Cinemark term loan resized, repriced and retranched as bond tender offer proves successful

By Sara Rosenberg

New York, March 30 - Cinemark USA Inc.'s term loan (Ba3/BB-) was reworked on Tuesday to reduce the size by $10 million, decrease pricing by 25 basis points and to make it a fully funded tranche as opposed to a portion of it being a delayed draw.

The now $260 million, compared to initial launch size of $270 million, fully funded term loan is priced with an interest rate of Libor plus 225 basis points as opposed to initial pricing of Libor plus 250 basis points, according to a market source.

Furthermore, the tranche contains a stepdown in pricing to Libor plus 200 basis points based on the operating company's leverage, the source added.

The reverse flex was a function of strong investor demand as the term loan was already well oversubscribed with more than $400 million in orders by late last week even though it only went to about 25 accounts.

As for the reduction in size, "retranching was not market driven but rather reflected the company's success in tendering for a high-yield deal that otherwise would have waited to be called," the market source explained.

As of last Thursday, the company had received the requisite consents to all of the proposed amendments to the indenture governing its outstanding $105 million 8½% series B senior subordinated notes due 2008 and approximately $94.1 million of the notes had been irrevocably tendered, according to a company news release. The tender offer does not expire until April 13.

"Most of the bonds were tendered so [it] didn't make sense to keep delayed draw mechanics in place for [a] small stub. [They] could have left [a] very small delayed draw to pick up [the] remainder of these bonds later, but frankly with a $100 million revolver and cash on the balance sheet, the company [had] no reason to do it. So [the] decision was [to] eliminate [the] delayed draw mechanic, fund [the] term loan at $260 million and eliminate the additional $10 million from the structure," the source added.

Goldman Sachs and Lehman Brothers are the lead banks on the deal.

Proceeds from the term loan will be used to repay existing term loans and to fund the tender offer.

As was previously reported, the transaction is being done in connection with the merger agreement between the parent company, Cinemark Inc., and affiliates of Madison Dearborn Partners Inc. in a transaction valued at about $1.5 billion. The merger has been approved by the company's board of directors and shareholders and is expected to close in April.

To help support the merger, Cinemark sold about $360 million proceeds of 10-year senior discount notes on Monday at 62.373 to yield 9¾%.

The company's current shareholders include the founder, chairman and chief executive officer Lee Roy Mitchell, and The Cypress Group LLC. As part of the transaction, Mitchell and members of management will retain significant equity stakes in the company.

Cinemark is a Plano, Texas, motion picture exhibitor.

Hillman breaks

The Hillman Cos. Inc.'s credit facility broke for trading on Tuesday with the $217.5 million term loan B quoted at par ¾ bid, 101 offered by one market source and par 7/8 bid, 101 1/8 offered by a second market source.

The term loan is priced with an interest rate of Libor plus 325 basis points.

Hillman's $257.5 million credit facility (B2/B) also contains a $40 million revolver with an interest rate of Libor plus 300 basis points.

Merrill Lynch and JPMorgan are the lead banks on the deal, with Merrill listed on the left.

Proceeds will be used to help support an affiliate of Code Hennessy & Simmons LLC's buyout of Hillman from Allied Capital Corp.

The definitive acquisition agreement places a total transaction value of about $510 million for the sale of the company, including repayment of outstanding debt and adding the value of the company's outstanding trust preferred shares, according to an Allied Capital news release.

Allied Capital expects to be repaid its $44 million in outstanding mezzanine debt but also expects to provide up to $47.5 million in new mezzanine financing to Hillman in conjunction with the transaction.

Hillman is a Cincinnati manufacturer of key-making equipment and distributor of key blanks, fasteners, signage, and other small hardware components.

Price talk on American Safety

Price talk emerged on American Safety Razor Co.'s proposed credit facility, with the $150 million seven-year first lien term loan (B) priced with an interest rate of Libor plus 350 basis points and the $50 million 71/2-year second lien term loan (CCC+) priced with an interest rate of Libor plus 650 basis points, according to a market source.

Furthermore, the second lien term loan contains call protection of 102 in year one and 101 in year two, the source added.

The $225 million credit facility, which is scheduled to launch Thursday, also contains a $25 million five-year revolver (B).

UBS is the lead bank on the deal.

Proceeds will be used to refinance existing debt.

Following completion of the transaction, first lien leverage will be 3.2 times and total leverage will be 4.3 times, according to the source.

American Razor, a J.W. Childs Associates LP portfolio company, is a Verona, Va., manufacturer of personal care consumer products primarily consisting of shaving razors and blades.

Hollywood seen in a few months

Hollywood Entertainment Corp.'s proposed $475 million credit facility "won't be launching for at least 150 days" since the company has to "go through public to private process," according to a market source.

UBS AG is the lead bank on the deal that will be used in combination with $600 million of high-yield notes to support a merger with an affiliate of Leonard Green & Partners LP.

The credit facility consists of a $400 million six-year term loan and a $75 million five-year revolver with a 50 basis points commitment fee. If the facility is rated B1/B+ or higher, then the two tranches will carry an initial interest rate of Libor plus 300 basis points. If the deal is rated below B1/B+, then the tranches will bear interest at Libor plus 350 basis points, the filing said. Pricing on the revolver can range from Libor plus 250 to 300 basis points depending on leverage assuming the B1/B+ rating and Libor plus 300 to 350 basis points assuming the lower than B1/B+ rating.

To back up the bond offering, the company has received a commitment for $600 million in bridge financing from UBS, consisting of a $400 million senior unsecured bridge loan and a $200 million senior subordinated unsecured bridge loan, both with a term of one year and both bearing interest at the greater of 10.2% or Libor plus 925 basis points.

Equity financing necessary for the transaction has been fully committed by Leonard Green & Partners LP through Green Equity Investors IV LP.

Under the terms of the merger agreement, Hollywood's shareholders will receive $14.00 per share in cash. The company entered into the merger agreement following the unanimous recommendation by a special committee comprised of the independent directors of the company's board of directors.

Closing of the merger, which is anticipated to take place in the third calendar quarter of 2004, is subject to various terms and conditions including shareholder approval, receipt of antitrust clearance and the completion of financing.

Hollywood Entertainment is a Wilsonville, Ore., video store chain.

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