September issuance anticipated to be dominated by acquisition/buyout related financing

By Sara Rosenberg

New York, Sept. 2 - Investors are looking ahead to what September might bring once the Labor Day holiday weekend is over, and some sources are expecting that about $10 billion to $15 billion of new deals may hit the market during the month, with the bulk of that being acquisition/leveraged buyout funding transactions.

"Don't expect any opportunistic stuff. Mostly acquisition stuff. About $8 billion to $10 billion of acquisition stuff that has to go in September on loan side," one source remarked, adding that he too agreed with the $10 billion to $15 billion new deal estimate.

Deals that have firm bank meeting dates set in September are Flexera Software and Buffalo Gulf Coast Terminals, but some others that are anticipated to launch this month include Garden Ridge, Kinetic Concepts Inc., Sealed Air Corp. and Open Text Inc.

And, other deals that are on the radar as possibilities include Web.com, BJ's Wholesale Club Inc., Blackboard Inc., Emdeon Inc., Go Daddy Group Inc. and SunGard Higher Education/Datatel Inc., sources told Prospect News.

However, firm timing on a lot of these transactions are still very fluid and it is thought that, depending in market conditions, some may come later in the fall, sources added.

Flexera coming soon

As was previously reported, Flexera Software's $355 million credit facility is set to launch with a bank meeting on Wednesday via lead bank BMO Capital Markets Corp.

The facility consists of a $25 million revolver (B), a $230 million first-lien term loan (B) and a $100 million second-lien term loan (CCC+).

Proceeds will be used to help fund the buyout of the company by Teachers' Private Capital from Thoma Bravo LLC, and closing on the transaction is expected in late September.

Flexera is a Schaumburg, Ill.-based provider of strategic application usage management services for application producers and their enterprise customers.

Buffalo Coast deal surfaces

Joining Flexera for the week of Sept. 5 is Buffalo Gulf Coast Terminals' proposed $275 million secured term loan, which is scheduled to launch with a bank meeting on Thursday, according to sources.

Price talk is not yet available, s sources said.

Barclays Capital Inc. is the lead bank on the deal that will be used to help fund the acquisition of Houston Fuel Oil Terminal Co. LLC, a provider of crude and residual fuel oil storage in the Gulf of Mexico, from ArcLight Capital Partners.

Garden Ridge details

Another deal on the calendar for September is Garden Ridge, after its launch was pushed off from early August.

Bank of America Merrill Lynch and UBS Securities LLC are the lead banks on the deal that consists of an $80 million ABL revolver and a $250 million six-year term loan B.

Proceeds will be used to fund the buyout of the company by AEA Investors LP.

Garden Ridge is a Houston-based seller of mattresses, ready-to-assemble furniture, discount apparel and handbags and books.

Kinetic deal plans

Kinetic Concepts' $2.8 billion senior secured credit facility (Ba3/BB-) is anticipated to launch to retail investors this month, while its senior managing agent round already kicked off in August.

The facility consists of a $2.6 billion term loan and a $200 million revolver.

Bank of America Merrill Lynch, Morgan Stanley & Co. Inc. and Credit Suisse Securities (USA) LLC are the lead arrangers on the deal that will be used to help fund the buyout of the company by Apax Partners, Canada Pension Plan Investment Board and the Public Sector Pension Investment Board for $68.50 per share in cash in a transaction valued at $6.3 billion, including outstanding debt.

Other funds for the acquisition are expected to come from bonds and about $1.75 billion of equity.

Kinetic bridge loans

As a backup for its bonds, Kinetic Concepts has received a commitment for a $900 million senior unsecured bridge loan and a $1.25 billion senior secured second-lien bridge loan, with a portion of the second-lien bridge loan possibly available in euros.

Syndication of the bridge loans is expected to launch after Labor Day. It was expected to kick off in August, but filing of the company's proxy got delayed until Aug. 8, the day that the market fell hundreds of points. As a result, the decision was made to move the launch to September.

Closing is expected in the second half of this year, subject to certain conditions, including shareholder and regulatory approvals. It is not subject to financing.

Kinetic Concepts is a San Antonio-based medical technology company.

Sealed Air readies B loan

Sealed Air is anticipated to launch its $1.2 billion seven-year term loan B this month, while syndication of the company's $1.1 billion five-year term loan A and $700 million five-year revolver was completed in August.

Initially, based on filings with the Securities and Exchange Commission, it was expected that the term loan A would be sized at $750 million and the term loan B would be sized at $1.55 billion, but when the pro rata was launched, a new structure emerged with the term loan A sized at $1 billion and the term loan B sized at $1.3 billion. And, since the term loan A was oversubscribed, the decision was made to increase it by another $100 million and decrease the B loan by the same amount.

Citigroup Global Markets Inc., Bank of America Merrill Lynch, BNP Paribas Securities Corp. and RBS Securities Inc. are the lead banks on the $3 billion credit facility (Ba1/BB+).

Sealed Air pro rata spread

Pricing on Sealed Air's term loan A and revolver is Libor plus 250 basis points, with the revolver having a 50 bps unused fee. This pricing is in line with what the company had outlined in filings with the SEC.

Official talk on the term loan B has not yet emerged, but the regulatory filings said the debt would be priced at Libor plus 275 bps on the U.S. piece and Euribor plus 300 bps on the euro piece, with the entire tranche having a 1% Libor/Euribor floor.

The company is also planning on approaching the high-yield market with a $1.5 billion senior unsecured notes offering.

Sealed Air buying Diversey

Proceeds from Sealed Air's credit facility and notes will be used to fund the purchase of Diversey Holdings Inc. from the Johnson family and Clayton, Dubilier & Rice LLC for $2.1 billion in cash and an aggregate of 31.7 million shares of Sealed Air common stock. The transaction is valued at $4.3 billion.

In connection with the acquisition, $1.4 billion of Diversey net debt will be refinanced.

Pro forma leverage will be 4.4 times.

Closing is expected to take place in the fourth quarter, subject to customary regulatory approvals.

Sealed Air is an Elmwood Park, N.J.-based manufacturer of packaging and performance-based materials and equipment systems for food, industrial, medical and consumer applications. Diversey is a Sturtevant, Wis.-based provider of cleaning, sanitization and hygiene products.

Open Text plans refi

Going somewhat against the grain is Open Text's proposed $900 million senior secured credit facility (Ba1), which would be used to refinance revolver borrowings used to fund the acquisition of Global 360 Holding Corp., add cash to the balance sheet and provide working capital.

Open Text, a Waterloo, Ont.-based enterprise software company, acquired Global 360, a Dallas-based provider of process and case management services, in July for about $260 million.

The facility, expected as September business, consists of a $100 million revolver, a $200 million delayed-draw term loan A and a $600 million term loan B.

Barclays Capital Inc. and RBC Capital Markets LLC are the joint lead arrangers and joint bookrunners on the deal.

Web.com fall business

Labeled as a potential September/October launch is Web.com's proposed $800 million senior secured credit facility that is being led by J.P. Morgan Securities LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co. and SunTrust Robinson Humphrey Inc.

The facility consists of a $50 million five-year revolver expected at Libor plus 425 bps, a $600 million seven-year first-lien term loan B expected at Libor plus 425 bps with a 1.25% Libor floor and a $150 million eight-year second-lien term loan expected at Libor plus 800 bps with a 1.25% Libor floor, according to a PREM14A recently filed with the SEC.

The second-lien term loan is expected to have call protection of 102 in year one and 101 in year two, the filing said.

Web.com funding acquisition

Proceeds from Web.com's credit facility will be used to help fund the purchase of a majority interest in Network Solutions from General Atlantic LLC for $405 million in cash and 18 million shares of common stock, and as part of the transaction, Network Solutions' existing debt of roughly $204 million will be refinanced, as will Web.com's $84 million of debt.

Completion of the acquisition is expected in the fourth quarter, subject to Web.com shareholder approval and customary regulatory approvals and conditions.

Leverage is 4.0 times through the first-lien and 5.0 times through the second-lien.

Web.com is a Jacksonville, Fla.-based provider of internet and online marketing services. Network Solutions is a Herndon, Va.-based provider of website services, online marketing and domain name registration.

BJ's on radar

Meanwhile, while timing on BJ's Wholesale Club's $2.575 billion senior secured credit facility is still unclear, some sources are thinking that it could be a September launch, or it could end up coming a little later in the year.

Based on filings with the SEC, the facility is expected to be comprised of a $900 million asset-based facility, a $1.25 billion first-lien term loan and a $425 million second-lien term loan.

Deutsche Bank Securities Inc., Citigroup Global Markets Inc., Barclays Capital Inc., Jefferies & Co., GE Capital Markets and Wells Fargo Securities LLC are the lead banks on the deal.

BJ's being acquired

Proceeds from BJ's credit facility will be used to help fund its buyout by Leonard Green & Partners LP and CVC Capital Partners for $51.25 per share in cash. The all-cash transaction is valued at $2.8 billion.

Other funds for the transaction will come from $640 million in equity.

Closing is expected in the fourth quarter, subject to approval of BJ's shareholders, customary conditions and regulatory approvals.

BJ's Wholesale Club is a Westborough, Mass.-based operator of warehouse clubs.

Blackboard timing

Blackboard's proposed $1.15 billion senior secured credit facility is in the same boat as BJ's in terms of timing, meaning that it could be September, but it could be later as well, sources remarked on Friday.

The facility consists of a $100 million five-year revolver expected at Libor plus Libor plus 450 bps, with step-downs to be agreed upon based on meeting a net senior secured leverage ratio, a $700 million seven-year first-lien term loan expected at Libor plus 475 bps with a 1.5% Libor floor, and a $350 million eight-year second-lien term loan expected at Libor plus 800 bps with a 1.5% Libor floor, according to recent filings with the SEC.

Proceeds will be used to help fund the buyout of the company by Providence Equity Partners for $45 per share in cash. The transaction is valued at $1.64 billion, plus the assumption of $130 million of net debt.

Blackboard lead banks

Bank of America Merrill Lynch, Deutsche Bank Securities Inc. and Morgan Stanley & Co. Inc. are the lead banks on Blackboard's credit facility.

Other funds for the buyout will come from up to $850 million in equity.

The first-lien term loan may be upsized by $80 million if 100% of the outstanding equity interests of a portfolio company of Providence are contributed to the company.

Closing is expected in the fourth quarter, subject to stockholder approval, other customary conditions and regulatory approvals.

Blackboard is a Washington, D.C.-based provider of enterprise software applications and related services to the education industry.

Emdeon loan structure

Also on tap for this fall is Emdeon's proposed $1.325 billion senior secured credit facility, and the company outlined expected details on the deal in recent filings with the SEC.

The facility, led by Bank of America Merrill Lynch, Citigroup Global Markets Inc. and Barclays Capital Inc., is expected to include a $125 million five-year revolver priced at Libor plus 450 bps with a 50 bps unused fee and a $1.2 billion seven-year term loan B priced at Libor plus 475 bps with a 1.25% Libor floor, the filings said.

Both revolver and term loan pricing will be subject to at least one 25 bps reduction on a pricing grid to be based on consolidated first-lien net leverage.

The B loan can be upsized to fund any original issue discount or up-front fees.

Emdeon plans notes

In addition to the credit facility, Emdeon anticipates selling $750 million of senior unsecured notes and backing these notes is a commitment for a $750 million one-year senior unsecured bridge loan priced at Libor plus 850 bps for the first 60 days. There is a 1.25% Libor floor.

Proceeds from the credit facility, notes, $870 million of equity and the rollover of about $330 million of equity will be used to fund the buyout of the company by Blackstone Capital Partners VI LP for $19 per share in cash. The transaction is valued at about $3 billion.

Closing is expected in the second half of this year, subject to customary conditions, including approval by Emdeon's stockholders and clearance under the Hart-Scott-Rodino Act.

Emdeon is a Nashville-based provider of revenue and payment cycle management solutions, connecting payers, providers and patients in the U.S. health care system.

Go Daddy credit facility

Another deal on the upcoming calendar that people are eyeing for a potential fall launch is Go Daddy Group's credit facility, for which details have yet to emerge.

Barclays Capital Inc., Deutsche Bank Securities, Inc., RBC Capital Markets LLC and KKR Capital Markets are the lead banks on the deal that will be used as part of a strategic investment and partnership with KKR, Silver Lake and Technology Crossover Ventures.

The financial terms of the transaction, which is subject to customary closing conditions, were not disclosed.

Go Daddy is a Scottsdale, Ariz.-based provider of web hosting and domain names.

SunGard/Datatel transaction

One more deal that sources mentioned to Prospect News on Friday as upcoming fall business was the new credit facility that will be used for the acquisition of SunGard Higher Education by Hellman & Friedman LLC and concurrent merger with Datatel Inc.

Bank of America Merrill Lynch, Barclays Capital Inc., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC are the lead banks on the financing commitment that was obtained by an entity named Sophia LP.

Under the agreement, Hellman & Friedman is buying SunGard Higher Education from SunGard Data Systems Inc. for $1.775 billion in cash. Once the merger with Datatel is completed, the combined company will operate under a new name that will be announced at closing.

SunGard Higher Education is a Malvern, Pa.-based provider of software and services to the higher education community. Datatel is a Fairfax, Va.-based provider of technology products, services and insight to higher education.

Plaze buyout closes

In other news, the acquisition of Plaze Inc. by Olympus Partners has been completed, according to a news release.

To help fund the transaction, Plaze got a new $150 million senior credit facility consisting of a $20 million revolver and a $130 million term loan. Both tranches are priced at Libor plus 475 bps with a 1.5% Libor floor and were sold at an original issue discount of 991/4.

The term loan has a step-down to Libor plus 450 bps when total leverage is less than 4.0 times and 101 soft call protection for one year.

During syndication, pricing on the entire facility was lowered from Libor plus 500 bps, and the term loan saw the addition of the step-down and call protection.

Plaze lead banks

GE Capital Markets and PNC Capital Markets LLC acted as the lead banks on Plaze's credit facility.

Other funds for the buyout came from $50 million of mezzanine debt.

Leverage through the senior facility is 3.75 times, and leverage through the mezzanine financing is 5.25 times.

Plaze is a St. Clair, Mo.-based full-service contract aerosol and liquid packager.

Ocwen wraps deal

Ocwen Financial Corp. closed on its $575 million five-year senior secured term loan (B1/B), according to an 8-K filed with the SEC on Friday.

Pricing on the term loan is Libor plus 550 bps with a 1.5% Libor floor, and it was sold at an original issue discount of 98. There is 101 soft call protection for one year.

During syndication, pricing on the Barclays Capital Inc.-led loan was reduced from Libor plus 575 bps as the deal was well-oversubscribed.

Pro forma for the transaction, corporate debt to run rate adjusted EBITDA is 1.7 times and total debt to total equity is 4.5 times.

Ocwen buys Litton

Proceeds from Ocwen's term loan were used to fund the purchase of Litton Loan Servicing LP, a provider of servicing and subservicing of primarily non-prime residential mortgage loans, from Goldman Sachs Group Inc. for $247.2 million.

In addition, Ocwen paid $296.4 million to retire a portion of the outstanding debt on an advance facility at Litton.

Ocwen is an Atlanta-based provider of residential and commercial loan servicing, special servicing and asset management services.

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