Dynegy, NANA break for trading; NRG, DaVita weaken with market; Avis price talk surfaces

By Sara Rosenberg

New York, Aug. 4 - Dynegy Inc.'s new senior secured term loans freed up on Thursday, with both the GasCo and the CoalCo debt quoted a little higher than their original issue discount prices on the open, but then they succumbed to the overall negativity in the market and moved lower to wrap around their issue prices.

Also in trading, NANA Development Corp.'s first-lien term loan made its way into the secondary, and NRG Energy Inc. and DaVita Inc. saw levels on their term loan Bs soften despite releasing what appeared to be favorable quarterly earnings results, also because of the general market heaviness.

"Not a lot of weight being given to normal positives today," a trader told Prospect News, explaining that the whole market was under pressure as stocks tanked. "A lot of guys have good earnings. They're down".

Over in the primary, Avis Budget Group Inc. released price talk on its credit facility as the deal was launched to lenders, and Insight Pharmaceuticals Corp. raised pricing and discount on its first-lien debt.

Furthermore, VCA Antech Inc.'s term loan A add-on is oversubscribed and its concurrent amendment and repricing is expected to be approved based on the positive feedback already received.

Dynegy starts trading

Dynegy's new senior secured term loans hit the secondary market on Thursday, with the $1.1. billion five-year GasCo term loan and the $600 million five-year CoalCo term loan quoted at 98¼ bid, 98¾ offered on the break and then moving to 97 7/8 bid, 98 3/8 offered, according to traders.

Pricing on both term loans is Libor plus 775 basis points with a 1.5% Libor floor, and the loans old at an original issue discount of 98. They are non-callable for two years, then at 102 in year three and 101 in year four.

During syndication, the GasCo term loan was downsized from $1.3 billion, the CoalCo loan was upsized from $400 million and maturities on both were shortened from six years. Also, pricing on GasCo was increased from Libor plus 650 bps, the discount widened from 99, and call premiums were sweetened from 103 in year one, 102 in year two and 101 in year three. Pricing on CoalCo came in line with talk.

Credit Suisse Securities (USA) LLC and Goldman Sachs & Co. are the leads on the deal.

Dynegy refinancing debt

Proceeds from the GasCo loan will be used to repay Dynegy Holdings Inc.'s existing senior secured credit facility, repay existing debt relating to Sithe Energies Inc., make a distribution and fund cash collateralized letters of credit and cash collateral for existing collateral requirements.

The distribution, sized at $400 million, is being split into $200 million from GasCo and $200 million from CoalCo, as opposed to the entire amount coming from GasCo. Additionally, the CoalCo loan will be used to fund cash collateralized letters of credit and cash collateral for existing collateral requirements and for general working capital and general corporate purposes.

GasCo and CoalCo are being created through a reorganization. GasCo will be a subsidiary that owns eight primarily natural gas-fired intermediate and peaking power generation facilities, and CoalCo will be a subsidiary that owns six primarily coal-fired baseload power generation facilities.

Dynegy is a Houston-based producer and seller of electric energy, capacity and ancillary services.

NANA Development breaks

NANA Development's $175 million first-lien term loan (Ba3/BB) also freed up, with one source seeing it at 98¼ bid, 99¼ offered.

Pricing on the loan is Libor plus 500 bps with a 1.5% Libor floor, and it was sold at an original issue discount of 98. There is call protection of 103 in year one, 102 in year two and 101 in year.

During syndication, the first-lien term loan was downsized from $435 million as a $260 million second-lien term loan (B3/B+) was added to the capital structure, pricing firmed at the low end of talk of Libor plus 500 bps to 550 bps, the discount widened from 99 and call protection was sweetened from just 101 soft call for one year.

Pricing on the second-lien term loan is in the low-12% area and it is non-callable for one year, then at 103 in year two and 101 in year three.

NANA getting revolver

NANA Development's $520 million credit facility also includes an $85 million five-year ABL revolving credit facility that is being held by Bank of America Merrill Lynch.

Goldman Sachs & Co. is the lead bank on the term loans.

Proceeds will be used to refinance the company's existing credit facility and to fund the acquisition of Grand Isle Shipyard Inc., a Galliano, La.-based service provider for the oil and gas industry.

NANA Development is an Anchorage-based provider of engineering and construction, resource development, facilities management and logistics, real estate and hotel development, and information technology and telecommunications services.

NRG Energy retreats

NRG Energy's term loan B headed lower in trading despite the release of positive numbers, with one trader quoting it at 99 1/8 bid, 99 5/8 offered, down from 99 7/8 bid, par offered, a second trader seeing it at 98¾ bid, 99¼ offered, down from 99½ bid, par offered, and a third trader quoting it at 99 3/8 bid, par offered, versus 99 5/8 bid, par offered.

For the second quarter, the Princeton, N.J.-based power generation company reported net income of $621 million, or $2.53 per diluted common share, compared to net income of $210 million, or $0.81 per diluted common share, last year.

Total operating revenues were $2.278 billion, compared to $2.133 billion in the second quarter of 2010.

Meanwhile, adjusted EBITDA for the quarter was down on a year-over-year basis, moving to $517 million from $693 million.

NRG revises guidance

Also, NRG Energy updated its full-year 2011 guidance to reflect that its Reliant retail business has continued to benefit from favorable conditions, raising the full-year adjusted EBITDA estimate to a range of $1.9 billion to $2 billion versus prior guidance of $1.75 billion to $1.95 billion.

Additionally, the company modified cash flow guidance as a result of its recent first-lien refinancing effort and current collateral needs supporting commercial operations.

The company now expects cash flow from operations of between $1.275 billion to $1.375 billion, compared to prior expectations of $1.25 billion to $1.45 billion.

And, free cash flow for the year is anticipated in the range of $425 million to $525 million, compared to earlier estimates of $450 million to $650 million.

NRG CFO resigns

NRG Energy announced separately on Thursday that its chief financial officer, Christian S. Schade, is leaving the company in early September to return to the health care industry as executive vice president and chief financial officer of Omthera Pharmaceuticals Inc., a privately held emerging specialty pharmaceuticals company.

A new chief financial officer is expected to be named in the near future "who will continue the work already done in progress on our capital structure and adhere to our corporate commitment to prudent balance sheet management," said David Crane, president and chief executive officer, in the release.

As was previously reported, NRG recently completed a refinancing of $3.9 billion of first-lien debt by getting a new $2.3 billion revolver and $1.6 billion term loan B and refinanced 2016 senior notes. Over the coming months, the company will look to complete the simplification of its capital structure by refinancing its 2017 senior notes.

DaVita B loan dips

DaVita was another company to put out earnings that showed year-over-year improvements, but its term loan dropped to 99½ bid, par offered, from 99 7/8 bid, par 3/8 offered, according to traders. The loss was not as great as those seen in other names, one trader remarked, adding that he thought the overall market was probably done around a point.

For the second quarter, DaVita had net income of $100 million, or $1.03 per share, compared to net income of $107.9 million, or $1.04 per share, last year.

Net operating revenues for the quarter were $1.71 billion versus $1.59 billion in the prior year.

And, operating cash flow for the rolling 12 months ended June 30 was $816 million, compared to $204 million last year, while free cash flow was $518 million versus $125 million in the 2010 quarter.

DaVita raises outlook

In addition, DaVita announced that it increased its operating income guidance for 2011 to be in the range of $1.08 billion to $1.12 billion, excluding a non-cash goodwill impairment charge recorded in the second quarter, compared to previous guidance that was in the range of $1.04 billion to $1.1 billion.

Operating cash flow guidance for the year was revised to $900 million to $980 million versus prior guidance of $840 million to $940 million.

The company also raised its operating income guidance for 2012 to be in the range of $1.2 billion to $1.3 billion, compared to previous expectations of $1.1 billion to $1.2 billion.

DaVita is a Denver-based provider of dialysis services.

Avis talk emerges

Switching to the primary, Avis Budget Group held a bank meeting on Thursday afternoon to launch its proposed $900 million in incremental senior secured credit facility debt (BB), and with the event, price talk was announced, according to a market source.

The $200 million term loan A and $300 million revolver add-on are talked at Libor plus 300 bps, subject to a ratings based grid, with no Libor floor. These tranches are being sold as a strip in a 1:1 ratio.

As for the $400 million term loan B, that is being talked at Libor plus 350 bps with a 1.25% Libor floor, an original issue discount of 99 and 101 soft call protection for one year, the source continued.

Morgan Stanley & Co. Inc., Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., Scotia Capital (USA) Inc. and RBS Securities Inc. are the lead banks on the deal and are asking for commitments by Aug. 18.

Avis funding acquisition

Proceeds from Avis Group's new bank debt will be used to help fund the acquisition of Avis Europe plc for 3.15 pounds in cash per share. The transaction is valued at 635 million pounds, or about $1 billion.

Closing is expected to take place in October, subject to Avis Europe shareholder approval, court approval and regulatory clearances.

In order to complete the transaction, Avis has to amend its existing credit facility to allow for the acquisition. The amendment also increased the consolidated leverage ratio by 0.50 for periods subsequent to Sept. 30, increased the maximum amount of incremental facilities by $385 million and provided additional flexibility under the debt, lien and investment covenants.

Parsippany, N.J.-based Avis Budget and England-based Avis Europe are vehicle rental companies.

Insight Pharma flexes

Insight Pharmaceuticals lifted pricing on its $20 million revolver and $290 million first-lien term loan to Libor plus 550 bps from talk of Libor plus 500 bps and moved the original issue discount to 98½ from 99, while leaving the 1.5% Libor floor unchanged, according to a market source.

Furthermore, 101 soft call protection for one year was added to the term loan, the source said.

The company's $420 million credit facility also includes a $110 million second-lien term loan that is talked at Libor plus 900 bps with a 1.5% Libor floor and an original issue discount of 98½ and has call protection of 103 in year one, 102 in year two and 101 in year three.

GE Capital Markets, SunTrust Robinson Humphrey Inc. and RBC Capital Markets LLC are the lead banks on the deal that will be used for acquisition financing.

Insight, a Langhorne, Pa.-based marketer and distributor of branded over-the-counter pharmaceutical products, will have first-lien leverage of 3.5 times and leverage through the second-lien of 4.9 times

VCA Antech well-met

VCA Antech's $100 million increase to its term loan A is well oversubscribed and its amendment and repricing process has good momentum, with the anticipation being that the 100% consent rate needed will be obtained, according to a market source.

Through this transaction, the new term loan A and the existing $500 million term loan A, as well as the existing $100 million revolver, will be priced at Libor plus 175 bps. By comparison, the existing debt is currently priced at Libor plus 225 bps.

Wells Fargo Securities LLC and Bank of America Merrill Lynch are the lead banks on the deal (Ba2) and are hoping to wrap up the amendment/syndication process in the next week or so, the source remarked.

VCA purchasing MediMedia

Proceeds from VCA Antech's add-on will be used to help fund the acquisition of MediMedia Animal Health LLC from MediMedia USA Inc. for $146 million in cash.

Closing is expected between August and early September, subject to the expiration or termination of the waiting period under the Hart-Scott Rodino Antitrust Improvements Act and customary conditions.

VCA Antech is a Los Angeles-based animal health care company. MediMedia is a Yardley, Pa.-based provider of online communications, professional education and marketing services to the veterinary community.

Academy Sports buyout closes

In other news, Kohlberg Kravis Roberts & Co. completed its acquisition of Academy Sports + Outdoors, a Katy, Texas-based chain of sporting goods and outdoor stores, according to a news release.

To help fund the transaction, Academy Sports got a new $1.49 billion credit facility, consisting of a $650 million asset-based revolver and an $840 million covenant-light term loan (B2/B).

Pricing on the term loan is Libor plus 450 bps with a 1.5% Libor floor, and it was sold at an original issue discount of 99. There is 101 soft call protection for one year.

During syndication, pricing on the term loan was reduced from talk of Libor plus 475 bps to 500 bps, and the discount moved from 981/2.

Morgan Stanley & Co. Inc., Credit Suisse Securities (USA) LLC, Barclays Capital Inc., Goldman Sachs & Co., Mizuho Securities USA Inc. and KKR Financial led the term loan and are all involved in the revolver too, but J.P. Morgan Securities LLC was the left lead on that asset-based tranche.

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