Deluxe Entertainment Services, Milk Specialties break; Kronos extended loan levels emerge

By Sara Rosenberg

New York, Dec. 22 - Deluxe Entertainment Services Group Inc.'s credit facility allocated and freed up for trading on Thursday, with the term loan bid right around its original issue discount price in a quiet secondary market.

Also breaking was Milk Specialties Global, with its first-lien term loan bid above its discount price, and Kronos Inc.'s extended first- and second-lien term loans began being quoted as well.

Deluxe starts trading

Deluxe Entertainment's credit facility made its way into the secondary market on Thursday with the $475 million51/2-year term loan (B1/B+) quoted at 96 bid, 96¾ offered, according to sources.

Pricing on the loan is Libor plus 650 basis points with a 1.5% Libor floor, and it was sold at an original issue discount of 96. There is 101 soft call protection for one year.

During syndication, the term loan was downsized from $500 million.

The company's $575 million credit facility also includes a $100 million five-year ABL revolver.

Credit Suisse Securities (USA) LLC, Bank of America Merrill Lynch, Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and Natixis are leading the deal that will be used to refinance existing debt.

Deluxe is a Los Angeles-based entertainment services provider that processes film, assists in motion picture post-production work and distributes prints to film studios.

Milk Specialties frees up

Another deal to break was Milk Specialties, with its $125 million first-lien term loan (B2/B+) quoted at 97½ bid, in very light volume since the deal was pretty well clubbed up, according to a trader.

Pricing on the first-lien loan is Libor plus 700 bps with a 1.5% Libor floor, and it was sold at an original issue discount of 97.

The company is also getting a $60 million second-lien term loan (CCC+) that is priced at Libor plus 1,300 bps with a 1.5% Libor floor and sold at a discount of 96. The tranche is non-callable for one year, then at 102 in year two and at 101 in year three.

During syndication, the first-lien tranche was downsized from $145 million, pricing increased from Libor plus 650 bps and the discount finalized at the high end of the initial 97 to 98 guidance. As for the second-lien, the coupon flexed up from Libor plus 1,050 bps and the discount came at the wide end of the 96 to 97 talk.

Milk being acquired

Proceeds from Milk Specialties' credit facility will be used to help fund its buyout by HM Capital from Stonehenge Partners Inc.

To make up for the first-lien term loan downsizing, $20 million more of equity will be used for the transaction.

RBC Capital Markets LLC is the lead bank on the $220 million credit facility, which also provides for a $35 million revolver (B2/B+).

Milk Specialties is a Carpentersville, Ill.-based manufacturer of nutrition products.

Kronos extended surfaces

Kronos' extended term loans started being quoted in trading on Thursday morning, with the first-lien term loan seen at 97½ bid, 98½ offered and second-lien term loan seen at 99 bid, par ½ offered, according to a trader.

The non-extended first-lien term loan was quoted at 96 bid, 97 offered and the non-extended second-lien term loan was quoted at 95 bid, 96 offered, the trader added.

The breakdown of the company's existing credit facility is a $60 million revolver, a $635 million first-lien term loan B and a $355 million second-lien term loan.

Specific sizes on the extended tranches were unavailable by press time, but it was said on Wednesday that consents to extend more than 50% of each tranche had been received.

Kronos extended pricing

Pricing on Kronos' extended first-lien loan due June 2017 is Libor plus 475 bps, after a flex from Libor plus 450 bps, and there is 101 soft call protection for one year that was added during syndication.

The non-extended first-lien term loan due June 2014 is priced at Libor plus 225 bps based on pro forma total leverage of 5.6 times.

Meanwhile, the extended second-lien loan due June 2018 is priced at Libor plus 1,000 bps at leverage of greater than 5.0 times and Libor plus 900 bps at leverage of 5.0 times, after flexing up from Libor plus 825 bps. Included in the extended tranche is hard call protection of 103 in year one, 102 in year two and 101 in year three, which had recently been revised from just 102 in year one and 101 in year three.

The non-extended second-lien term loan due June 2015 is priced at Libor plus 575 bps.

Also, the company extended some of its revolver by three years to June 2017at pricing of Libor plus 475 bps - raised from initial talk of Libor plus 450 bps.

Non-extended revolver pricing is Libor plus 200 bps.

Kronos incremental rises

With the amendment and extension transaction, Kronos is getting a new $370 million incremental first-lien term loan B (B1/B) due December 2018, and that tranche was higher on the day from its recent breaking levels, the trader remarked.

Specifically, the incremental loan was quoted at 99½ bid, par ½ offered, up from 98¾ bid, 99¾ offered, where it freed up for trading late Wednesday, the trader continued.

Pricing on the incremental loan is Libor plus 500 bps, after flexing from Libor plus 475 bps, with a 1.25% Libor floor. The debt was sold at an original issue discount of 98 and includes 101 soft call protection for one year.

Proceeds will be used to fund a distribution to shareholders.

J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC, Wells Fargo Securities LLC, Jefferies & Co. and Deutsche Bank Securities Inc. are leading the deal that is expected to close on Dec. 28.

Kronos is a Chelmsford, Mass.-based provider of workforce management software.

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