Harrah's loans slide with launch of incremental; Delta second-lien better as new loan downsized

By Sara Rosenberg

New York, Sept. 22 - Harrah's Operating Co. Inc.'s existing term loan B bank debt headed lower during Tuesday's trading session after the company launched its incremental term loan and released details on the new transaction.

In other news, Delta Air Lines Inc.'s second-lien term loan gained some ground in trading following word that the company's new term loan was being reduced as a result of its upsized bond offering.

Harrah's existing B softens

Harrah's existing term loan B debt traded lower in the secondary market on the back of the launch of the company's $750 million incremental term loan (B-) that has the potential to be upsized, according to traders.

The company's term loan B-1 and term loan B-3 were both quoted at 82 bid, 82½ offered, down from 82½ bid, 83 offered, one trader said.

And, the term loan B-2 was quoted by one trader at 82 1/8 bid, 82 5/8 offered, down from 82¾ bid, 83 3/8 offered, and by a second trader at 82 bid, 82½ offered, down from 82½ bid, 83½ offered.

Harrah's price talk

In connection with the conference call that was held on Tuesday morning to kick off syndication on the new incremental term loan, Harrah's came out with price talk on the deal, according to sources.

Price talk on the loan is Libor plus 750 basis points with a 2% Libor floor and an original issue discount in the 97 to 98 area, sources said.

For optional redemptions, the loan is non-callable for two years, then at 105 in year three, 103 in year four and par thereafter.

The deal was first announced on Monday and, at that time, size was labeled as still to be determined and there was no price talk.

Allocations on the loan are expected to go out on Wednesday.

Harrah's refinancing debt

Harrah's is using proceeds from the incremental term loan to refinance existing debt, to provide additional liquidity and to fund note tender offers.

On Tuesday, the company revealed that it is tendering for up to $175 million of its 5.5% senior notes, 7.875% senior subordinated notes, 8% senior notes and 8.125% senior subordinated notes.

The tender offers will expire on Oct. 21.

Bank of America and Citigroup are the joint lead arrangers and joint bookrunners on the incremental loan, and JPMorgan, Credit Suisse and Deutsche Bank are also bookrunners.

The loan, due in October 2016, is being obtained under the accordion feature of the company's existing credit facility.

Covenants under the term loan are similar to those under the existing credit facility.

Harrah's is a Las Vegas-based provider of branded casino entertainment.

Delta second-lien strengthens

Delta Air Lines' second-lien term loan headed higher in trading after the company reduced the size of its new term loan and increased the size of its bond deal, according to a trader.

The second-lien term loan was quoted at 84½ bid, 85½ offered, up from 83 bid, 84 offered, the trader said, explaining that investors were happy to find out that there would be less first-lien debt ahead of them than was previously expected.

Meanwhile, the company's existing first-lien term loan was quoted at 91¼ bid, 92¾ offered, unchanged on the day, the trader remarked.

On Tuesday, Delta reduced its new four-year term loan to $250 million from $500 million and raised its first-lien bond offering to $750 million from $500 million.

Talk of the loan downsizing first emerged on Monday when the bond deal size guidance was changed to $500 million to $750 million from just $500 million previously.

Delta price talk

In addition, on Tuesday, Delta came out with price talk on its downsized term loan at Libor plus 675 bps to 700 bps with a 2% Libor floor and an original issue discount of 98, a fund manager said.

Previous estimates around the market had the term loan in the Libor plus 700 bps area with the 2% floor and 98 discount, but nothing official had been announced.

Citigroup and Deutsche Bank are the joint lead arrangers and bookrunners on the loan.

Commitments were due on Tuesday afternoon towards the loan. Initially, the deadline was set for Wednesday, but it was moved up.

Delta's now $750 million credit facility (Ba2) also includes a $500 million 31/2-year revolver that is not currently being marketed.

Delta refinancing debt

Proceeds from Delta's new credit facility, the first-lien notes and $500 million of second-lien notes that were just added to the transaction on Tuesday will be used to repay borrowings under Northwest Airlines Inc.'s senior corporate credit facility.

Any remaining net proceeds will be used for general corporate purposes.

The second-lien notes are talked in the 13% area and the first-lien notes are talked in the 9 7/8% area.

Prior to the upsizing and restructuring of the bond offering, the first-lien notes were being talked in the 10% context.

Delta is an Atlanta-based airline company.

Paul A. Harris contributed to this article.

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