Reynolds, Petco float talk; Stolle, Service tweak deals; Ply Gem second lien fills out; Dura drops again

By Sara Rosenberg

New York, Sept. 26 - The Reynolds and Reynolds Co. started circulating price talk on its $2 billion plus credit facility and made some modifications to first-lien tranching as the transaction is getting ready for its Wednesday bank meeting, and Petco Animal Supplies Inc. released price talk on its term loan B as the deal launched during the Tuesday session.

Also in the primary, Stolle Machinery Co. LLC lowered pricing on its first-lien tranches, added a step down to its first-lien term loan B and moved some funds around, Service Corp. reverse flexed pricing on its unsecured term loan, and Ply Gem Industries Inc.'s second-lien term loan is already fully syndicated ahead of next week's actual launch due to early marketing.

Meanwhile, in the secondary Dura Automotive Systems Inc.'s second-lien bank debt gave up some more ground in trading Tuesday as investors continue to react negatively toward the credit.

Reynolds and Reynolds came out with some changes to first-lien tranche sizes and has begun floating spread guidance on its proposed multi-billion dollar credit facility as general syndication on the deal is slated to officially kick off with a bank meeting during Wednesday's market hours, according to a source.

With the new tranching structure, the revolver (BB-) is now sized at $75 million, as opposed to the previously expected size of $150 million, and the first-lien term loan (BB-) is now sized at $1.485 billion, as opposed to the previously expected size of $1.61 billion, the source said. Tranche sizes on the second-and third-lien term loans are unchanged from prior expectations.

The reason behind the first-lien downsizings is that the company decided to do an accounts receivable securitization, the source explained.

As for spread guidance, the first-lien term loan is being talked at Libor plus 275 basis points, the $520 million second-lien term loan (B) is being talked at Libor plus 550 basis points and the $405 million third-lien term loan (B-) is being talked at Libor plus 700 basis points, the source added.

Deutsche Bank, Credit Suisse and Bank of America are the lead banks on the $2.485 billion deal (down from $2.685 billion), with Deutsche the left lead.

Over the course of last week, the syndicate had started talking to big accounts on a one-on-one basis about the deal, and indications are that these conversations have elicited some positive feedback from these potential investors.

Proceeds from the credit facility will be used to help fund the company's merger with Universal Computer Systems Inc.

Under the agreement, Universal Computer is buying Reynolds for $40.00 per share in cash, with the surviving Dayton, Ohio-based dealer services company to be named The Reynolds and Reynolds Co. The transaction is valued at $2.8 billion, including the assumption of Reynolds' $300 million of debt.

Equity financing for the merger of up to $420 million will come primarily from a group of investors led by Goldman Sachs Capital Partners, Vista Equity Partners and others.

The transaction is subject to approval by Reynolds shareholders and regulatory clearances and is expected to close late this year or in early 2007.

Reynolds has scheduled a special meeting of shareholders for Oct. 23 to vote on the agreement.

The merger has already been granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 by the Federal Trade Commission.

Petco sets talk

Petco announced price talk of Libor plus 300 basis points on its proposed $650 million seven-year covenant-light term loan B (Ba3) as the deal was presented to lenders with a bank meeting on Tuesday, according to a market source.

The company's $850 million senior secured credit facility also includes a $180 million six-year last-in, first-out asset-based revolver talked at Libor plus 150 basis points and a $20 million six-year first-in, last-out asset-based revolver talked at Libor plus 250 basis points, the source said.

Price talk on the revolvers had previously been disclosed in various filings with the Securities and Exchange Commission.

In those filings, term loan B expected pricing was also outlined, but with Tuesday's meeting, that originally anticipated pricing proved to be slightly off the mark as the filings had it at Libor plus 250 bps, subject to an increase to Libor plus 275 bps if certain rating requirements are not met.

Credit Suisse, Bank of America and Wells Fargo are the lead banks on the deal, with Credit Suisse the left lead.

Proceeds will be used to help fund the leveraged buyout of Petco by Leonard Green & Partners, LP and Texas Pacific Group.

In addition, GS Mezzanine has agreed to purchase $500 million of newly issued eight-year 10½% senior subordinated notes.

Leonard Green has provided an equity commitment for $350 million and Texas Pacific Group has provided an equity commitment for $415 million to help fund the deal as well.

Under the LBO agreement, the sponsors will purchase Petco for $29.00 per share in cash. The total value of the transaction, including assumed debt, is $1.8 billion.

The transaction, which is expected to close by the fourth quarter, is subject to approval by stockholders, as well as other customary closing conditions, including the receipt of regulatory approvals.

In August, the company received early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.

Petco is a San Diego-based specialty retailer of premium pet food, supplies and services.

Stolle fine tunes deal

Stolle Machinery made some changes to its in-market $200 million credit facility, including reducing pricing on its revolver and first-lien term loan B, adding a step down to the term loan B, and shifting $10 million out of its second-lien term loan and into its first-lien B loan, according to a market source.

Under the changes, the $25 million five-year revolver (Ba3/BB-) is priced with an interest rate of Libor plus 250 basis points, down 25 basis points from original talk at launch of Libor plus 275 basis points, the source said. This tranche carries a 50 basis point commitment fee.

The six-year first-lien term loan B (Ba3/BB-) is also now priced with an interest rate of Libor plus 250 basis points, down from original talk at launch of Libor plus 275 basis points, and, the size of this tranche was increased to $125 million from $115 million, the source continued.

In addition, the first-lien term loan B now includes a step down under which pricing can drop to Libor plus 225 basis points at 4.0 times total leverage.

Lastly, the seven-year second-lien term loan (Caa1/B) is now sized at $50 million, down from an original size of $60 million, the source said.

Pricing on the second-lien loan will be flexed down from original talk at launch of Libor plus 675 basis points, but the new margin is still to be determined, the source added.

The second-lien loan carries call premiums of 102 in year one and 101 in year two.

When the deal was first launched around mid-September, it was said to have sparked some positive buzz and early interest as investors were impressed that the company has over an 85% market share in its business.

Goldman Sachs and Credit Suisse are joint lead arrangers on the deal that will be used to help fund the leveraged buyout of Stolle by Littlejohn & Co.

Stolle is a Denver-based producer of capital equipment, spare parts and services for the rigid packaging industry.

Service trims term loan spread

Service Corp. lowered pricing on its $150 million senior unsecured term loan to Libor plus 200 basis points from original talk at launch of Libor plus 250 basis points, according to a market source.

The company's $450 million credit facility also includes a $300 million revolver.

JPMorgan is the lead bank on the deal that will be used to help fund the acquisition of Alderwoods Group Inc. for $20.00 per share in cash. The transaction is valued at $856 million.

Houston-based Service Corp. is a leading provider of funeral and cemetery services. Cincinnati-based Alderwoods is the second largest operator of funeral homes and cemeteries.

Ply Gem second-lien subscribed

Ply Gem's proposed $117 million new second-lien term loan tranche is already done in terms of syndication, even though the actual bank meeting to launch the deal isn't scheduled to take place until Oct. 3, as investors jumped on the transaction during an early marketing stage, according to a source.

Furthermore, based on this strong market reception toward the second lien, it is now expected that pricing on the tranche will end up lower than the current talk of Libor plus 675 basis points, the source said.

Proceeds from the second-lien loan, along with a $175 million add-on to the company's first-lien term loan that will also launch on Oct. 3, will be used to help fund the acquisition of Alcoa Home Exteriors, Inc. from Alcoa Inc. in a cash transaction valued at about $305 million.

The first-lien term loan add-on, which hasn't been marketed early, is being talked at Libor plus 300 basis points, the source said.

UBS, Deutsche Bank and JPMorgan are the lead banks on the $292 million of new term loan debt, with UBS the left lead.

Completion of the transaction, which is expected to occur in the fourth quarter, is subject to customary closing conditions.

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. Alcoa Home Exteriors is a manufacturer of vinyl siding, aluminum siding, injection molded shutters and vinyl, aluminum and injection molded accessories.

Insight Midwest flex rumored

Market talk is that Insight Midwest's $1.725 billion term loan B may end up needing to flex up to Libor plus 225 basis points from current price talk of Libor plus 200 basis points before the deal is done, according to various sources.

No official change to pricing has been announced as of yet, sources added.

The company's $2.575 billion credit facility (Ba3/BB-) also includes a $350 million revolver and a $500 million term loan A that are being talked at Libor plus 150 basis points.

Bank of America and JPMorgan are the lead banks on the deal that will be used to refinance existing debt, including the company's 10½% senior notes due Nov. 1, 2010 and a portion of its 9¾% senior notes due Oct. 1, 2009.

Insight Midwest is a subsidiary of Insight Communications Co. Inc., a New York-based cable television system operator.

Renfro ups pricing, adds OID

Renfro Corp. increased pricing on its $145 million term loan B (B2/B) to Libor plus 325 basis points from original talk of Libor plus 300 basis points, added an original issue discount of 99½ and added one-year of 101 soft call protection, according to a fund manager.

Of the total term loan B amount, $35 million is delayed draw for 18 months. This delayed-draw piece will carry an unused fee of 100 basis points initially that will then step up every six months.

Bear Stearns is the lead bank on the term loan B.

Renfro's $205 million credit facility also includes a $60 million ABL revolver that is being led by Wachovia.

Proceeds from the credit facility, along with about $57 million in equity, will be used to help fund Kelso & Co.'s leveraged buyout of the company.

Total leverage will be inside of 4 times.

Renfro is a Mt. Airy, N.C., manufacturer of socks for the Fruit of the Loom, Fit First, Vassarette, Ducks Unlimited and Odor-Eaters brands, among others.

Dura freefall continues

Switching to trading, Dura Automotive's second-lien loan was softer again on Tuesday with no credit specific news seen pushing the paper lower, according to a trader.

The second-lien debt closed the day quoted at 87½ bid, 88½ offered, down from Monday's closing levels of 89 bid, 91 offered, the trader said.

Dura's bank debt has been sliding lower on a fairly steady basis ever since rumors emerged that a potential bankruptcy filing may be in the company's future and that it is having a hard time lining up debtor-in-possession financing on favorable terms.

Other factors that have been affecting the paper have been the overall negative feeling toward the auto sector in general lately.

Dura is a Rochester Hills, Mich.-based automotive parts maker.

Charter trades up

Charter Communications Inc.'s term loan B was slightly stronger during Tuesday's market hours on market technicals, according to a trader.

The term loan B closed the day at par ½ bid, par 7/8 offered, up from prior levels of par 3/8 bid, par ¾ offered, the trader said.

Charter is a St. Louis-based broadband communications company.

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