Laureate firms OID, breaks for trading; Movie Gallery, Neff slide; Hologic overfills pro rata

By Sara Rosenberg

New York, Sept. 20 - Laureate Education Inc. finalized the original issue discount on its term loan debt and then allocated the paper to see it trade in the 97 area.

Also in trading, Movie Gallery Inc.'s first-lien term loan and Neff Corp.'s second-lien term loan both headed lower on some profit taking.

In other news, Hologic Inc.'s pro rata bank debt was well received by the market, enough so that the tranches are oversubscribed.

Laureate firmed up the original issue discount on its $775 million in senior secured seven-year term loan debt (B1/B) as the books on the deal closed at 2 p.m. ET on Thursday, and then the banks managed to allocate and break the loan for trading by late day, according to a trader.

The original issue discount on the $675 million covenant-light funded term loan B and the $100 million covenant-light delayed-draw term loan B finalized at 961/4, the trader said. When the deal was launched to lenders last week, the discount was labeled as to be determined and then early on in the day Thursday, the discount was being talked at 96 to 96½ before firming up right in the midpoint of that range.

Once the discount was set, the banks were able to give out allocations and free the paper up for trading.

Immediately on the break, the strip of funded and delayed-draw term loan B debt was being quoted at 96¼ bid, but it quickly headed up to 96 7/8 bid, 97¼ offered, where it closed out the day, the trader said.

Pricing on the funded and delayed-draw term loan Bs is set at Libor plus 325 basis points.

The delayed-draw term loan carries a commitment fee of 100 bps in year one and 125 bps in year two.

Goldman Sachs, Citigroup, Credit Suisse and JPMorgan are the lead banks on the deal.

Proceeds will be used to help fund the already completed buyout of the company by an investor group led by company chairman and chief executive officer Douglas L. Becker that includes Kohlberg Kravis Roberts & Co., Citi Private Equity, S.A.C. Capital Management, LLC, SPG Partners, Bregal Investments, Caisse de depot et placement du Quebec, Sterling Capital, Makena Capital, Torreal SA, Brenthurst Funds, Vulcan Capital and others.

Laureate already has a $400 million revolver in place that was completed in connection with the leveraged buyout.

Leverage is around 7.1 times.

Laureate is a Baltimore-based provider of higher education.

Movie Gallery slips lower

Movie Gallery's first-lien term loan was weaker during Thursday's market hours. The weakness was probably just due to some profit taking, although Standard & Poor's did come out with a downgrade on the company's ratings, according to a trader.

The first-lien term loan was quoted at 87 bid, 89 offered, down from around 89 bid, 91 offered, the trader said.

"I don't think the downgrade caught anyone by surprise," the trader said. "We've been expecting the Chapter 11 filing.

"It probably would be down either way," the trader continued. "Things have been ticking up all week and now people are just taking some profits."

On Thursday, S&P downgraded its corporate credit rating on Movie Gallery to D from CC, lowered its second-lien term loan to D and affirmed its first-lien and senior unsecured debt rating of CC.

The downgrade reflects Movie Gallery's decision to defer the payment of interest due on Sept. 10 on its second-lien loan beyond the payment grace period.

For the same reason, earlier this week, Moody's Investors Service downgraded the corporate family rating to C from Caa3, the revolver to Caa1 from B2, the synthetic letter-of-credit facility to Ca from Caa2, the first-lien term loan to Ca from Caa2 and the second-lien term loan to C from Caa3.

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

Neff falls too

Neff was another name that saw bank levels drop lower in trading on Thursday as it too was affected by the profit taking seen during the session, according to a trader.

The company's second-lien term loan was quoted around 88 bid, 90 offered, down from around 90½ bid, 91½ offered, the trader said.

Neff is a Miami-based construction equipment rental company.

Hologic pro rata oversubscribed

Hologic's $200 million five-year revolver and $250 million five-year term loan A are both oversubscribed at the initial talk of Libor plus 225 bps, according to a market source, who said that the deal "is in great shape."

The company's $2.55 billion senior secured credit facility (Ba3/BB) also includes an $850 million 51/2-year term loan B talked at Libor plus 250 bps and a $1.25 billion 18-month capital markets term loan X talked at Libor plus 175 bps.

When the deal was launched to investors about two weeks ago, it was said that the primary focus was to syndicate the revolver and term loan A. It didn't really look like they were syndicating the term loan B to new investors or really syndicating the term loan X.

The capital markets term loan X is expected to be refinanced with convertible debt or other equity or equity-linked financing.

Goldman Sachs, Bank of America, Citigroup and JPMorgan are the joint lead arrangers on the deal, with Goldman Sachs and Bank of America the joint bookrunners and Goldman Sachs the left lead.

Leverage through the term loan A is 0.5 times, leverage through the term loan B is 2.1 times, leverage through the term loan X is 4.4 times and net debt leverage is 4.1 times.

Proceeds from the term loans will be used to help fund the acquisition of Cytyc Corp. and to repay bank debt at both companies if any is outstanding.

The revolver is expected to be undrawn at close.

Under the terms of the agreement, Cytyc shareholders will receive 0.52 of a share of Hologic common stock and $16.50 in cash for each share of Cytyc common stock they own. The cash consideration totals about $2.1 billion.

Hologic is a Bedford, Mass., developer, manufacturer and supplier of diagnostic and medical imaging systems with a focus on the health-care needs of women. Cytyc is a Marlborough, Mass., diversified diagnostic and medical device company.

HealthSpring price talk emerges

HealthSpring, Inc. is talking its in-market $100 million revolver and $300 million term loan A at Libor plus 250 bps, according to a market source.

Goldman Sachs is the lead bank on the $400 million senior secured credit facility (Ba3/BB-).

Proceeds will be used to help fund the acquisition of Leon Medical Centers Health Plans, Inc., a Miami-based Medicare Advantage HMO with over 25,700 members, for $355 million in cash at closing.

HealthSpring is a Nashville-based managed care organization whose primary focus is the Medicare Advantage market.

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