MarkWest brings $500 million facility; Kendall upsizes, flexes price, Neiman Marcus trades up on break

By Paul A. Harris

St. Louis, Oct. 3 - Sources saw clear sailing ahead in the bank loan market as the month of October got underway on Monday.

In the primary, MarkWest Energy Partners, LP is prepping a new $500 million credit facility for later in the week, and timing was heard on Alpha Natural Resources, Inc.'s $500 million package.

Elsewhere Illinois energy generator LSP-Kendall Energy LLC upped its term loan by $10 million and flexed in pricing by 75 basis points.

Meanwhile, in the secondary market The Neiman Marcus Group Inc.'s upsized term loan broke for trading and got a nice pop, while the existing paper of Huntsman International LLC was flat on a perceived triple-whammy: two hurricanes and an energy crisis.

Steady as she goes

One market source told Prospect News on Monday that the leveraged loan market remains notably sound.

"It's liquid and aggressive, and spreads are coming down," the source commented. "Terms are getting looser.

"It's kind of a broken record."

The official said that in spite of the present turbulence now taking place in the junk bond market there are still no negatives in sight for the leveraged loan market.

As for the junk market, recent large LBO transactions are getting hammered.

On Monday Affinion Group downsized its LBO junk bond deal to $270 million from what had originally come into the market as a $750 million two-parter. Affinion whacked off its already downsized ($350 million from $500 million) sub tranche altogether, and the seniors, priced to yield 10 3/8%, came 37.5 bps beyond the wide end of price talk.

And last week Neiman Marcus hauled $925 million of its proposed junk deal out of high yield and into its term loan.

Prospect News asked the market source whether the present chop in high yield was anything but good news for the bank loan market.

"It does drive more of the business into the floating-rate market just because it looks better on a relative value basis," the source responded.

"Right now people are not afraid of adding a little more leverage. People like seeing some sub debt in the capital structure. But it's not really the market of preferred execution right now."

The source added that companies are presently eyeing second-lien structures as a sort of proxy for subordinated debt.

Kendall upsizes, flexes pricing

In primary market action Monday, LSP-Kendall Energy LLC flexed pricing on an upsized $422 million eight-year term loan by 75 basis points to Libor plus 200 bps from Libor plus 275 bps.

Meanwhile the call protection was increased to 103 in year one. And the loan was increased from an original size of $412 million.

The overall $432 million debt refinancing deal (B1/B), via Credit Suisse First Boston, Lehman Brothers, Goldman Sachs also has a $10 million liquidity facility talked at Libor plus 275 bps.

Alpha Natural Resources to launch Thursday

Elsewhere timing was heard on Alpha Natural Resources $500 million credit facility, which is expected to launch Thursday via Citigroup and UBS.

The Virginia coal producer's acquisition and debt refinancing deal sports a $250 million five-year revolver estimated around Libor plus 175 to 200 bps and a $250 million seven-year term B estimated around Libor plus 175 to 200 bps.

MarkWest brings $500 million

A Thursday bank meeting is set for MarkWest Energy Partners $500 million credit facility, via RBC Capital Markets.

The Denver-based natural gas processing company's acquisition deal features a $100 million revolver and a $400 million term loan.

Neiman Marcus breaks for trading

In the secondary market Monday The Neiman Marcus Group's above-mentioned $1.975 billion 71/2-year term B (B1/B+/B) broke for trading. And the paper saw healthy demand, one trader said.

The high end retailer's paper broke strong, to 101 bid, 101.50 offered, before settling in at 100.75 bid, 101 offered.

Meanwhile the trader perceived some nervousness in the trading of Huntsman International's paper, which was "flat," around 100.75 bid, 101 offered.

"People are fearful of what chemical plants are doing," the source said, noting the negative impacts of Hurricanes Katrina and Rita, and the "energy crisis" that was amplified by those catastrophes.

"It's getting very expensive to run those plants," the trader noted.

LBOs announced Monday

Elsewhere Monday NRG Energy's proposed acquisition of Texas Genco caught people's attention.

The company intends to fund the acquisition of Texas Genco with a combination of a senior secured credit facility and high-yield notes along with common and preferred equity.

Morgan Stanley and Citigroup have arranged for $4.8 billion in secured debt financing. There is also a $5.1 billion bridge loan.

R.H. Donnelley's acquistion of Dex Media, Inc. is expected to generate $2.3 billion of new debt, according to Steven M. Blondy, Donnelley's senior vice president and chief financial officer.

Blondy added that the specific types of debt and the maturities would depend on condition in the financial markets during the coming two to three months.

"We have to maintain flexibility," Blondy commented, adding that the transaction will take place in a rising interest rate environment.

Penn National closes

In follow-up news, Penn National Gaming Inc. said it completed a $2.725 billion senior secured credit facility to fund its acquisition of Argosy Gaming Co., repay some of Argosy's outstanding debt, pay transaction costs and provide additional working capital. Penn National also repaid its old credit facility.

The facility (Ba3/BB-) came via Deutsche Bank Trust Co. Americas, Goldman Sachs Credit Partners LP and Lehman Brothers Inc., with Deutsche left lead.

It was made up of a $750 million five-year revolver at Libor plus 200 bps, a $325 million six-year term loan A at Libor plus 200 bps and a $1.65 billion seven-year term B at Libor plus 200 bps.

Initially $236 million was drawn on the revolver.

The Wyomissing, Pa., casino and horse racing company said the facility also allows it to raise an additional $300 million in senior secured credit for project development and property expansion as well as to satisfy, if there are materially adverse legislative or regulatory events, the post-closing termination rights related to the company's sale earlier this year of The Downs Racing and its subsidiaries to the Mohegan Tribal Gaming Authority.

Walter completes $1.87 billion facility

Walter Industries Inc. said it completed its acquisition of Mueller Water Products and the $1.87 billion of new credit facilities obtained as part of the transaction.

Banc of America Securities LLC and Morgan Stanley & Co. were the lead arrangers, with Banc of America on the left.

The facilities is made up of a $675 million credit facility (Ba3/B+) at Walter Industries containing a $450 million term loan B at Libor plus 200 basis points with a step down to Libor plus 175 bps and a $225 million revolver. In addition, Walter obtained a $1.195 billion facility (B2/B+) at Mueller Group consisting of a $1.05 billion term loan B at Libor plus 225 bps with a step down to Libor plus 200 bps, and a $145 million revolver.

Proceeds were used to buy Mueller, refinance existing bank debt and pay expenses.

Walter is a Tampa, Fla., diversified company that operates in homebuilding, related financing, and water transmission products, and is also a producer of high-quality metallurgical coal.

Primedia closes

Primedia Inc. said Monday it closed on a $500 million eight-year term loan B (B2/B).

J.P. Morgan Securities Inc. and Banc of America Securities LLC were joint lead arrangers and joint bookrunners and JPMorgan Chase Bank, NA was administrative agent.

The loan is priced at Libor plus 225 bps, with a step down to Libor plus 200 bps when leverage is less than 5 times.

Proceeds along with money raised from the sale of Primedia Business Information were used to repay existing bank debt and will fund a redemption of its $212 million liquidation preference series H preferred stock and $146 million 7 5/8% senior notes due 2008.

Primedia is a New York-based targeted media company.

Knoll wraps $450 million

Knoll, Inc. said it completed its $450 million credit facility (Ba3/BB-) via UBS Loan Finance LLC, UBS Securities LLC, Bank of America NA and Banc of America Securities, LLC.

The facility is made up of a $250 million seven-year term loan at Libor plus 200 bps with a step down to Libor plus 175 bps when leverage is less than 3 times, and a $200 million five-year revolver at Libor plus 200 bps.

Proceeds were used to refinance existing debt.

Commenting on the closing, Andrew B. Cogan, CEO, Knoll, Inc., said, "The new credit facility reflects the strengthened operating performance of the company as well as $90 million of debt repayments made over the past year," said Andrew B. Cogan, Knoll's chief executive officer, in a news release. "This facility will reduce our borrowing costs, permit us to double our ongoing quarterly dividend and give the company greater financial flexibility going forward."

Knoll is an East Greenville, Pa., designer and manufacturer of branded office furniture products and textiles.

Gibraltar closes

Gibraltar Industries, Inc. said Monday it completed a $300 million credit facility to help fund its now completed acquisition of Alabama Metal Industries Corp.

The new facility was underwritten by banks led by Key Bank, with JPMorganChase and Harris Nesbitt also participating.

Further borrowings came from Gibraltar's existing revolving credit facility, which was increased to $300 million from $250 million.

As previously announced, Gibraltar is planning to refinance the borrowings with longer term debt offerings in the capital markets. It is currently intending to use the institutional term loan and high-yield markets.

The Buffalo, N.Y., manufacturer, processor, and distributor of metals and other engineered materials is currently obtaining public credit ratings as part of the process. The permanent financing is expected to be in place by year end.

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