MEGA Brands seeks $50 million second-lien loan, amendment of covenants

By Sara Rosenberg

New York, June 20 - MEGA Brands Inc. is currently in market with a $50 million second-lien term loan, and is looking to amend its existing credit facility to make some room under covenants and increase pricing, according to a buy-side source.

The second-lien term loan is being talked at Libor plus 400 basis points and will be used o pay down revolver borrowings, the source said.

Covenants under the existing credit facility will be changed to allow for the second-lien loan and, at the same time, address the company's recent weaker-than-expected financials because of significant problems with its Magnetix product, including product recalls, product replacement and product liability settlement expenses.

In return, the company will add an extra tier to its revolver and term loan A pricing grid so that the spread can now top out at Libor plus 250 bps, as opposed to Libor plus 225 bps.

Furthermore, pricing on the term loan B would be changed to a ratings grid, under which the spread would be Libor plus 225 bps at B1/B+ ratings and Libor plus 200 bps at better than B1/B+ ratings, the source added. Currently, the term loan B is priced at Libor plus 175 bps.

Scotia is the lead bank on the amendment that was launched with a conference call on Monday.

Consents are due on June 26 and lenders will get a 25 bps amendment fee.

MEGA Brands is a Montreal, Canada, maker of plastic building blocks and other toys, games as well as arts and crafts supplies.

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