MotorCity sets price talk; Key Energy back-stop facility meets with early interest; USI closes books early

By Sara Rosenberg

New York, July 6 - MotorCity Casino came out with opening price talk on its newly launched $625 million credit facility (B1/B+) Wednesday and Key Energy Services Inc.'s back-stop credit facility has already gotten some positive feedback from potential lenders ahead of Thursday's bank meeting, leaving some to believe that syndication should be no sweat.

In other primary doings, United Subcontractors Inc. decided to close the books on its in-market deal a tad ahead of schedule as the institutional portion is well oversubscribed.

Detroit-based gaming company, MotorCity Casino, announced opening price talk of Libor plus 250 basis points on both its $75 million revolver and $550 million term loan B as the deal was launched into syndication via a bank meeting Wednesday, according to a market source.

Deutsche Bank and Merrill Lynch are the lead banks on the deal, with Deutsche left lead.

Proceeds will be used, along with proceeds from a proposed $200 million offering of eight-year senior unsecured notes, to fund the acquisition of MotorCity Casino by Ilitch Holdings Inc. from MGM Mandalay.

Key Energy getting good reception

Meanwhile, Key Energy's $550 million credit facility has some feeling "very good about the transaction" as early feedback from market players "has been pretty strong", a market source told Prospect News Wednesday.

The facility consists of a $400 million seven-month delayed-draw term loan, with a seven-year final maturity, that will be launched with opening price talk of Libor plus 300 basis points, an $85 million five-year pre-funded letter of credit facility that will be launched with opening price talk of Libor plus 300 basis points and a $65 million five-year revolver that will be launched with opening price talk of Libor plus 275 basis points.

Pricing on the loan will step up by 50 basis points on Dec. 31, 2005 and June 30, 2006 if Key Energy has not provided audited and unaudited financial statements. It will also increase by 25 basis points if more than $275 million of term loans are outstanding.

Once the loans are rated, pricing will be set by a grid. If the deal is rated Ba3 or higher and BB- or higher, the revolver will be priced at Libor plus 200 basis points, and the term loan and letter of credit facility will be priced at Libor plus 225 basis points. If the deal is rated Ba3, B1 and/or B+, BB-, the revolver will be priced at Libor plus 225 basis points, and the term loan and letter of credit facility will be priced at Libor plus 250 basis points. And, if the deal is rated B1 or lower and B+ or lower, the revolver will be priced at Libor plus 250 basis points, and the term loan and letter of credit facility will be priced at Libor plus 275 basis points.

"It's not rated because they can't produce unaudited financials but they do have ratings on the bonds as a reference point," the source explained.

The revolver has an unused fee of 50 basis points and the term loan has an unused fee of 100 basis points.

Proceeds will be used by the company if it elects or is required to refinance any or all of its senior secured credit facility, its 6.375% senior notes due 2013 or its 8.375% senior notes due 2008.

On June 7, the company announced that the trustee for its 6 3/8% senior notes due 2013 and 8 3/8% senior notes due 2008 has delivered a notice of default.

The default relates to the financial reporting covenants and Key Energy's failure to file its 10-K annual report for the year ending Dec. 31, 2003 by a May 31, 2005 deadline.

The company has 60 days to cure the default or obtain a waiver, meaning that after Aug. 5, the trustee or holders of 25% of the notes can accelerate the debt, so closing on the back-stop credit facility must occur before that time.

"Default risk is being taken away because this facility will take out the bonds. They've been paying off all kinds of debt. Just can't get the audits done. They're coming. They're getting there," the market source said regarding the various positives working in favor of the new deal.

Under the terms of the facility, Key Energy will be required to meet financial covenants setting a minimum interest coverage ratio of at least 3.0:1 and maximum total leverage ratio of not more than 3.5:1 until the period ending March 31, 2006; 3.0:1 for the period ending March 31, 2006 until the period ending Sept., 30, 2006; and 2.75:1 for the period ending Sept. 30, 2006 and later.

Lehman Brothers is the lead bank on the Midland, Tex., well service company's deal.

USI accelerates commitment deadline

United Subcontractors moved the commitment deadline on its proposed $305 million credit facility (B1/B+) up to Wednesday - one day ahead of the original schedule - as the term loan B tranche was already two times oversubscribed, according to a market source.

Currently, the $265 million seven-year term loan B is talked at Libor plus 275 basis points.

United Subcontractors' facility also contains a $40 million six-year revolver that is talked at Libor plus 275 basis points as well. This pro rata tranche is fully circled, but no where near as much of a blowout as the term loan B, the source added.

Royal Bank of Scotland and Citigroup are joint lead arrangers on the deal, with RBS left lead and administrative agent.

Proceeds will be used for to fund the $42.5 million acquisition of CSCI, a shell contracting business, pay a $20 million dividend to the sponsor, which is Wind Point Partners, and refinance existing credit facility debt.

Following completion of the transaction, net leverage will be 3.3x.

United Subcontractors is a Salt Lake City-based installer of residential and commercial insulation systems and provider of related products and services.

Secondary stronger

In general the secondary loan market felt "really good" on Wednesday with the more liquid names quoted higher by about a quarter of a point on the day and trading flow taking a very positive turn, according to a market source.

"The market traded really well today across the board. We can't hold on to anything today. We're the only asset class trading well. Bonds were slightly off and the equity market was lower," the source said.

Some specific names that saw the quarter point gain included General Growth Properties Inc., Fidelity National Information Services Inc. and Kerr-McGee Corp.

General Growth Properties, a Chicago-based self-administered and self-managed real estate investment trust, saw levels on its term loan B move to 101¼ bid, 101½ offered by the end of the session, the source said.

Fidelity National, a Jacksonville, Fla.-based provider of technology to the financial services and real estate industries, saw levels on its bank debt move to 99 7/8 bid, par ¼ offered by day's end, the source continued.

And, Kerr-McGee, an Oklahoma City-based energy and inorganic chemical company, saw its bank debt move to the 101¾ bid, 102 offered area, the source added.

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