Natural Products oversubscription has some awaiting price cuts; Genoa, Ozburn, Acco to allocate soon

By Sara Rosenberg

New York, Aug. 1 - Natural Products Group LLC's new deal has some investors holding their breaths non-too happily anticipating a price change soon as the deal was met with strong demand.

Meanwhile, a handful of deals are expecting to allocate this week, including Genoa Healthcare, Ozburn-Hessey Logistics LLC and Acco Brands Corp., hopefully bringing some much needed activity to what has started the month as a quiet summer secondary market.

Natural Products Group's $253.5 million credit facility is said to be oversubscribed, leaving some lenders nervous over a potential reverse flex in pricing, although no official word on the matter has come down from the syndicate as of yet, according to a fund manager.

"I just found out they didn't only go to existing lenders. They went out to a broader group. They could have rolled everybody over and it would have been fine so I would imagine that the [oversubscription talk] is true," the fund manager said.

"I haven't heard of any changes yet, but I wouldn't bet against it. Potentially, it could flex down. That would be a big negative to me, but if they're oversubscribed I can't imagine them not taking advantage of the situation," the fund manager added.

Natural Products Group's facility consists of a $15 million revolver talked at Libor plus 325 basis points, a $175 million first-lien term loan talked at Libor plus 325 basis points and a $63.5 million second-lien term loan talked at Libor plus 700 basis points.

CIBC is the lead bank on the deal that will be used for a dividend recapitalization and refinancing existing debt.

Natural Products Group is a California-based natural personal care products company owned by Harvest Partners.

Genoa, Ozburn, Acco to break this week

Genoa Healthcare, Ozburn-Hessey and Acco are anticipating allocations to go out this week, with Genoa hoping to break for trading on Tuesday, Ozburn-Hessey hoping to break for trading on Wednesday and ACCO hoping to break for trading later in the week, according to market sources.

Genoa's $170 million credit facility consists of a $100 million first-lien term loan (B2/B) with an interest rate of Libor plus 325 basis points, a $50 million second-lien term loan (Caa1/CCC+) with an interest rate of Libor plus 775 basis points and a $20 million revolver (B2/B) with an interest rate of Libor plus 350 basis points.

Last week, Genoa increased the size of its first-lien term loan from $90 million and reverse flexed pricing on the tranche from Libor plus 350 basis points. At the same time, pricing on the second-lien term loan was reverse flexed from Libor plus 800 basis points.

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

Morgan Stanley and GE Capital Corp. are the lead banks on the Genoa deal, with Morgan Stanley the left lead.

Proceeds from the credit facility will be used for a dividend recapitalization.

Genoa is a Tampa, Fla.-based manager of 61 skilled nursing facilities.

Ozburn-Hessey's $180 million credit facility (B2/B+) consists of a $140 million seven-year term loan B and a $40 million five-year revolver, with both tranches priced at Libor plus 275 basis points.

Last week, the syndicate reverse flexed pricing on both the term loan and the revolver from Libor plus 300 basis points, and at the same time added a step down to the term loan B credit agreement, under which pricing can drop to Libor plus 250 basis points at 2.5x leverage.

Morgan Stanley and Bear Stearns are joint lead arrangers and joint bookrunners on Ozburn-Hessey deal, with Morgan Stanley the left lead.

Proceeds from the term loan will be used to help fund a leveraged buyout of the company by Welsh, Carson, Anderson & Stowe.

The revolver will be undrawn at closing and will be available for general corporate purposes.

Welsh, Carson, Anderson & Stowe is putting in 63% of the money for the LBO consisting of $80 million of holding company mezzanine debt and $157 million of equity.

Following the transaction, senior leverage will be 31/2x and total leverage through the holding company will be 51/2x.

Ozburn-Hessey is a Nashville-based third-party logistics provider.

Acco's $750 million credit facility (BB-) consists of a $150 million five-year revolver with an interest rate of Libor plus 200 basis points, a $200 million five-year term loan A with an interest rate of Libor plus 200 basis points and a $400 million seven-year term loan B with an interest rate of Libor plus 175 basis points.

The company reverse flexed pricing on its term loan B from Libor plus 200 basis points during syndication.

Citigroup and ABN Amro are the lead banks on the Acco deal, with Citigroup the left lead.

Proceeds from the term loans will be used to help fund Fortune Brands Inc.'s spinoff of Acco World Corp. and merger of Acco with General Binding Corp. to form a new entity called Acco Brands. Revolver borrowings will be available for general corporate purposes.

Immediately following the merger, Fortune Brands stockholders and Acco World's current minority stockholder will together own 66%, and General Binding's stockholders will own 34%, of the shares of common stock of the new company on a fully diluted basis.

Acco is an Illinois-based supplier of branded office products.

Key Energy closes

Key Energy Services Inc. closed on its new $547.25 million credit facility consisting of a $400 million seven-year delayed-draw term loan B with an interest rate of Libor plus 275 basis points, an $82.25 million five-year pre-funded letter-of-credit facility with an interest rate of Libor plus 275 basis points and a $65 million five-year revolver with an interest rate of Libor plus 275 basis points.

Pricing on the term loan and letter-of-credit facility was reduced from Libor plus 300 basis points during syndication.

Furthermore, 101 soft call protection for one year was added during syndication to the delayed-draw term loan tranche. The term loan is delayed draw for seven months.

The revolver has an unused fee of 50 basis points, and the term loan has an unused fee of 100 basis points.

The revolver and letter-of-credit facility replace the company's previous $150 million revolver.

The term loan will be used to refinance the company's 6 3/8% senior notes due 2013 or its 8 3/8% senior notes due 2008, if necessary.

Lehman Commercial Paper Inc. will serve as the administrative agent and collateral agent and Wells Fargo Foothill Inc. will serve as the administrative agent for the revolver and letter-of-credit facility.

Failure to provide audited financial statements will not create a breach of the new credit facility until March 16, 2007, the date the company's 10-K for the year ended Dec. 31, 2006 would be due, giving the company ample time to complete its restatement process.

Pricing on the back-stop facility will step up by 50 basis points on Dec. 31, 2005 and June 30, 2006 if Key Energy has not provided audited and unaudited financial statements.

"We are very pleased with the success of the senior credit facilities and the support we received from Lehman Brothers and Wells Fargo Foothill. In addition, we are gratified that over 80 lenders and institutions made commitments to the facilities. The facilities permit the company to refinance both the 6 3/8% and 8 3/8% notes, if and to the extent necessary, as well as to meet our letter-of-credit needs and provide a source of additional liquidity if we need it in the future," said Dick Alario, chairman and chief executive officer, in a company news release.

Key Energy is a Midland, Texas, rig-based, onshore well service company.

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