Calpine dips after rejecting NRG bid; FTD timing emerges; Booz nets interest; Learning Care sets talk

By Sara Rosenberg

New York, May 30 - Calpine Corp.'s term loan inched lower during a relatively quiet trading session on Friday as the company said that it would not be taking NRG Energy Inc. up on its buyout proposal.

Over in primary happenings, FTD Group Inc. firmed up timing on the launch of its proposed credit facility, Booz Allen Hamilton Inc.'s U.S. Government Consulting Business' credit facility is sparking some interest from accounts who are being given an early look at the deal, and Learning Care Group came out with price talk on its credit facility ahead of its Tuesday bank meeting.

Calpine's term loan weakened in trading following news that the company rejected NRG's acquisition proposal because it's too low, according to a trader.

The term loan was quoted at 96¾ bid, 97¼ offered, down fro 97 bid, 97½ offered, the trader said.

Meanwhile, NRG's strip of institutional bank debt was unchanged on the news at 96 bid, 96½ offered, the trader remarked.

"Even though they rejected the offer, they still sort of left the door open whether it be with a higher bid or whatever the case may be," the trader added.

On Friday morning, Calpine announced that after thoroughly reviewing the proposal from NRG, it was unanimously decided by the company's board of directors and financial and legal advisors to reject the merger.

"NRG's proposal is inadequate and materially undervalues the company's unique asset portfolio and future prospects," Calpine said in a news release.

However, Calpine's advisors have been authorized to contact NRG to figure out whether there is a basis for discussions between the two companies to explore a business combination.

Under the recent NRG proposal, NRG offered to purchase all of Houston-based Calpine's outstanding capital stock in an all stock transaction. The proposed fixed exchange ratio was 0.534 NRG shares, which represented about $23 per Calpine share as of May 14.

NRG said that the combined company would be a more than 45,000 MW, $38 billion enterprise value, $20 billion market cap company with four highly coherent regions of at least 8 GW each.

Princeton, N.J.-based NRG also said that the merger would have reduced the leverage of the combined company, significantly enhancing consolidated credit metrics.

As part of the proposal, NRG was willing to contribute $2.5 billion in current liquidity and more than 10 major counterparties in its first-lien structure.

UAL, US Airways hold steady

Also in trading, UAL Corp. and US Airways Group Inc. both saw their term loans hold firm on Friday despite chatter that the merger talks between the two companies have come to an end, according to a trader.

UAL's term loan B was quoted at 77 bid, 78 ½ offered, basically unchanged from 77 bid, 78 offered on Thursday, the trader said.

And, US Airways' term loan was quoted at 68½ bid, 70 offered, also unchanged on the day, the trader continued.

"That's sort of been talked about for a while," the trader said regarding the end of the merger talks, adding that the news was probably already priced in to the loans.

UAL is a Chicago-based provider of air transportation services. US Airways is a Tempe, Ariz.-based airline company.

FTD launch date surfaces

Switching to primary news, FTD nailed down timing on the launch of its proposed $450 million credit facility with the scheduling of a bank meeting for June 11 in New York, according to a market source.

Previously the deal was labeled as June business, with the target being that it would come earlier in the month rather than later.

The facility consists of a $75 million five-year revolver, which is expected to be undrawn at close, a $175 million five-year term loan A and a $200 million six-year term loan B, with price talk on all tranches still to be determined, the source said.

Financial covenants include a leverage ratio, a fixed-charge coverage ratio and a maximum capital expenditures requirement.

Wells Fargo is the lead arranger, bookrunner and administrative agent on the deal that will be used to help fund United Online Inc.'s acquisition of FTD for $7.34 in cash, 0.4087 of a share of United Online common stock and $3.31 principal amount of United Online 13% senior secured notes due 2013 per share.

The total consideration to FTD stockholders will be about $456 million, consisting of $222 million in cash, 12.35 million shares of United Online stock and $100 million aggregate principal amount of notes.

The remaining purchase price consists of repayment of FTD debt and expenses incurred in connection with the transaction.

If United Online raises an additional $100 million in debt financing, which could come in the form of senior secured debt, mezzanine financing, as well as in various other forms, it may replace the senior notes with additional cash consideration, in which case FTD stockholders will receive a total of $10.15 in cash and 0.4087 of a share of United Online stock per share.

In that situation, the total consideration to FTD stockholders will be about $440 million, consisting of $307 million in cash and 12.34 million shares of United Online stock.

Pro forma leverage is 1.9 times, based on total debt to pro forma combined reported United Online adjusted OIBDA and FTD adjusted EBITDA for the 12 months ended Dec. 31.

Following the close, FTD will continue to operate as a wholly owned subsidiary of United Online from FTD's existing facilities, including its U.S. headquarters in Downers Grove, Ill., and its international headquarters in the United Kingdom.

FTD is a provider of floral related products and services. United Online is a Woodland Hills, Calif., provider of consumer internet and media services.

Booz Allen gets good feedback

Booz Allen Hamilton Inc.'s U.S. Government Consulting Business's proposed $810 million credit facility already seems to have strong momentum just from the lenders that are currently getting an early look at the transaction, according to a market source.

"Talking to some accounts now. Feedback has been very positive," the source added.

Bank of America, Credit Suisse and Lehman Brothers are the lead banks on the deal that is eyeing June 11 for its retail bank meeting.

The facility consists of a $100 million revolver, a $250 million term loan A and a $460 million term loan B, with official price talk on the tranches unavailable at this time.

Proceeds from the deal will be used to help fund Carlyle Group's buyout of the company for $2.54 billion.

Other acquisition financing will come from $550 million of mezzanine debt.

Leverage through the bank deal will be around the low-3s and total leverage will be around the mid-5s.

The U.S. government business, based in McLean, Va., has more than 18,000 employees in 80 offices worldwide, generating annual net revenues in excess of $2.7 billion.

Learning Care price talk

Learning Care Group released price talk on its proposed $215 million credit facility (Ba3) as the deal is getting ready to officially launch with a bank meeting on Tuesday morning, according to a market source.

The $40 million revolver, which will be undrawn at close, and the $175 million term loan are both being talked at Libor plus 450 bps, the source said.

In addition, the term loan has a 3.5% Libor floor and will be offered to investors at an original issue discount of 96, the source added.

Some investors were already given an early look at the deal.

Barclays Capital is the lead bank on the deal that will be used to help fund Morgan Stanley Private Equity's purchase of a 60% interest in the company from A.B.C. Learning Centres.

Other financing for the transaction will come from a $247 million equity contribution from Morgan Stanley Private Equity and a rollover of A.B.C.'s 40% stake valued at $185 million.

A.B.C. will also retain $20 million of 81/2-year preferred equity in Learning Care, with a PIK coupon of Libor plus 250 bps in year one, Libor plus 350 bps in year two and Libor plus 450 bps thereafter.

Furthermore, Barclays has been engaged to arrange up to $55 million of potential mezzanine financing on a best efforts basis, which would be used to reduce the equity contribution.

If Barclays is unsuccessful in securing the mezzanine financing, Morgan Stanley Private Equity has the option to retain a 60% interest, provide the mezzanine financing, or decrease its equity ownership in the Learning Care to a minimum of 55%, with an option to increase its stake back to 60% within the next three years at the initial purchase price.

Learning Care Group is a Novi, Mich., provider of early education and care services to children between the ages of six weeks and 12 years.

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