N.E.W. Customer Service retranches; Northwest adds ratings grid; HealthSouth, Georgia-Pacific stronger

By Sara Rosenberg

New York, Aug. 18 - N.E.W. Customer Service Cos. Inc. shifted some funds out of its second-lien term loan and into its first-lien term loan on Friday, and Northwest Airlines Inc. added a ratings-based grid to its exit facility that will be created from its debtor-in-possession financing facility.

In secondary happenings, HealthSouth Corp. and Georgia-Pacific Corp. saw improvements in their term loan B levels amid relatively muted summer Friday trading.

N.E.W. Customer Service tweaked the tranching under its credit facility as $20 million was moved into the first-lien term loan B from the second-lien term loan, according to a market source.

Under the changes, the seven-year first-lien term loan B is sized at $410 million, up from $390 million, and the 71/2-year second-lien term loan is sized at $235 million, down from $255 million, the source said.

Pricing on the first-lien term loan B is set at Libor plus 275 basis points, after flexing up earlier in the syndication process from initial talk at launch of Libor plus 225 to 250 basis points, and pricing on the second-lien term loan is set at Libor plus 700 basis points after recently flexing up from initial talk at launch of Libor plus 575 to 625 basis points.

Both the first- and the second-lien term loans are oversubscribed, the source added.

N.E.W. Customer Service's $665 million credit facility also includes a $20 million six-year revolver priced at Libor plus 275 basis points with a 50 basis point commitment fee. Pricing on the revolver was recently flexed up as well from initial talk of Libor plus 225 to 250 basis points.

Credit Suisse and CIBC are joint lead arrangers on the deal.

Proceeds from the deal are being used to back the leveraged buyout of the company by Berkshire Partners LLC, Freeman Spogli & Co. and management, which was already completed early in the week of Aug. 7.

N.E.W. Customer Service is a Sterling, Va., provider of extended service plans, buyer protection programs and product support for retailers, manufacturers, utilities and financial service companies.

Northwest adds grid

Northwest Airlines announced the addition of a ratings-based grid to its exit financing facility only, under which pricing will increase to Libor plus 300 basis points if the facility gets less than four-B ratings, according to a market source.

The five-year exit facility will be the $1.225 billion DIP facility (Ba2/BBB-) converted into a permanent financing structure once the company emerges from Chapter 11.

The DIP/exit facility is comprised of a $975 million term loan and a $250 million revolver, with pricing on both tranches firming up at initial talk of Libor plus 250 basis points.

Just a few days ago, rumors were going around the market regarding the possible addition of this ratings-based grid to the exit financing, which obviously came to fruition, and talk also speculated that there could be a slight increase to DIP pricing, which obviously proved unnecessary.

Prior to the deal's launch, the transaction was expected to carry a size of $1.375 billion consisting of a $1.225 billion term loan and a $150 million revolver.

However, at the actual Aug. 7 bank meeting, lenders were presented with a slightly downsized deal with different tranching.

Citigroup and JPMorgan are the lead banks on the Eagan, Minn.-based airline company's facility, with Citi acting as the left lead.

Proceeds from the DIP facility will be used to repay amounts owed under the company's existing DIP facility, and, at the company's option, some proceeds will be used to replace or provide cash collateral for the first-lien obligations.

Georgia-Pacific, HealthSouth trade up

Switching to trading, Georgia-Pacific and HealthSouth both saw their bank debt levels head up by about an eighth of a point in an otherwise quiet summer Friday, according to a trader.

Georgia-Pacific's term loan B closed the day quoted at par bid, par ¼ offered, the trader said. The company is an Atlanta-based manufacturer and marketer of tissue, packaging, paper, building products and related chemicals.

HealthSouth's term loan B closed the day quoted at par 1/4, par ½ offered, the trader continued. The company is a Birmingham, Ala.-based provider of outpatient surgery, diagnostic imaging and rehabilitative health care services.

There has recently been some increased attention given toward the HealthSouth bank debt due to the Aug. 14 announcement that the company is evaluating spinning off or selling its surgery center and outpatient rehabilitation divisions.

The company plans to use a substantial portion of the proceeds from the potential divestments for deleveraging.

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