Masonite allocates and breaks for trading with incremental term C heading up to par 5/8 bid

By Sara Rosenberg

New York, Jan. 23 - Masonite International Corp.'s incremental term loans allocated and broke for trading on Friday with the $150 million incremental term loan C quoted at par 5/8 bid, par 7/8 to 101 offered, up from its initial selling price to investors of par.

"Allocations were not very large," a fund manager said. "They cut everybody back by about half because they were so oversubscribed. But everybody got cut back equally so you got your pro rata share of what you put in for," a fund manager said.

The $200 million add-on deal consists of a $50 million incremental term loan B with an interest rate of Libor plus 200 basis points and a $150 million incremental term loan with an interest rate of Libor plus 225 basis points.

The incremental B loan was marketed toward banks while the incremental C loan was marketed toward institutions, the fund manager said.

This latest transaction basically adds debt to the already existing term loan B and term loan C. Interestingly, the existing term loan B is priced with an interest rate of Libor plus 250 basis points and the existing term loan C is priced with an interest rate of Libor plus 275 basis points, while the add-on pieces are priced lower. "I don't think there's a price decrease on the existing pieces," the fund manager added.

Proceeds from the facility will be used to help fund the $160 million cash acquisition price of The Stanley Works' residential entry door business.

An amendment of the existing credit agreement had to be passed to allow for this additional term loan debt as well as to allow for the acquisition.

On a pro forma basis and immediately after the expected closing date, the company's pro forma debt-to-equity ratio is estimated to be about 0.9-to-1 and its pro forma debt-to-EBITDA ratio is estimated to be about 2.5-to-1, based on 12 months trailing results and not including any cost benefits from the combination.

SunTrust is the sole lead bank on the loan.

Masonite is a Mississauga, Ont., building products company.

Reliant, El Paso active

Reliant Resources Inc. was moving around once again on Friday, still trading actively on potential asset sales and a rumored bond deal, which has some investors thinking that a pay down is not too far away, according to a trader.

The paper traded at both 98 5/8 and 98¾ levels and continued to remain in that context by late day, the trader said.

On Thursday, about $30 million of Reliant's bank paper traded on the Street right around 98 5/8, according to a second trader, who placed the debt in the 98¼ bid, 99 offered context on Wednesday.

As was previously reported by Prospect News, Reliant is said to be seeking bids for its New York state power plants, including two in New York City and several others upstate.

El Paso Corp.'s bank debt was also being watched on Friday with the June 2005 revolver paper bid at 991/4, according to a trader, who explained that it was hard to pinpoint an offer level since there "really isn't a lot of paper around".

On Thursday, the Houston energy company's revolver was quoted at 99 1/8 bid, 99½ offered, compared to quotes of 98 bid, 98¾ offered last week.

Once again the focus is strong on El Paso due to an unconfirmed rumor of a capital markets deal possibly being done.

Carmike allocations next week

Official pricing and allocations are expected to take place next week on Carmike Cinemas Inc.'s $150 million credit facility, which just launched this past Wednesday to a very receptive market, according to a source close to the deal. In fact, both tranches of the facility are already oversubscribed, the source added.

The facility consists of a $50 million first lien revolver due 2008 with price talk of Libor plus 325 basis points and a $100 million second lien term loan due 2009 with price talk in the Libor plus 325 to 350 basis points area, according to the source.

Goldman Sachs is the sole lead bank on the deal.

Besides the new credit facility, the company also is gearing up to price $150 million of senior subordinated notes and sell common stock.

Proceeds from the new credit facility, the new senior subordinated notes and excess cash will be used to refinance the existing term loan, tender the existing 10 3/8% senior subordinated notes, repay a portion of long-term trade payables and pay related transaction fees and expenses.

Proceeds from the common stock offering, which are estimated at $95.8 million, will be used to repay term loan debt as well.

The interest rate on the company's existing term loan in effect as of Sept. 30 was 7.75% per annum, according to a filing with the Securities and Exchange Commission. The term loan is not set to mature until Jan. 31, 2007.

On Friday, Moody's Investors Service rated the term loan at B2 and the revolver at B1, with a stable outlook. In addition, the company's senior implied rating was upgraded to B2 from B3.

"The upgrade of the senior implied rating to B2 from B3 reflects the prospective improvement in Carmike's balance sheet pro forma for the proposed refinancing and, importantly, simultaneous equity offering. The proposed transaction will lower absolute financial leverage and remove previous liquidity concerns related to the rapid amortization schedule for Carmike's existing bank credit facility, which was put in place prior to the company's emergence from bankruptcy," Moody's said.

"The new financing will also replace the somewhat weak covenant protections that remained in the current/exit-bank facility with a stronger financial covenant package," Moody's explained.

Ratings reflect the company's still high financial leverage, relatively lower quality asset base in comparison to its rated peer group, concerns about a concentration of cash flow generating assets, and continued industry-wide concerns about future box office volatility, lingering structural overcapacity and dependence on Hollywood studios for good film product.

Offsetting these factors somewhat is the relatively smaller, more rural markets in which the company operates, strong concession margins, comparatively low real estate and labor costs and an improved liquidity situation as a result of the proposed transactions, Moody's added.

Pro forma for the proposed transaction, adjusted debt/EBITDAR is expected to approach 4.6x on a net of cash basis, while EBITDAR/interest plus rents should rise marginally to 1.8x, Moody's said.

Carmike is a Columbus, Ga., motion picture exhibitor.

Arinc oversubscribed

Arinc Inc.'s proposed $125 million term loan B due 2011 talked at Libor plus 250 basis points is now oversubscribed as about $200 million in commitments have flooded into the books, according to a market source.

The $200 million secured credit facility (Ba3/BB) also contains a $75 million revolver due 2009 talked at Libor plus 200 basis points.

Both the institutional and the pro rata tranches contain a pricing grid based on leverage.

Wachovia is the lead bank on the deal that will be used to help fund a benefit pension plan, refinance existing bank debt and refinance existing bond debt.

Arinc is an Annapolis, Md., provider of transportation communications and systems engineering solutions for aviation, airports, defense, government and transportation.

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