and chatter at this point.

The term loan B closed the day quoted at 97½ bid, 98½ offered by one trader and a little tighter at 97½ bid, 98 offered by a second trader. By comparison, on Friday, the term loan was quoted at 97 bid, 97½ offered, the second trader added.

In addition, the Dothan, Ala.-based movie rental company's stock took quite a jump, closing out the day up by $1.01, or 17.27%, at $6.86, on a day when the NYSE closed down 159.72 points and the Dow Jones Industrial Average closed down 199.15 points.

El Pollo adds step

El Pollo Loco added a step down in pricing to its term loan B tranche and is now looking for recommitments from lenders by Tuesday, according to a market source.

The $175 million seven-year term loan B, which is priced with an interest rate of Libor plus 225 basis points, now has the ability to step down to Libor plus 200 basis points when leverage falls to 31/2x, the source said.

Even though recommits are due shortly, it is unclear when the deal may allocate since there is an initial public offering of common stock involved in this transaction, the source added.

El Pollo's $200 million credit facility (B1/B+) also contains a $25 million six-year revolver with an interest rate of Libor plus 225 basis points.

Merrill Lynch, Bank of America and Goldman Sachs are the lead banks on the deal, with Merrill Lynch the left lead.

Proceeds from the new term loan will be used to fund the redemption of the company's 14½% senior discount notes due 2014 and its 11¾% senior notes due 2013 and to fund the repayment of its existing senior secured credit facility.

Revolver borrowings will be available for working capital and general corporate purposes.

Successful consummation of the new credit facility, note repurchases and the IPO are all conditioned upon each other.

El Pollo Loco is an Irvine, Calif., quick-service restaurant chain specializing in Mexican-style chicken dishes.

Mark IV tweaks deal

Mark IV Industries Inc. made some changes to its in-market term loan debt, including shifting some funds from the second-lien term loan into the first-lien term loan, firming up pricing on the first-lien term loan at the low end of talk and reverse flexing pricing on the second-lien term loan, according to a market source.

The first-lien institutional term loan (B1/BB) due June 2011 is now sized at $749 million, up from $729 million, and pricing firmed up at Libor plus 250 basis points, the tight end of original Libor plus 250 to 275 basis point guidance, the source said.

Meanwhile, the 51/2-year second-lien term loan (B3/BB-) is now sized at $150 million, down from an original size of $170 million, and pricing was reduced to Libor plus 575 basis points for original talk at launch of Libor plus 600 to 625 basis points, the source continued.

Following the changes, basically everybody has already recommitted to the deal, the source added.

Allocations on the transaction are expected to go out this week, with closing targeted for next week.

The first-lien term loan debt includes about $145 million of incremental debt and the repricing of about $604 million of existing first-lien debt. Before the deal was launched, the company was thinking of just doing an add-on to its first-lien loan at existing pricing of Libor plus 300 basis points, but when it actually came to market, the plan was changed to include rolling the existing first-lien debt into a new term loan with lower pricing.

The second-lien term loan contains soft call protection of 102 in year one and 101 in year two on voluntary prepayments.

Bear Stearns, JPMorgan and Credit Suisse are joint lead arrangers and joint bookrunners on the deal, with Bear Stearns administrative agent on the second-lien loan and JPMorgan administrative agent on the term loan B add-on.

Proceeds from the incremental term loan debt will be used to fund a tender offer and consent solicitation for the company's $250 million of 7½% senior subordinated notes due 2007, which expires on June 13.

The company's existing $150 million revolver and euro term loan are remaining in place as is.

Mark IV is an Amherst, N.Y., maker of engineered systems and components for transportation infrastructure, vehicles and equipment.

MD Beauty upsizes

MD Beauty Inc. upsized its credit facility by $31.5 million through increases to the first- and second-lien term loan tranches, according to a market source.

The first-lien term loan (B1/B-) is now sized at $248.5 million, up from an original size of $237 million, and the second-lien term loan (B3/CCC) is now sized at $166 million, up from an original size of $146 million, the source said.

Pricing on the first-lien term loan remained at Libor plus 275 basis points and pricing on the second-lien term loan remained at Libor plus 700 basis points, the source added.

MD Beauty's now $439.5 million credit facility also includes a $25 million revolver (B1/B-) with an interest rate of Libor plus 275 basis points.

BNP Paribas is the lead bank on the deal.

Proceeds will be used to refinance the company's existing credit facility and to fund a dividend payment.

MD Beauty is a San Francisco-based personal care company.

Constellation Brands closes

Constellation Brands Inc. completed its acquisition of Vincor International for C$36.50 per share, according to a company news release.

To help fund the purchase, Constellation got a new $3.5 billion credit facility (Ba2/BB) consisting of a $2.3 billion term loan B with an interest rate of Libor plus 150 basis points, a $500 million revolver with an interest rate of Libor plus 125 basis points and a $700 million term loan A with an interest rate of Libor plus 125 basis points.

JPMorgan acted as the lead bank on the deal.

Constellation is a Fairport, N.Y., producer and marketer of beverage alcohol brands. Vincor is a Mississauga, Ont., wine company.

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