Targus pulls bonds, ups first lien, adds second lien; Polymer Group, El Pollo Loco up spreads

By Sara Rosenberg

New York, Nov. 15 - Targus Group International Inc. made a round of changes to its credit facility, including adding a second-lien term loan and increasing both size and pricing on the first-lien term loan, after opting to drop its proposed bond offering.

Also, in the primary, Polymer Group Inc. and El Pollo Loco Inc. increased spreads on their credit facilities, and El Pollo Loco once again minimally upsized its term loan B.

Targus reworked its credit facility structure - upsizing the first-lien term loan while flexing pricing higher, and adding a second-lien term loan to the deal - in order to help compensate for the company's decision to pull its $150 million bond offering, according to market sources.

The first-lien term loan (B1/B) is now sized at $190 million, up from $165 million, and pricing was raised to Libor plus 300 basis points from original price talk at launch of Libor plus 250 to 275 basis points, sources said. The change in pricing is a result of increased first-lien and senior leverage.

Furthermore, an $85 million second-lien term loan tranche was added to the credit structure. Pricing on the tranche is talked at Libor plus 750 basis points. The loan is non-callable for one year, then at 102 in year two and 101 in year three, sources said.

Targus' now $315 million credit facility (up from $205 million) also contains a $40 million revolver (B1/B).

Proceeds from the financing will be used to help fund Fenway Partners Inc.'s leveraged buyout of Targus from Apax Partners LP for $382.5 million.

The remaining $40 million of proceeds that were lost by canceling the bond deal are being balanced by a $15 million increase in the equity contribution by Fenway and the addition of a $25 million holding company pay-in-kind financing note, sources added.

Operating company leverage is now 5x, compared with 5.75x previously under the bank/bond scenario.

Goldman Sachs and UBS are the lead banks on the credit facility, with Goldman the left lead.

Targus is an Anaheim, Calif., supplier of mobile computing cases and accessories.

Polymer flexes up

Polymer Group increased pricing on its credit facility, raising spreads on both the $50 million revolver and $405 million term loan B to Libor plus 225 basis points from original price talk at launch of Libor plus 200 basis points, according to a market source.

The new $455 million (B1/BB-) credit facility will be used to refinance the company's existing credit facility that consists of a $280 million first-lien term loan B, a $125 million second-lien term loan C and a $50 million revolver.

Citigroup is the lead bank on the deal.

Polymer Group is a North Charleston, S.C., technology-driven developer, manufacturer and marketer of engineered materials.

El Pollo Loco ups pricing

El Pollo Loco flexed pricing higher by 25 basis points across the board on its credit facility and upsized the term loan B tranche by an additional $2 million, according to a market source.

Pricing on the company's revolver and term loan B was finalized at Libor plus 300 basis points, up from original price talk at launch of Libor plus 275 basis points, after the company's restructured bond offering priced, the source said.

Furthermore, the term loan B is now sized at $104.5 million. Originally, the tranche was sized at $100 million and then it was increased on Monday to $102.5 million after the company's bond offering was decreased. The latest $2 million upsizing was instituted in order to reduce outstanding borrowings under the revolver.

The revolver remained sized at $25 million, the source added.

The term loan B contains 101 soft call protection for one year. This call premium was added to the deal once Moody's Investors Service put out a B3 rating on the facility, the source explained.

On Monday, the company's senior note offering was decreased to $125 million from $150 million and price talk was revised to 12% from 11¾% to 12%. In addition, a tranche of notes to be issued at the holding company level was added to the capital structure.

The bonds priced on Tuesday, with the 11¾% senior notes coming at a discount of 98.74 to yield 12% for proceeds of about $123.4 million and the holdco notes coming at 57.191 to yield 14½% for proceeds of $22.5 million.

Proceeds from the now $129.5 million credit facility (B3/B+), along with bond proceeds, will be used to help fund the leveraged buyout of the company by Trimaran Capital Partners from American Securities Capital Partners LP.

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

El Pollo Loco is an Irvine, Calif., quick-service restaurant chain specializing in Mexican-style chicken dishes.

Kodak dips

Eastman Kodak Co.'s term loan succumbed to selling pressure during Tuesday's session as levels dropped by about three eighths of a point to 98 5/8 bid, 98 7/8 offered, according to a trader.

"There are just a couple of institutional sellers pushing it down," the trader said. "But, in generality the market felt weaker, off an eighth to a quarter on the day. There was general selling across the board."

Kodak is a Rochester, N.Y.-based digital imaging products, services and solutions company.

Goodyear hit by sector worries

The Goodyear Tire & Rubber Co.'s term loan debt also dropped in trading as the entire auto sector has been under some pressure over the past two days with credit default swaps widening and General Motors Corp. bankruptcy chatter circulating, according to a trader.

The Akron, Ohio, tire company's first-lien term loan was quoted lower by about an eighth at par 3/8 bid, par 7/8 offered, the second-lien term loan was quoted lower by about a quarter at par ¼ bid, par ¾ offered and the third-lien term loan was quoted lower by about an eighth at 98 7/8 bid, 99 3/8 offered, the trader said.

The GM bankruptcy talk started on Monday as a Wall Street Journal article suggested that the company should declare bankruptcy now rather than later.

Xerium hurt by numbers

Xerium Technologies Inc.'s term loan traded down by about a quarter of a point on the heels of the company's release of third-quarter numbers, to close the session quoted at 101¼ bid, 101¾ offered, according to a trader.

"It traded off more on an inquiry base, not flow," the trader added.

For the quarter, the company reported net sales of $140.1 million, a 1.8% decrease from $142.6 million for the third quarter of 2004, a net loss per diluted share of $0.18, compared to a net loss per diluted share of $0.37 for the third quarter of 2004 and adjusted EBITDA of $35.7 million, compared with $35.6 million for the third quarter of 2004.

For full-year 2005, the company revised its guidance downwards and now anticipates that net loss per diluted share will be in a range of $0.08 to $0.03 on a GAAP basis, as opposed to the previous estimate of net income of $0.45 to $0.55 on a GAAP basis. Net income per diluted share excluding the impact of IPO-related costs is now anticipated to be in the range of $0.57 to $0.62 as opposed to $1.14 to $1.24.

Xerium is a Westborough, Mass., supplier of consumables used in the manufacture of paper.

Citgo closes

Citgo Petroleum Corp. closed on its new $1.85 billion senior secured credit facility (Ba1/BBB-/BB+), according to a company news release. BNP Paribas and J.P. Morgan Securities Inc. acted as co-lead arrangers on the deal.

The facility consists of a $1.15 billion five-year revolver and a $700 million seven-year term loan, priced at Libor plus 137.5 basis points.

Proceeds were used to refinance the company's existing credit facility and to fund the cash tender offers for any and all of its $150 million 7 7/8% senior notes due 2006 and $250 million 6% senior notes due 2011, as well as other note redemptions.

Citgo is a Houston-based refiner, transporter and marketer of transportation fuels, lubricants, petrochemicals, refined waxes, asphalt and other industrial products.

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