LKQ ups discount; Univar, Manor Care set talk; Autos under pressure; LCDX dips; Movie Gallery breaks

By Sara Rosenberg

New York, Oct. 18 - LKQ Corp. is offering investors more of a discount on its term loan paper than originally planned, and Univar NV and Manor Care Inc. came out with price talk on their bank deals as the transactions were launched to investors during Thursday's market hours.

Over in trading, autos, such as General Motors Corp., Ford Motor Co. and Allison Transmission, were lower on some selling pressure and LCDX bounced around, dropping noticeably early on in the day after Bank of America Corp. released disappointing earnings and then coming back slightly by the close.

Also in trading, Movie Gallery Inc.'s debtor-in-possession financing facility freed up for trading, with levels quoted above the original issue discount.

LKQ revised the original issue discount on its U.S. and Canadian term loan As, and with this change the deal is expected to reach oversubscription levels, according to a market source.

The $610 million term loan A and the C$40 million term loan A are now being offered at a discount of 99¼ as opposed to at 993/4, the source said.

Pricing on the tranches remained unchanged at Libor plus 225 basis points, the source added.

Recommitments are due from lenders on Friday at 5 p.m. ET.

LKQ's approximately $750 million senior secured credit facility (Ba3/BB+) also includes a $100 million revolver priced at Libor plus 225 bps as well.

Lehman Brothers and Deutsche Bank are the lead banks on the deal.

Proceeds from the facility, which already funded, were used to fund the acquisition of Keystone Automotive Industries, Inc. for $48.00 per share in cash.

LKQ is a Chicago-based provider of recycled light vehicle original equipment manufacturer products and related services and aftermarket collision replacement products and refurbished wheels.

Palm modifies OID

Also increasing its original issue discount was Palm Inc. as it moved guidance on its $400 million 61/2-year term loan to the low-90 area from the mid-90 area, according to a market source.

The term loan is talked at Libor plus 350 bps and carries soft call protection of 103 in year one, 102 in year two and 101 in year three.

Palm's $430 million credit facility (Ba3/B+) also includes a $30 million five-year revolver talked at Libor plus 350 bps as well.

Under the original financing plans, the revolver was expected to be sized at $40 million and pricing on the term loan was estimated by the company to be around Libor plus 225 bps to 275 bps, depending on ratings and market conditions.

JPMorgan and Morgan Stanley are the joint bookrunners on the deal.

Pro forma for the transaction, net debt to adjusted EBITDA will be around 0.3 times and total debt to adjusted EBITDA will be around 3.4 times.

Proceeds will be used to help fund a recapitalization, under which Elevation Partners will invest $325 million in Palm through the purchase of a new series of convertible preferred stock with a conversion price of $8.50 per share.

As part of the recapitalization, shareholders will receive a cash distribution of $9.00 per share that will be funded by the term loan, existing cash and the Elevation investment. The amount of total proceeds to be distributed to shareholders is estimated to be about $940 million.

Upon completion of the transaction, Elevation will own about 25% of Palm's outstanding common stock on an as-converted and diluted basis.

Palm is a Sunnyvale, Calif., mobile computing devices company.

Univar price talk

In more primary happenings, Univar held a bank meeting on Thursday to kick off syndication on its proposed $975 million term loan B (B2/B), and in connection with the launch, price talk was announced, according to a market source.

The term loan B was presented to lenders with talk of Libor plus 300 bps and an original issue discount of 99, the source said.

Bank of America and Deutsche Bank are the lead banks on the deal, with Bank of America the left lead.

The term loan B is part of a $2.35 billion credit facility that also includes a $1 billion asset-based revolver talked at Libor plus 150 bps, a $100 million first-in, last-out asset-based term loan talked at Libor plus 275 bps and a $275 million term loan A (B2/B) talked at Libor plus 275 bps.

The revolver, asset-based term loan and term loan A were launched to U.S. and European investors in early September, but the syndicate opted not to launch the term loan B at that time because of primary market conditions.

Proceeds from the credit facility will be used to help fund the acquisition of Univar by a wholly owned Dutch subsidiary of Ulysses Luxembourg Sarl, a portfolio company of CVC Capital Partners, for €53.50 in cash per share.

Univar is a Netherlands-based distributor of industrial chemicals and provider of related specialty services.

Manor Care guidance emerges

Also launching with a bank meeting on Thursday was Manor Care's $900 million senior secured credit facility, at which time it too came out with price talk, according to a market source.

Both the $700 million seven-year term loan B and the $200 million six-year revolver are being talked at Libor plus 275 bps, the source said.

The term loan is being offered with an original issue discount in the 98 context.

The facility will have a senior secured leverage test but details are still to be determined, the source added.

JPMorgan, Credit Suisse and Bank of America are the lead banks on the deal that will be used to help fund the buyout of the company by The Carlyle Group for $67.00 in cash per share. The transaction is valued at $6.3 billion.

Other LBO financing will come from $1.327 billion in equity and $4.6 billion in CMBS debt that is priced at Libor plus 250 bps.

Manor Care is a Toledo, Ohio, provider of short-term post-acute services and long-term care.

Texas Competitive continues to track well

Texas Competitive Electric Holdings Co. LLC's (TXU) term loan B-2 continues to see good momentum in terms of syndication since launching with a bank meeting Monday as the book is building rather nicely, according to a market source.

The source went on to say that the deal is attracting orders from a wide variety of accounts including high-yield guys, asset managers, hedge funds and traditional loan investors.

Even before the deal launched, sources were hearing good things about the deal such as that a significant amount of early orders were thrown in and a significant amount of interest was being indicated by potential investors.

Positives working in favor of the deal include that Texas Competitive is a utility-related credit and it has hard assets, sources previously told Prospect News.

The $7 billion term loan B-2 is being offered with a discount in the 99½ area, is priced at Libor plus 350 bps and carries soft call protection of 103 in year one, 102 in year two and 101 in year three.

The company's $24.5 billion senior secured credit facility (Ba3/B+) also includes a $4.1 billion seven-year final maturity delayed-draw term loan, a $1.25 billion seven-year deposit letter-of-credit facility, a $2.7 billion six-year revolver, a $3.45 billion seven-year term loan B-1 and a $6 billion seven-year term loan B-3, with all of these tranches priced at Libor plus 350 bps as well.

The delayed-draw term loan, revolver, letter-of-credit facility, term loan B-1 and term loan B-3 are not currently being syndicated.

The term loan B-1 carries no call protection and the term loan B-3 is non-callable for three years.

The revolver has a commitment fee of 50 bps.

Of the total delayed-draw term loan amount, $2.15 billion was funded at close. It is unclear what B loan tranche this funded delayed-draw debt will fall under at this point, so what type of call protection it will have is not yet known.

The additional $1.95 billion of delayed-draw term loan commitments in place are to ensure available liquidity to fund the construction of new plants.

The delayed-draw term loan has an undrawn fee of 125 bps for the first year and 150 bps after that.

Under the facility, the company must maintain a maximum secured leverage ratio beginning on Sept. 30, 2008 of 7.25 to 1.00.

There is a $2 billion accordion feature.

Citigroup, JPMorgan, Goldman Sachs, Lehman Brothers, Morgan Stanley and Credit Suisse are the joint lead arrangers and bookrunners on the deal, with Citi administrative agent, JPMorgan syndication agent, and Credit Suisse, Goldman, Lehman and Morgan Stanley co-documentation agents.

Proceeds from the credit facility were used to help fund the recently completed leveraged buyout of TXU Corp. by an investor group led by Kohlberg Kravis Roberts & Co. and Texas Pacific Group for $69.25 per share. The transaction was valued at $45 billion.

In addition, the company got a senior secured cash collateral posting facility, the size of which is capped by the mark-to-market exposure of Texas Competitive and its subsidiaries on a portfolio of commodity swaps and futures transactions.

In connection with the buyout, TXU changed its name to Energy Future Holdings Corp.

Other buyout financing came from a $5 billion senior unsecured cash-pay bridge loan with initial pricing of Libor plus 325 bps at Texas Competitive, a $1.75 billion senior unsecured toggle bridge loan with initial pricing of Libor plus 350 bps at Texas Competitive, a $2.5 billion senior unsecured cash-pay bridge loan with initial pricing of Libor plus 400 bps at Energy Future and a $2 billion senior unsecured toggle bridge loan with initial pricing of Libor plus 425 bps at Energy Future.

On Monday, Texas Competitive announced plans to sell approximately $2.5 billion of cash-pay senior notes due 2015 and Energy Future announced plans to sell up to approximately $2 billion of cash-pay senior notes due 2017, with proceeds from these transactions going towards the repayment of some of the bridge loan debt. The bonds are expected to price late next week.

As of June 30, Texas Competitive's total senior secured debt was 4.8 times pro forma adjusted last-12-months EBITDA and total debt was 6.9 times.

Energy Future is a Dallas-based energy company.

Autos soften

Switching to the secondary, the auto sector in general was weaker on Thursday on some selling pressure, according to traders.

Allison Transmission, a Speedway, Ind.-based designer and manufacturer of automatic transmissions, saw its term loan B end the day at 97 7/8 bid, 98 3/8 offered, down from opening levels of 98 bid, 98½ offered, one trader said. The loan had gotten as low as 97¾ bid, 98¼ offered during the session.

General Motors, a Detroit-based developer, producer and marketer of cars, trucks and parts, saw its term loan end the day at 98¼ bid, 99 offered, down from 98 7/8 bid, 99 5/8 offered, a second trader remarked.

Ford, a Dearborn, Mich.-based automaker, saw its term loan end the day at 97 bid, 97½ offered, down from 97½ bid, 98 offered, the second trader continued.

"GM put out sales numbers today and they rose by slightly less than people were expecting, but I don't think that was really the cause," the trader said.

General Motors said on Thursday that, according to preliminary sales figures, it sold 2.38 million cars and trucks around the world in the third quarter, a 4% increase compared with last year.

"People just got too long on autos earlier so now people are selling some off," the trader added.

LCDX rollercoasters

LCDX dropped after Bank of America announced disappointing third-quarter numbers, but once people had time to digest the news the index started to regain some ground, according to traders.

The LCDX 9 was quoted by one trader at 99.25 bid, 99.40 offered at the end of the day and by a second trader at 99.30 bid, 99.50 offered, down from 99.55 bid, 99.65 offered. During market hours, the index traded as low as 99.00.

LCDX 8 was quoted at 97.00 bid, 97.10 offered, down from 97.20 bid, 97.40 offered, traders said, adding that it was very quiet in this series.

"People may have been shaky about the Bank of America news. They came in below estimates at $0.82 per share. Analysts were expecting $1.06. Kind of shook people up this morning and then it settled out," one trader explained.

For the third quarter, Bank of America's earnings per share fell 31% from $1.18 last year and net income declined 32% to $3.7 billion from $5.42 billion a year earlier.

The bank said that the lower net income resulted from a $1.33 billion decline in earnings in global corporate and investment banking given the significant disruption in the financial markets during the quarter.

Movie Gallery DIP frees to trade

In other news, Movie Gallery's debtor-in-possession financing facility hit the secondary on Thursday, trading above its discount sale price, according to a trader.

The $50 million revolver was quoted at 98½ bid, 99½ offered and the $100 million term loan was quoted at 99¼ bid, par ¼ offered, the trader said.

Both tranches are priced at Libor plus 350 bps and both were sold at a discount of 981/2.

Goldman Sachs is the lead bank on the $150 million deal that was oversubscribed by existing first-lien lenders.

Proceeds from the DIP will be used to refinance the company's existing revolver at a lower interest rate and provide additional working capital.

Movie Gallery is a Dothan, Ala.-based video rental company.

Technical Olympic trades up

Technical Olympic USA Inc.'s first-lien bank debt was stronger on Thursday as the potential for a bankruptcy filing seems likely to market players, according to a trader.

The Hollywood, Fla.-based homebuilder's first-lien term loan was quoted at 96½ bid, 97½ offered, up from Wednesday's levels of 96¼ bid, 96¾ offered, the trader said.

The revolver was quoted at 97 bid, 97½ offered, up from 96½ bid, 97 offered, the trader continued.

"People are still banking on recoveries. There's a growing view that a Chapter 11 filing is going to happen," the trader added.

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