Language Line decreases B tranche by $50 million, adds $55 million holdco bond piece

By Sara Rosenberg and Paul A. Harris

New York, June 2 - Language Line Inc. reduced the size of its proposed term loan B to $285 million from $335 million, bringing the total credit facility (B2/B) size down to $325 million, and increased the size of its proposed bond offering by the equivalent amount, according to a market source.

The $40 million revolver was left unchanged.

In terms of the bond financing, basically the company added a $55 million mezzanine tranche of nine-year senior discount notes at the holding company level, which are non-callable for four years, and decreased the offering of eight-year senior subordinated notes, which are non-callable for four years, to $165 million from $170 million.

The operating company bonds are talked at 11½% to 11¾%. The holding company bonds are talked at 275-300 basis points behind the senior subordinated notes. Pricing is expected Thursday.

Meanwhile price talk on the credit facility is not being revealed until after the bonds price, the source said.

Merrill Lynch and Bank of America are the lead banks on the credit facility, with Merrill listed on the left for the transaction.

Proceeds from the credit facility and the bonds will be used to fund Abry Partners LLC's acquisition of Language Line from Providence Equity Partners.

Language Line is a Monterey, Calif., provider of over-the-phone interpretation services.

Directed Electronics repriced

Directed Electronics Inc. reduced the size of its proposed credit facility to $136 million from $156 million through the reduction of its proposed six-year term loan B to $111 million from $131 million. Furthermore, the company increased pricing on the proposed term loan B to Libor plus 425 basis points from Libor plus 400 basis points, according to a syndicate document.

The $25 million five-year revolver with an interest rate of Libor plus 350 basis points was left unchanged in size and pricing.

Wachovia and CIBC are the lead banks on the deal.

Proceeds will be used to fund a dividend payment to TriVest Partners and repay some junior notes.

Directed Electronics is a Vista, Calif., vehicle security, remote start and car audio manufacturer.

Pegasus active on DirecTV offer

Pegasus Media & Communications Inc.'s term loan D traded actively on Wednesday following news that the company received notice from the National Rural Telecommunications Cooperative (NRTC) terminating Pegasus Satellite Television's exclusive distribution arrangements, which provide exclusive rights to distribute DirecTV services in specified U.S. rural territories.

DirecTV has made a cash offer to Pegasus - payable in either a lump sum or monthly payments - if Pegasus agrees to an orderly transfer of its subscribers to DirecTV that is completed before Aug. 31.

The tranche D was quoted at 99¼ bid, 99¾ offered, basically unchanged on the day when compared to the 99¼ bid, par ¼ offered level where the paper went out on Tuesday, according to a trader.

"[This] offer on the table would imply par recovery for all the bank debt," the trader added.

Pegasus Satellite Communications Inc.'s bank debt, however, was not seen quoted in the secondary, with the trader explaining the term loan D was active since it is more liquid than the Satellite debt.

On Wednesday, DirecTV and NRTC announced that they have agreed to end the NRTC's exclusive DirecTV service distribution contract with Pegasus effective immediately. The NRTC and DirecTV have further agreed to enter into a new relationship that will provide NRTC members an opportunity to continue to participate as non-exclusive DirecTV retailers and service providers.

"We believe that terminating the NRTC's exclusive distribution agreement is in the best interest of consumers and all parties involved," said Steve Cox, executive vice president, sales, distribution and business development, DirecTV Inc., in a company news release. "With the settlement of the disputes with the NRTC and its members last year by mutual agreement and the subsequent successful conclusion of DirecTV's litigation with NRTC affiliate Pegasus, the time was right for the NRTC and DirecTV to reach this new agreement.

"Management of both the NRTC and DirecTV recognized that creating an artificial divide between rural America and the rest of the country for distribution of some DirecTV services made the DirecTV service less competitive with other multichannel video providers," Cox continued in the release. "Furthermore, we have seen the number of subscribers to DirecTV services in territories covered by the NRTC agreement steadily decline - primarily in Pegasus territories - in the last few years. We believe the termination of the old distribution arrangement will allow DirecTV and NRTC to reverse this trend and compete more effectively in rural America. This can only be beneficial to consumers."

"We are still evaluating the notice purporting to terminate our agreements and a related cash offer, which we received this morning with no prior notification," said Ted S. Lodge, president and chief operating officer of Pegasus Satellite Television, in a company news release responding to DirecTV's and NRTC's actions. "We categorically reject DirecTV's and NRTC's assertion that they can terminate our agreements, and intend to vigorously protect our rights. We believe the strong arm tactics demonstrated by these actions today further evidence both the true value of our assets and the very strong desire of DirecTV and NRTC to take value away from our stakeholders."

However after the market close, Pegasus did file for Chapter 11, bearing out the bankruptcy concerns that had been floating around for about two weeks.

Bankruptcy worries started due to a court case involving DirecTV, in which DirecTV won a judgment of $51.5 million against Pegasus, plus interest - money Pegasus says it does not have. Furthermore, DirecTV later said that judge Lourdes Baird of the U.S. District Court for the Central District of California had entered a judgment in favor of DirecTV Inc. against Pegasus Satellite Television Inc. and Golden Sky Systems Inc. (Pegasus) of $62.6 million, which includes prejudgment interest. DirecTV is also entitled to recover its legal costs.

Pegasus is a Bala Cynwyd, Pa., diversified media and communications company.

GECC signs on to Vutek

General Electric Capital Corp., a lender on Vutek's existing facility, signed up as administrative agent on Vutek's $140 million credit facility (B1/B+) right before the well-attended bank meeting kicked off on Wednesday morning, according to a market source. Goldman Sachs is the lead bank on the deal.

The facility consists of a $125 million term loan with price talk in the Libor plus 325 to 350 basis points context and a $15 million revolver.

The term loan is being offered to investors at par.

Proceeds will be used to refinance existing debt.

Senior and total leverage is 3.6x and interest coverage is 5.7x, the source said, adding that the company also generates high free cash flow since it only requires about $1 million of capital expenditures per year.

Vutek is a Meredith, N.H., digital inkjet printing technology company.

Handful of deals launch

In addition to Vutek, the primary bank loan market saw a number of deals launch on Wednesday, including FairPoint Communications Inc., Iasis Healthcare Corp. and Alliance Laundry Systems LLC.

FairPoint Communications held a bank meeting for a proposed $450 million credit facility (B2) consisting of a $100 million revolver and a $350 million term loan.

Deutsche, CIBC and Citigroup are the lead banks on the deal, with Deutsche listed on the left.

The facility is being obtained in connection with the initial public offering of the company's Income Deposit Securities (IDS).

Proceeds from the term loan, combined with proceeds from the $750 million IDS offering, will be used to repay all outstanding loans under the existing credit facility and to fund the repurchase all outstanding senior notes and senior subordinated notes.

More specifically, $817.3 million will be used to repay existing debt, $113.2 million will be used to repurchase series A preferred stock, $10.5 million will be used as a cash reserve for discontinued operations and $159 million will be used for other purposes.

In addition, in connection with the IDS offering, the company expects to issue about $361.4 million principal amount of senior subordinated notes to the public and its existing equityholders.

FairPoint is a Charlotte, N.C., provider of telecommunications services.

Iasis held a bank meeting for its proposed $675 million credit facility (B1/B+) consisting of a $425 million term loan B and a $250 million revolver.

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

Proceeds will be used to help fund the acquisition of Iasis by an investor group led by Texas Pacific Group from JLL Partners in a transaction valued at about $1.4 billion.

The company is also expected to approach the high-yield market in June with a new bond offering as part of the LBO, subject to market conditions.

The LBO is subject to regulatory approvals, financing and other customary closing conditions and is expected to close by June 30.

In connection with the LBO, Iasis began a cash tender offer and consent solicitation for any and all of its $230 million principal amount of 13% senior subordinated notes due 2009 and its $100 million principal amount of 8½% senior subordinated notes due 2009. The offer is scheduled to expire at midnight ET on June 3.

As of May 19, the company had received the required consents to amend the indentures governing its 13% senior subordinated notes and its 8½% senior subordinated notes, and holders of $226.5 million principal amount of the outstanding 13% notes and $100 million of the outstanding 8½% notes delivered valid tenders.

The refinancing of Iasis' credit facility and the receipt of financing are all conditions to the company's newly announced tender offer.

Iasis is a Franklin, Tenn., owner and operator of medium-sized acute care hospitals.

Alliance Laundry Systems LLC held a bank meeting for its proposed $160 million credit facility (B2/B) consisting of a $50 million revolver with an interest rate of Libor plus 375 basis points and a $110 million term loan B with an interest rate of Libor plus 375 basis points.

CIBC World Markets Corp. and Lehman Brothers Inc. are joint lead arrangers and joint book managers on the deal, with CIBC listed on the left.

Like FairPoint, this loan is also being obtained in connection with an IDS offering.

Proceeds from the credit facility, combined with proceeds from the IDS sale and a proposed notes offering, will be used to redeem the company's 9 5/8% notes in a tender offer and consent solicitation, repay all borrowings under the company's existing credit facility, repay its junior notes, redeem the mandatorily redeemable preferred membership interests in Alliance Laundry Systems held by affiliates of Trust Co. of the West and affiliates of Sankaty Advisors, fund working capital, and buy back the company's equity investors' remaining equity interests.

Alliance Laundry is a Ripon, Wis., manufacturer of commercial laundry products.

BWAY next week

A bank meeting for BWAY Corp.'s credit facility is expected to take place next week, according to an informed source, although the total size of the deal is still not being disclosed since details on the term loan are still fluid.

In addition to the term loan, the credit facility will contain a $30 million revolver that is expected to be undrawn at closing.

Deutsche Bank and JPMorgan are joint lead arrangers on the deal, with Deutsche listed on the left.

Proceeds from the term loan will be used, along with a $30 million equity contribution, to help fund the acquisition of North America Packaging Corp. (Nampac) and to repay borrowings under the company's existing $90 million credit agreement.

The acquisition is expected to close within about 30 days.

BWAY is paying $210 million for Nampac, subject to adjustments for the redemption of preferred stock, repayment of debt and working capital.

On a pro forma basis for the Nampac acquisition, leverage as of the second fiscal quarter ended April 4 would be 4.7x.

Considering management estimates of initial synergies resulting from the Nampac acquisition, pro forma leverage as of the second fiscal quarter that ended April 4 would be 4.5x, according to a company news release.

BWAY is an Atlanta manufacturer of steel and plastic containers. Nampac is a Raleigh, N.C., producer of general line rigid plastic containers.

Conseco price talk

Conseco Inc.'s $800 million term loan, which is scheduled to launch Thursday, is talked at Libor plus 350 basis points, according to a market source. Bank of America is the sole lead bank on the deal.

Proceeds will be used to refinance existing bank debt.

As of March 31 the company had about $1.3 billion of outstanding bank debt consisting of a $1 billion term loan A and a $300 million term loan B. As of Sept. 30 the term A carried an interest rate of Libor plus 525 basis points with a 2% Libor floor and the term B carried an interest rate of Libor plus 725 basis points with a 2.25% Libor floor.

However, on May 6, the company priced public offerings of 44 million shares of common stock at an offering price of $18.25 per share and 24 million shares of our 5.5% class B mandatorily convertible preferred stock at an offering price of $25 per share. Of the proceeds received from the offerings, Conseco planned on repaying about $400 million of bank debt.

Conseco is a Carmel, Ind., provider of supplemental health insurance, life insurance and annuities.

CKE closes

CKE Restaurants Inc. closed on its $380 million senior secured credit facility (B1/B) consisting of a $150 million three-year revolver with an interest rate of Libor plus 275 basis points and a $230 million six-year term loan with an interest rate of Libor plus 300 basis points.

BNP Paribas is the lead arranger and administrative agent for the deal.

Originally, the credit facility was structured as a $320 million first lien term loan talked at Libor plus 275 to 300 basis points and a $60 million second lien term loan talked at Libor plus 475 to 500 basis points. However, due to massive oversubscription they restructured the deal, collapsing the second lien tranche into the first.

Proceeds from the term loan will be used to prepay the company's 9.125% senior subordinated notes. The revolver will be used for general working capital purposes and also includes an $85 million letter-of-credit sub-facility to support the company's casualty insurance programs.

"The prepayment of our subordinated notes will provide approximately $7 million of interest savings during the first year and allows for future debt repayment without incurring additional prepayment penalties," said Ted Abajian, executive vice president and chief financial officer, in a company news release.

CKE is a Santa Barbara, Calif., owner and operator of quick-service restaurants.

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