Philadelphia Newspapers upsizes; Hawkeye ups first-lien spread; Graham trades up

By Sara Rosenberg

New York, June 28 - Philadelphia Newspapers LLC decided to increase the size of its credit facility and decrease the size of its mezzanine debt due to strong loan market demand.

Also on the primary front, Hawkeye Renewables LLC flexed pricing higher on its first-lien bank debt and added an equity pay down provision.

In secondary news, Graham Packaging Co. LP saw its bank debt head higher now that the company is out of the running for a merger with Berry Plastics Corp., Credit Suisse emerged as the winner on a portfolio that was auctioned off during market hours and AttachmateWRQ freed for trading.

Philadelphia Newspapers upsized its credit facility through an increase to its term loan B tranche on Wednesday as market demand warranted the move, allowing the company to reduce its mezzanine debt by the equivalent amount, according to a market source.

The term loan B is now sized at $295 million, up from an original size of $275 million, the source said. Pricing on the paper is set at Libor plus 275 basis points, as it firmed earlier this week at the high end of original guidance of Libor plus 250 to 275 basis points.

Meanwhile, the amount of mezzanine debt that the company is obtaining has been reduced to $85 million from an original size of $105 million, the source added.

Philadelphia Newspapers' now $345 million senior credit facility (up from $325 million) also contains a $50 million revolver with an interest rate of Libor plus 275 basis points. Pricing on this tranche also firmed up earlier this week at the high end of original guidance of Libor plus 250 to 275 basis points.

RBS Securities is the lead bank on the deal.

Proceeds from the credit facility and the mezzanine debt will be used to help fund the company's acquisition of Philadelphia Newspapers, Inc. from The McClatchy Co.

The $562 million acquisition covers the Philadelphia Inquirer and Philadelphia Daily News, both daily newspapers, and related media assets including philly.com.

Philadelphia Newspapers was formed by a group of local investors headed by advertising executive Brian Tierney for the purpose of acquiring these assets.

Hawkeye ups pricing

Hawkeye Renewables increased pricing on its revolver and first-lien term loan on Wednesday and added a provision that requires the company to repay first-lien bank debt with $50 million of proceeds from its initial public offering of common stock, according to a market source.

The $500 million first-lien term loan (B3) and the $50 million revolver (B3) are now priced with an interest rate of Libor plus 400 basis points, up from most recent price talk of Libor plus 350 basis points, the source said. When the deal first launched, the two first-lien tranches were talked at Libor plus 325 basis points but pricing was adjusted last week to Libor plus 350 basis points to fit the Moody Investors Service's B3 rating.

The revolver carries a 50 basis point commitment fee.

Pricing on the company's $150 million second-lien term loan (Caa1) remained at Libor plus 725 basis points, after being adjusted last week from original talk at launch of Libor plus 700 basis points because of the Caa1 rating that Moody's assigned to the deal.

The second-lien term loan contains call protection of 102 in year one and 101 in year two.

Credit Suisse and Bank of America are joint lead arrangers and joint bookrunners on the deal, with Credit Suisse also the administrative agent.

Proceeds from the credit facility will be used to fund the acquisition of an approximate 80% ownership interest in Hawkeye by Thomas H. Lee Partners LP, refinance the company's $185 million term loan, to refinance its $55.6 subordinated notes, and for working capital and general corporate purposes.

In connection with the Thomas H. Lee purchase, Hawkeye Holdings Inc. is planning on doing an IPO. Prior to the IPO, a new holding company structure will be implemented under which Hawkeye Renewables will become an indirect wholly owned limited liability company subsidiary of Hawkeye Holdings.

Those who choose to participate in Hawkeye's new credit facility, regardless of which lien they play in, are being offered on a pro rata basis $20 million of co-invest in the equity with final allocations.

Hawkeye Renewables is an Iowa Falls, Iowa, manufacturer of alcohol based fuel derived from corn.

Vertellus flexes up

Vertellus flexed pricing higher on both its first- and its second-lien term loan, according to a market source.

The $195 million first-lien term loan was flexed up to Libor plus 325 basis points from original talk at launch of Libor plus 275 basis points and the $85 million second-lien term loan was flexed up to Libor plus 700 basis points from original talk at launch of Libor plus 600 basis points, the source said.

Vertellus' $310 million credit facility also contains a $30 million revolver.

JPMorgan is the lead bank on the deal.

Proceeds from the deal will be used for a dividend recapitalization.

Graham Packaging trades higher

Switching over to trading, Graham Packaging's bank debt was stronger Wednesday after news emerged that private equity firms Apollo Management, LP and Graham Partners had won the bid for Berry Plastics, according to a trader.

Previously, it was rumored that The Blackstone Group was bidding on Berry Plastics with plans to merge Berry with its existing portfolio company, Graham, the trader said. Because of those rumors, investors feared that they would be facing a pay down/refinancing on the Graham bank debt causing the paper to trade right around the par context.

However, now that Blackstone is obviously out of the running for Berry Plastics, Graham Packaging's bank debt headed up by a quarter of a point to par ¼ bid, par ½ offered as repayment fears have diminished, the trader added.

On Wednesday morning, Apollo Management and Graham Partners (an equity firm with no relation to Graham Packaging) announced that they signed a definitive agreement to acquire BPC Holding Corp., parent of Berry Plastics, for an enterprise value of $2.25 billion in total consideration.

Berry Plastics, an Evansville, Ind.-based manufacturer and marketer of rigid plastic packaging products, is currently owned by Goldman Sachs Capital Partners and JPMorgan Partners.

The transaction is subject to regulatory approval and other customary closing conditions, and is expected to close by the end of the third quarter.

Goldman, Sachs & Co. and JPMorgan served as financial advisers to Berry Plastics on the transaction.

Graham Packaging is a York, Pa.-based producer of custom high-value-added blow-molded plastic containers.

Credit Suisse wins portfolio

In other secondary news, Credit Suisse emerged as the winner on a $158 million portfolio of primarily par names that was being auctioned off on Wednesday, according to a trader.

Bids on the portfolio had been due at noon.

AttachmateWRQ breaks

AttachmateWRQ allocated its credit facility on Wednesday, with the $300 million six-year first-lien term loan B (B2/B) seen trading at par 1/4, according to a market source.

The first-lien term loan B is priced with an interest rate of Libor plus 350 basis points and contains 101 soft call protection for one year.

During syndication, the term loan B was downsized from $320 million, pricing was flexed up from Libor plus 325 basis points and the call premium was added.

AttachmateWRQ's $505 million credit facility also contains a $185 million 61/2-year second-lien term loan with an interest rate of Libor plus 675 basis points and a $20 million five-year revolver (B2/B) with an interest rate of Libor plus 350 basis points and a 50 basis point commitment fee.

During syndication, the second-lien term loan was upsized from $165 million and pricing was reverse flexed from Libor plus 700 basis points, and revolver pricing was increased from Libor plus 325 basis points.

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

Credit Suisse and UBS are the lead banks on the deal that will be used to fund the acquisition of NetIQ Corp. for $12.20 per share in cash, in a transaction valued at about $495 million.

AttachmateWRQ, which is owned by an investment group led by Francisco Partners, Golden Gate Capital and Thoma Cressey Equity Partners, is a Seattle-based provider of access and integration software for legacy systems. NetIQ is a San Jose, Calif.-based provider of integrated systems and security management solutions.

GenCorp closes

GenCorp Inc. closed on its new $154.5 million credit-linked facility (BB-) consisting of an $80 million letter-of-credit subfacility and a $74.5 million term loan subfacility.

Wachovia acted as the lead bank on the deal.

The new letter-of-credit facility has a $20 million accordion feature.

Proceeds were used to replace the company's existing $98.5 million credit-linked facility, which consisted of a $44.3 million letter-of-credit subfacility and a $54.2 million term loan subfacility, and will be used to fund the repayment of its 5¾% convertible notes due April 15, 2007.

Under the new facility, the maximum leverage ratio was increased to 8.25 to 1 for the third quarter of fiscal 2006, 8.50 to 1 for the fourth quarter of fiscal 2006 and first quarter of fiscal 2007, 8.00 to 1 for the second quarter of fiscal 2007, 7.50 to 1 for the third quarter of fiscal 2007 and 7.00 to 1 for the fourth quarter of fiscal 2007.

GenCorp is a Rancho Cordova, Calif., manufacturer of technology-based aerospace and defense products.

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