Nursing home sector continues decline; MetroPCS, Cengage weaken; Ocwen trims pricing

By Sara Rosenberg

New York, Aug. 2 - In trading on Tuesday, Golden Living, Kindred Healthcare Inc., HCR ManorCare and Skilled Healthcare Group Inc. once again trended downwards as investors are still reacting to the recent news of lower reimbursements from Medicare.

Also in the secondary, in what was described as an overall heavy market, MetroPCS Communications Inc.'s term loans were weaker after the company released quarterly results, and Cengage Learning's term loan B gave up some more ground since coming under scrutiny following last week's disappointing earnings announcement.

Over in the primary, Ocwen Financial Corp. lowered pricing on its oversubscribed term loan, Immucor Inc. released price talk on its term loan as the deal was presented to lenders during the session, Omnicare Inc. began circulating guidance on its upcoming facility, and Avis Budget Group Inc. surfaced with plans to bring a new deal to market later this week.

Nursing home names pressured

Golden Living, Kindred Healthcare, ManorCare and Skilled Healthcare spent another day watching levels drop in reaction to Medicare's recent announcement that payments to nursing homes are being lowered by $3.87 billion, or 11.1% in fiscal 2012, according to traders.

Golden Living, a Fort Smith, Ark.-based provider of post-acute health and wellness services, saw its term loan quoted by a trader at 93 bid, 94 offered, down from 95 bid, 95¾ offered.

Kindred Healthcare, a Louisville, Ky.-based health care services company, saw its term loan quoted by a trader at 96½ bid, 97½ offered, down from 98 bid, 98¾ offered.

And, ManorCare, a Toledo, Ohio-based provider of short-term, post-acute services and long-term care, saw its term loan quoted by a trader at 95¼ bid, 96¼ offered, down from 95¾ bid, 96½ offered.

Skilled Healthcare softens

Another company to feel the impact of the Medicare news was Skilled Healthcare, with its term loan quoted by a trader at 94 bid, 95 offered, down from 95 bid, 96 offered, according to a trader.

Additionally, Skilled Healthcare announced on Tuesday that its board of directors concluded its exploration of strategic alternatives, including a potential sale of the company's real estate assets or the whole company.

The company said in a release that the decision was made after consideration of the reduction to Medicare reimbursement rates because the board believes the news has diminished the prospects of maximizing shareholder value through a sale.

Skilled Healthcare is a Foothill Ranch, Calif.-based operator of long-term care facilities.

MetroPCS loans slide

MetroPCS' term loans headed lower in trading as the company came out with second-quarter numbers that showed year-over-year improvements but fell short of analyst estimates, according to a trader.

The company's term loan B-2 was quoted at 98 7/8 bid, 99 3/8 offered, down from 99½ bid, par offered, and its term loan B-3 was also quoted at 98 7/8 bid, 99 3/8 offered, down from 99 3/8 bid, 99 7/8 offered, the trader said.

For the second quarter, the company reported net income of $84 million, or $0.23 per diluted share, compared to net income of $80 million, or $0.22 per diluted share.

Total revenues for the quarter were $1.21 billion, compared to $1.01 billion last year.

And, adjusted EBITDA was $357 million, compared to $322 million in the 2010 quarter.

MetroPCS is a Dallas-based provider of no annual contract, unlimited, flat-rate wireless communications service.

Cengage retreats further

Cengage Learning's term loan B dropped down to 86 bid, 87 offered, from 87 1/8 bid, 87 7/8 offered as the overall market felt weaker and there continues to be some negativity regarding recent earnings results, according to a trader.

"Higher beta name to the market and it's an easy one for guys to beat up on when things are feeling heavy like they were today," the trader said, adding that "recent earnings didn't help."

For the fourth quarter of fiscal year 2011, Cengage reported revenue of $472.9 million, down 14.5% from $553.4 million in the previous year.

Additionally, adjusted EBITDA for the quarter was $201.5 million, down 13.9% from $234 million in the fourth quarter of fiscal 2010.

Cengage is a Stamford, Conn.-based provider of teaching, learning and research services for the academic, professional and library markets.

Ocwen lowers spread

Switching to the primary, Ocwen Financial reverse flexed pricing on its $575 million five-year senior secured term loan (B1/B) to Libor plus 550 bps from Libor plus 575 bps, while leaving the 1.5% Libor floor, original issue discount of 98 and 101 soft call protection for one year intact, according to a market source.

Recommitments were due on Tuesday and allocations are expected to go out later this week.

Barclays Capital Inc. is the lead bank on the deal that has 10% amortization and covenants that include a maximum corporate debt to EBITDA ratio, a maximum total consolidated debt to tangible net worth ratio, a minimum interest coverage ratio and a maximum loan to value ratio.

Pro forma for the transaction, corporate debt to run rate adjusted EBITDA is 1.7 times and total debt to total equity is 4.5 times.

Ocwen buying Litton

Proceeds from Ocwen's term loan will be used to help fund the acquisition of Litton Loan Servicing LP, a provider of servicing and subservicing of primarily non-prime residential mortgage loans, from Goldman Sachs Group Inc. for a base purchase price of $263.7 million in cash.

In addition, subject to adjustments based on outstanding servicer advances at closing, Ocwen will pay $337.4 million to retire a portion of the outstanding debt on an existing advance facility at Litton that was provided by Goldman.

Closing is expected on Sept. 1, subject to the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other conditions.

Ocwen is an Atlanta-based provider of residential and commercial loan servicing, special servicing and asset management services.

Immucor talk emerges

Immucor, a Norcross, Ga.-based provider of automated instrument-reagent systems to the blood transfusion industry, held a bank meeting on Tuesday morning to kick off syndication on its proposed credit facility, and in connection with the event, term loan price talk was disclosed, according to a sources.

The $600 million seven-year term loan is being talked at Libor plus 450 bps to 475 bps with a 1.5% Libor floor, an original issue discount of 99 and 101 soft call protection for one year, sources said.

By comparison, the company had previously said in filings with the Securities and Exchange Commission that term loan pricing was expected at Libor plus 475 bps with a 1.5% floor.

The company's $700 million senior secured credit facility (Ba3/BB-) also includes a $100 million five-year revolver, of which no more than $25 million can be drawn at closing.

Commitments are due from lenders on Aug. 12.

Immucor lead banks

Citigroup Global Markets Inc. and J.P. Morgan Securities LLC are the joint lead arrangers on Immucor's credit facility, and they are bookrunners with UBS Securities LLC.

Proceeds - along with $400 million of notes backed by a commitment for a $400 million senior unsecured bridge loan that has already been syndicated and up to $691 million in equity - will be used to fund the buyout of the company by TPG Capital for $27.00 per share in cash. The transaction has a fully diluted equity value of $1.973 billion.

As part of the agreement, TPG is in the process of tendering for Immucor's common stock shares. The tender offer expires on Aug. 18, and there is a minimum tender condition of 84%. Closing is also subject to approval under the Hart-Scott-Rodino Antitrust Improvements Act, the receipt of approvals under German antitrust or merger control laws and other customary conditions.

Omnicare floats guidance

Price talk on Omnicare's proposed $750 million five-year unsecured credit facility also came out as the deal is gearing up for its Wednesday bank meeting, according to a market source.

The facility, comprised of a $300 million revolver and a $450 million term loan, is being talked at Libor plus 250 bps, the source said.

SunTrust Robinson Humphrey Inc. J.P. Morgan Securities LLC, Barclays Capital Inc. and Goldman Sachs & Co. are the lead banks on the deal that will be used to refinance existing debt.

Net leverage is 2.3 times.

Omnicare is a Covington, Ky.-based pharmaceutical services company.

Avis readies deal

Avis Budget Group has scheduled a bank meeting for 3 p.m. ET on Thursday to launch $900 million in incremental senior secured credit facility debt, consisting of a $200 million term loan A, a $400 million term loan B and a $300 million revolver add-on, according to a market source.

Morgan Stanley & Co. Inc., Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., Scotia Capital (USA) Inc. and RBS Securities Inc. are the lead banks on the deal that will be used to help fund the acquisition of Avis Europe plc for 3.15 pounds in cash per share. The transaction is valued at 635 million pounds, or about $1 billion.

Completion of the transaction is expected to occur in October, subject to Avis Europe shareholder approval, court approval and regulatory clearances.

Parsippany, N.J.-based Avis Budget and England-based Avis Europe are vehicle rental companies.

Stackpole closes

In other news, the buyout of Stackpole International by Sterling Group was completed, according to a news release.

To help fund the transaction, Stackpole got a new $165 million senior secured credit facility, consisting of a $25 million five-year revolver and a $140 million six-year term loan priced at Libor plus 600 bps with a 1.5% Libor floor. The term loan was sold at an original issue discount of 98 and has 101 soft call protection for one year.

During syndication, pricing on the term loan was increased from talk of Libor plus 475 bps to 500 bps, the discount widened from 99 and the call protection was added.

RBC Capital Markets LLC, BNP Paribas Securities Corp. and UBS Securities LLC led the deal for the supplier of highly engineered engine and transmission oil pumps and powdered metal components to automotive and original equipment manufacturers.

OM Group wraps deal

OM Group Inc. closed on its $900 million senior secured facility (Ba2/BB-), consisting of a $200 million five-year revolver, a $100 million five-year term loan A, a $350 million six-year U.S. term loan B and a €175 million six-year term loan B, according to a news release.

Pricing on the revolver and term A is Libor plus 375 bps with no Libor floor, pricing on the U.S. term B is Libor plus 425 bps, and pricing on the euro term B is Euribor plus 475 bps. Both term Bs have a 1.5% floor, were sold at a discount of 99 and have 101 soft call protection for one year.

During syndication, the U.S. B loan was upsized from $300 million and pricing was reduced from talk of Libor plus 475 bps to 500 bps, and the euro B loan was downsized from $300 million and the spread was trimmed from Euribor plus 500 bps.

Bank of America Merrill Lynch, PNC Capital Markets LLC and BNP Paribas Securities Corp. led the deal that was used to fund the €700 million acquisition of Vacuumschmelze Holding GmbH, a Hanau, Germany-based manufacturer of industrial use advanced magnetic materials and fabricated products.

OM Group is a Cleveland-based provider of specialty chemicals, advanced materials, electrochemical energy storage and unique technologies.

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