Prodigy sets talk; NCO revises spread guidance; Merrill firms pricing; Dresser breaks

By Sara Rosenberg

New York, Oct. 31 - Prodigy Health Group, Inc. released pricing guidance on its credit facility as the deal launched during Tuesday's session, and NCO Group Inc. moved price talk higher on its term loan B, with some already anticipating that the spread will end up at the wide end of the new range.

In other primary news, Merrill Corp. firmed up pricing on its second-lien term loan at the high end of original talk.

On the secondary front, Dresser Inc.'s credit facility freed for trading with the term loan B quoted in the upper par's.

Prodigy Health announced opening price talk levels on its proposed $250 million credit facility shortly after the company held a bank meeting on Wednesday to kick off syndication on the transaction, according to a market source.

The $20 million five-year revolver (B2/B+) and the $155 million six-year term loan B (B2/B+) are both being talked at Libor plus 325 basis points, and the $75 million seven-year second-lien term loan (Caa1/B-) is being talked at Libor plus 700 bps, the source said.

The second-lien loan contains call protection of 102 in year one and 101 in year two, the source added.

Goldman Sachs is the lead bank on the deal that will be used to fund an acquisition and refinance existing debt.

Prodigy is a Westport, Conn., health care services company.

NCO ups price talk

NCO Group changed the price talk on its $465 million seven-year term loan B to the Libor plus 275 to 300 bps context from original talk at launch of Libor plus 250 bps, according to a market source.

And, the expectation among some market participants is that Libor plus 300 bps will most likely end up being the final pricing on the loan, a second source remarked.

NCO's $565 million senior secured credit facility (Ba3/B+) also includes a $100 million five-year revolver with a 50 bps unused fee. Sources have said that the revolver price talk of Libor plus 250 bps has not undergone any changes as of yet.

Of the total revolver amount, $75 million is committed and $25 million is subject to syndication.

The credit facility has a $100 million accordion feature.

Morgan Stanley and JPMorgan are the lead banks on the deal.

Proceeds from the credit facility will be used to help fund the acquisition of NCO by its chairman and chief executive officer, Michael J. Barrist, in partnership with One Equity Partners II LP, for $27.50 per share in cash. The transaction is valued at $1.26 billion.

Other acquisition financing will come from $365 million of senior subordinated bonds divided into $165 million of seven-year senior floating-rate notes and $200 million of eight-year senior subordinated fixed-rate notes, and up to $368.2 million of equity from One Equity Partners.

The roadshow for the notes began on Tuesday, with pricing expected to occur mid-to-late next week.

NCO is a Horsham, Pa., provider of business process outsourcing services.

Merrill sets pricing

Merrill has firmed up pricing on its $200 million second-lien term loan (B3/B-) at Libor plus 650 bps, the wide end of original talk of Libor plus 600 to 650 bps, according to a market source.

Syndication on the transaction is expected to wrap up on Wednesday, the source added.

Call premiums on the second-lien loan are 102 in year one and 101 in year two.

Credit Suisse and Deutsche Bank are the lead banks on the deal that will be used to fund a dividend payment, with Credit Suisse the left lead.

Merrill is a St. Paul, Minn., provider of electronic and paper document and information management services.

Dresser frees to trade

Meanwhile, in trading news, Dresser's credit facility hit the secondary with its $785 million six-year term loan B quoted at par 5/8 bid, par 7/8 offered, according to traders.

The term loan B is priced at Libor plus 275 bps with a step down to Libor plus 250 bps once 2005 audited financials are filed and a further step down to Libor plus 225 bps if Ba3/BB- ratings are achieved. During syndication, pricing on the term loan B was reverse flexed from original talk at launch of Libor plus 300 bps with the addition of the two step downs.

Dresser's $935 million senior secured credit facility (B1/B), which closed on Tuesday as well, also includes a $150 million six-year revolver priced at Libor plus 250 bps. During syndication, the revolver was upsized from $100 million as a $50 million synthetic letter-of-credit facility that was being talked at Libor plus 300 bps was removed from the capital structure.

Morgan Stanley and Credit Suisse acted as the lead banks on the deal.

Proceeds from the term loan were used to refinance the company's $70 million of borrowings under its senior secured credit facility, $125 million of borrowings under its senior unsecured term loan and the $550 million principal amount of its 9 3/8% senior subordinated notes.

The revolver is available for general corporate purposes and to support letter-of-credit obligations. At close, the revolver was undrawn.

Dresser is a Dallas-based provider of engineered equipment and services for the energy industry.

UAL softens

UAL Corp.'s term loan B was a touch weaker on Tuesday despite the release of seemingly positive third-quarter numbers, according to a trader.

The term loan B closed the day at 101¼ bid, 101¾ offered, down fro previous levels of 101½ bid, 102 offered, the trader said.

For the third quarter, the company reported after-tax net income of $190 million, an improvement of $95 million on a year-over-year basis, basic earnings per share of $1.62, diluted earnings per share of $1.30 and total revenues of $5.2 billion compared with $4.7 billion in the third quarter of 2005.

UAL is an Elk Grove Township, Ill., airline.

Kodak rises

Eastman Kodak Co.'s term loan B, on the other hand, headed higher after the company released third-quarter results that showed an improvement from last year, according to a trader.

The term loan B closed the day at par ¼ bid, par ½ offered, up from par 1/8 bid, par 3/8 offered, the trader said.

For the quarter, the company reported a third-quarter net loss of $37 million, or $0.13 per share, compared with a net loss of $914 million, or $3.18 per share, in 2005. The difference is largely driven by the inclusion in last year's third quarter of a $778 million, or $2.71 per share, non-cash charge to record a valuation allowance against the net deferred tax assets in the United States.

Sales in the third quarter totaled $3.204 billion, a decrease of 10% from $3.553 billion in the third quarter of 2005.

Kodak is a Rochester, N.Y.-based digital imaging products, services and solutions company.

Owens Corning closes

Owens Corning emerged from Chapter 11 bankruptcy on Tuesday, according to a company news release.

As part of the exit plan, the company got a new $1.6 billion five-year exit financing credit facility (Baa3/BBB-) consisting of a $600 million term loan and a $1 billion revolver, with both tranches priced at Libor plus 75 bps.

During syndication, the term loan was downsized from $1.4 billion as the company completed a $1.2 billion bond offering.

Citigroup and Bank of America acted as the lead banks on the deal for the Toledo, Ohio, building materials company.

Ply Gem closes

Ply Gem Industries, Inc. closed on its $292 million of incremental bank debt, according to a company news release.

The new debt is comprised of a $187 million five-year first-lien term loan add-on (Ba3/BB-) at Libor plus 300 bps with a step down to Libor plus 275 bps at less than 4.5x leverage and a $105 million five-year second-lien term loan (B3/B+) at Libor plus 575 bps with call protection of 102 in year one and 101 in year two.

During syndication, the first-lien term loan was upsized from $175 million while the second-lien term loan was downsized from $117 million. In addition, the pricing step down was added to the first-lien term loan and pricing on the second-lien was reverse flexed from original talk at launch of Libor plus 675 bps.

UBS, Deutsche Bank and JPMorgan acted as the lead banks on the deal, with UBS the left lead.

Proceeds were used to help fund the acquisition of Alcoa Home Exteriors, Inc. from Alcoa Inc. in a cash transaction valued at about $305 million.

Ply Gem is a Kearney, Mo., manufacturer and marketer of products for use in the residential new construction, do-it-yourself and professional renovation markets.

Crawford closes

Crawford & Co. completed its acquisition of Broadspire Services Inc. from Platinum Equity for $150 million, according to a company news release.

To help fund the transaction, Crawford got a new $310 million credit facility (B1/BB-) consisting of a $100 million revolver priced at Libor plus 225 bps and a $210 million term loan B priced at Libor plus 250 bps.

During syndication, the revolver was upsized from $50 million, the term loan was downsized from $235 million with pricing flexing up from original talk of Libor plus 225 bps, and a $25 million synthetic letter-of-credit facility was removed from the capital structure.

SunTrust acted as the lead bank on the deal.

Crawford is an Atlanta-based provider of claims management solutions.

Michaels closes

Bain Capital and The Blackstone Group completed their leveraged buyout of Michaels Stores Inc. for $44.00 per share in cash, representing a transaction value of more than $6 billion, according to a news release.

To help fund the transaction, Michaels got a new $3.4 billion senior secured credit facility consisting of a $2.4 billion term loan (B2/B-) priced at Libor plus 300 bps and a $1 billion asset-based revolver.

The term loan pricing can be reduced by 25 bps if total leverage is less than 5.5 times and/or reduced by 25 bps if Moody's upgrades the transaction to B1 or better. These step downs were added to the deal during syndication.

Deutsche Bank, JPMorgan, Bank of America and Credit Suisse acted the lead banks on the facility.

Michaels Stores is an Irving, Texas, specialty retailer of arts, crafts, framing, floral, wall decor and seasonal merchandise for the hobbyist and do-it-yourself home decorator.

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