Cengage gains with earnings; Rocket reworks deal; Local TV floats talk on extended loan

By Sara Rosenberg

New York, Feb. 3 - Cengage Learning Holdings II LP's term loan B strengthened in trading on Friday as the company released quarterly results that showed year-over-year improvements in earnings, revenues and adjusted EBITDA.

Moving to the primary, Rocket Software Inc. made a round of revisions to its credit facility since the deal was well oversubscribed, including reducing spreads and tightening original issue discounts on all tranches.

And, in more loan happenings, Local TV Finance LLC released price talk on its proposed extended term loan, and Caesars Entertainment Operating Co. Inc. firmed up timing on the lender call for its amendment and extension transaction.

Cengage trades up

Cengage's term loan B moved to 90 1/8 bid, 90 5/8 offered on Friday from 88½ bid, 89½ offered in the prior session as the company announced favorable results for the quarter ended Dec. 31, according to a trader.

For the second fiscal quarter, Cengage reported a net loss of $11 million, versus a net loss of $23 million in the previous year.

Revenues for the quarter were $456.2 million, up 3.2% from $442.2 million in the second fiscal quarter of 2011.

Adjusted EBITDA for the quarter was $175 million, up 2.7% from $170.4 million last year.

And, unlevered free cash flow for the six months ended Dec. 31 increased by $79 million, or 16.8%, to $549.8 million, with the company attributing the improvement to increased income from continuing operations and higher contribution from working capital.

Cengage is a Stamford, Conn.-based provider of teaching, learning and research services for the academic, professional and library markets.

Rocket flexes pricing

Over on the new deal front, Rocket Software's $430 million credit facility was very well received by the market, and, as a result, pricing and discounts on the revolver, first-lien term loan and second-lien term loan were all tightened, according to sources.

Under the changes, the $25 million five-year revolver (B1/BB) and $300 million six-year first-lien term loan B (B1/BB) are priced at Libor plus 550 bps with a 1.5% Libor floor and an original issue discount of 98, versus initial talk of Libor plus 575 bps to 600 bps with a 1.5% floor and a discount of 971/2, sources remarked.

As for the $105 million seven-year second-lien term loan (Caa1/B+), that is priced at Libor plus 875 bps with a 1.5% floor and a discount of 98, compared to earlier guidance of Libor plus 925 bps to 950 bps with a 1.5% floor and a discount of 971/2, sources added.

Rocket call premiums

Rocket Software's term loan call protection was left intact. The first-lien B loan has a 101 soft call for one year and the second-lien loan is non-callable for one year, then at 103 in year two and 101 in year three.

Lead banks Credit Suisse Securities (USA) LLC, Wells Fargo Securities LLC and Jefferies & Co. were seeking recommitments by 5 p.m. ET on Friday, with the target being to allocate on Tuesday.

Proceeds from the credit facility will be used to refinance existing debt and fund a dividend.

Total leverage will be 3.9 times, and first-lien leverage will be 2.9 times. Prior to the transaction, the company's total leverage was 1.0 times.

Rocket Software, a Court Square portfolio company, is a Newton, Mass.-based software development firm.

Local TV reveals talk

Local TV disclosed price talk of Libor plus 375 bps on its proposed extension offer, under which the company is asking to extend $170 million of its term loan (B1/BB-) by two years to May 2015, according to a market source. Non-extended pricing is Libor plus 200 bps.

Additionally, lenders will be offered a 10 bps amendment fee, the source said.

Deutsche Bank Securities Inc. and UBS Securities LLC are the lead banks on the deal that will launch with a call on Monday.

Commitments are due on Feb. 10.

Local TV is a Fort Wright, Ky.-based television station operator.

Caesars firms launch

Caesars Entertainment nailed down timing on the launch of its credit facility amendment and extension deal, setting the lender call for Monday, according to a market source. Previously, timing had been labeled as early in the Feb. 6 week.

Under the proposal, the company wants to push out the maturity on up to $4 billion of term loan B-1, B-2 and B-3 debt by three years to Jan. 28, 2018 at pricing of Libor plus 450 bps if less than $3.25 billion is extended and Libor plus 475 bps if more than $3.25 billion is extended. The new extended tranche will be called a term loan B-6.

Current pricing on the company's $5 billion of non-extended term loans is Libor plus 300 bps and there is also around $1.2 billion in existing extended term loan debt due Jan. 28, 2018 priced at Libor plus 425 bps.

Caesars revolver changes

On the call, Caesars will also ask to convert original maturity revolver commitments to extended term loans and extend any revolver commitments that aren't converted by three years to Jan. 28, 2017.

The company will repay extended term loans held by any consenting revolver lender in an amount equal to 10% of the amount of the commitment that was converted and cancel 20% of the extended revolver commitments on a pro rata basis.

Currently, the company's revolver is sized at around $1.2 billion and priced at Libor plus 300 bps with a 50 bps unused fee.

Bank of America Merrill Lynch is the lead bank on the amend-and-extend deal.

Caesars offering fees

As incentive to participate, Caesars will be giving lenders that consent to the amendment a 10 bps fee and extending lenders a 15 bps fee.

Commitments toward the term loan extension and consents for the amendment are due on Feb. 10.

As part of the amendment, the company expects to raise up to $1.25 billion of senior secured debt, with the plan being to use up to $1 billion of the proceeds to repay a portion of the term loans held by extending lenders.

Specifically, non-extended B-1, B-2 and B-3 borrowings held by extending lenders would be repaid first, followed by the repayment of extended term loans.

Caesars is a Las Vegas-based diversified casino-entertainment company.

Vantage sees demand

In other news, Vantage Specialty Chemicals' $300 million credit facility was "going really well" ahead of Friday's commitment deadline, with the deal oversubscribed, a market source told Prospect News, adding that allocations are targeted for the week of Feb. 6.

The facility consists of a $60 million five-year revolver talked at Libor plus 525 bps with no Libor floor, and a $240 million six-year term loan B talked at Libor plus 550 bps with a 1.5% Libor floor and an original issue discount of 98.

RBC Capital Markets LLC and Fifth Third Securities Inc. are the lead banks on the deal that will be used, along with more than 50% equity, to back the already-completed buyout of the company by Jordan Co. from H.I.G. Capital LLC.

Vantage, a Chicago-based specialty chemicals company, will have total and senior leverage of around 4.2 times.

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