SunGard cuts spread; Aveta, Vanguard set price talk; Northwest soars on earnings; MotorCity breaks

By Sara Rosenberg

New York, July 26 - SunGard Data Systems Inc. cut pricing on its mammoth term loan B while adding soft call protection to the tranche. Aveta Holdings LLC came out with price talk on its credit facility as the deal launched via a seemingly successful bank meeting that produced a good amount of early commitments.

And, Vanguard Car Rental USA Inc. set price talk on its credit facility as the deal gears up for its Thursday bank meeting.

In secondary doings, Northwest Airlines Corp.'s bank debt headed higher across the board as the company released second-quarter numbers that were better than analysts had estimated. And, MotorCity Casino freed up for trading during market hours, with the term loan quoted in the upper-101 region.

SunGard reverse flexed pricing on its $4 billion 71/2-year term loan B to Libor plus 250 basis points from Libor plus 275 basis points on Tuesday, while at the same time adding 101 soft call protection for one year to the term loan agreement, according to a market source.

The B loan, which has a $500 million carve-out for European investors, is still being offered to investors with an original issue discount of an eighth.

Prior to launching, the term loan B was talked at Libor plus 250 basis points before being revised to Libor plus 250 to 275 basis points and then launching at Libor plus 275 basis points.

And, even though the deal was launched at the high end of talk, investors still wondered if the tranche would get done with some even guessing that pricing would need to go up to Libor plus 300 basis points to catch enough interest.

But, everything changed as the market tone shifted into a more positive direction and the term loan B started seeing more and more orders flying into the book.

SunGard's $5 billion credit facility (B1/B+) also contains a $1 billion six-year revolver with an interest rate of Libor plus 275 basis points.

JPMorgan and Citigroup are joint lead arrangers on the deal, and JPMorgan, Citigroup and Deutsche Bank are joint bookrunners. JPMorgan is also acting as administrative agent, Deutsche and Citigroup are acting as co-syndication agents, and Goldman Sachs and Morgan Stanley are co-documentation agents.

Proceeds from the credit facility will be used to help fund Solar Capital Corp.'s leveraged buyout of SunGard.

The company is also marketing a $2 billion senior unsecured notes offering that was upsized from $1.25 billion. The fixed-rate portion is talked in the 9¼% area, and the floating-rate portion is talked in the Libor plus 450 to 475 basis points range. Pricing is expected for Wednesday.

SunGard's $250 million 3.75% senior notes due 2009 and $250 million 4.875% senior notes due 2014, which were issued under a single indenture in January 2004, will remain outstanding after completion of the leveraged buyout.

The seven private equity investment firms that joined together to form Solar Capital to execute the purchase includes Silver Lake Partners, Bain Capital, The Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts & Co. LP, Providence Equity Partners and Texas Pacific Group.

Under the acquisition agreement, the consortium agreed to purchase SunGard in a transaction valued at $11.3 billion. SunGard stockholders will receive $36 in cash for each share of common stock.

Sungard is a Wayne, Pa., provider of integrated software and processing solutions, primarily for financial services.

Aveta sets price talk, sees orders

Aveta launched its new deal to investors Tuesday morning with opening price talk of Libor plus 350 basis points on the $20 million five-year revolver and opening price talk of Libor plus 375 to 400 basis points on the $400 million six-year term loan, according to a market source.

And, the term loan is off to a good start as the syndicate had already received more than $100 million in commitments from existing MMM Healthcare lenders by early afternoon, the source added.

The term loan is being offered to investors at par. Investors will receive a 75 basis point upfront fee for revolver commitments on allocation.

Bear Stearns is the sole lead bank on the deal.

Proceeds from the $420 million credit facility (B2/B-) will be used to help fund MMM Healthcare's acquisition of NAMM, after which Aveta will be the holding company for the merged entity, to refinance MMM debt and to pay a dividend to MMM shareholders.

MMM is the largest Medicare advantage provider in Puerto Rico. NAMM is a provider of outsourced medical management in California and Illinois.

On a combined basis, the company has about 31% compounded annual revenue growth from 2002 year to date and about 69% compounded annual EBITDA growth from 2002 year to date. Last-12-month EBITDA on a combined basis is around $93.5 million.

Total and senior leverage is around 4.28x, but with the combined company's substantial cash flows and rising EBITDA, leverage is expected to fall to the mid-3s by year-end.

Vanguard price talk

Price talk on Vanguard Car Rental's proposed $900 million credit facility surfaced with both the $175 million revolver and the $725 million term loan expected to launch Thursday with opening pricing of Libor plus 450 basis points, according to a market source.

Lehman, Goldman Sachs and Citigroup are bookrunners on the deal, with Lehman the left lead, and Credit Suisse First Boston and Wachovia are involved as well.

Proceeds will be used to refinance existing debt as well as fund a distribution to shareholders.

Vanguard is the Tulsa, Okla., owner and operator of Alamo Rent A Car and National Car Rental.

Northwest flies high on numbers

Northwest Airlines' bank debt was stronger by about a point across the complex as investors were pleased with earnings results that outperformed analyst estimates, according to a trader.

The term loan A was quoted at 95½ bid, 96½ offered, the term loan B was quoted at 98 bid, 99 offered and the term loan C was quoted at 96½ bid, 97½ offered, the trader added.

For the second quarter, the Eagan, Minn.-based airline reported a net loss of $225 million or $2.59 per common share, including unusual items, compared to a net loss of $182 million or $2.11 per common share, including unusual items, in the second quarter of 2004.

Excluding $54 million in net unusual items, the second-quarter net loss was $279 million or $3.21 per common share, compared to the 2004 second quarter net loss of $78 million or $0.90 per common share, excluding unusual items.

Analyst estimates were for a net loss of $3.29 per share, making Northwest's actual results somewhat of a pleasant surprise for investors.

However, although the company beat estimates, there was one resounding issue highlighted in the financial release - the company's need to address labor costs and pension plan problems or possibly face a bankruptcy filing.

"We need to rapidly achieve at least $1.1 billion in labor cost savings and resolve our pension plan challenges by freezing our defined benefit pension plans and obtaining federal legislation that addresses existing problems in the pension laws. Failing to do so will force Northwest to consider other alternatives, including filing under Chapter 11 of the U.S. Bankruptcy Code," said Doug Steenland, president and chief executive officer, in the release.

"Many of our major competitors have significantly lowered their labor costs, both in and outside of bankruptcy, leaving Northwest with the highest labor costs in the industry. Moreover, low cost carriers continue to grow and represent a significant competitive challenge. It is imperative that we reach labor agreements with all of our unions as quickly as possible.

"Along with several of our unions, we have asked Congress to enact legislation that allows a longer time period for airlines to pay off the unfunded liabilities in their pension plans. We remain hopeful that we will be able to address this issue quickly," Steenland added in the release.

Other second-quarter results included an increase in operating revenues by 11.3% versus the second quarter of 2004 to $3.2 billion and an increase in passenger revenue per available seat mile by 3.1% on 4.4% more available seat miles. Operating expenses in the quarter, excluding unusual items, increased 18% versus a year ago to $3.33 billion. And, fuel prices averaged 164.2 cents per gallon, excluding taxes, up 52.2% versus the second quarter of 2004.

MotorCity breaks atop 101

MotorCity allocated its new deal on Tuesday, with the term loan opening for trading at 101½ bid, 101¾ offered context and remaining at those levels until the close, according to traders.

The $650 million seven-year term loan B, of which $100 million is delayed draw for six months, is priced with an interest rate of Libor plus 200 basis points. The delayed-draw tranche was added during syndication at which time pricing on the term loan B came down from Libor plus 250 basis points.

There is a 75 basis point undrawn fee on the delayed-draw term loan.

The potential for a delayed-draw term loan in the credit structure was being contemplated from the very start with the decision set to be based on demand. Being that the deal was hugely oversubscribed, the company and the syndicate decided to go ahead with the extra tranche.

MotorCity's $750 million credit facility (B1/B+) also contains a $100 million revolver with an interest rate of Libor plus 250 basis points. The revolver was upsized from $75 million during syndication.

Deutsche Bank and Merrill Lynch are the lead banks on the deal, with Deutsche the left lead.

The company also recently priced an eight-year senior unsecured notes offering that was upsized to $300 million from $200 million. The deal priced at par to yield 8% - the tight end of the 8% to 8¼% price talk range that was previously heard in the market.

Proceeds from the debt financings will be used to fund the acquisition of MotorCity Casino by Ilitch Holdings Inc. from MGM Mandalay.

The extra liquidity gained through the delayed-draw term loan, the revolver upsizing and the bond upsizing will be used to fund the expansion project that is planned for the Detroit-based gaming company and will also be used to help fund the LBO as well.

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