MEG Energy delayed draw has investors watching; Dunkin' breaks atop par; Gentiva breaks around 101

By Sara Rosenberg

New York, Feb. 27 - MEG Energy Corp.'s upcoming credit facility is already attracting market attention as investors are curious to see how the inclusion of a relatively large delayed-draw tranche ends up playing out for the deal in terms of pricing and participation.

Meanwhile, in secondary happenings, Dunkin' Brands Inc.'s credit facility freed for trading late in the day with its term loan quoted in the pars, and Gentiva Health Services Inc. freed for trading as well, with its term loan quoted around the 101 type of context.

MEG Energy's $750 million credit facility (BB) has been labeled as one to watch as people can't help but wonder whether the company will get as attractive a rate or as large of an audience with the presence of a decent sized chunk of delayed-draw term loan B debt in the capital structure.

The delayed-draw piece is sized at $350 million, will be delayed draw for two years with a seven-year final maturity and will be part of the company's term loan B tranche - which also contains $350 million of funded debt.

Talk is that the delayed-draw and the funded term loan B paper will be launched at Wednesday's bank meeting with price talk of Libor plus 225 basis points.

"This will actually be an interesting deal to watch the market react to, as it's basically impossible to price that high a percentage of delayed draw at an attractive blended rate, but the gut feel for oil sands collateral value is very high," one buyside source remarked.

"Moreover, the delayed-draw component makes the deal tough to do for most CLOs, which are 70% of demand. Would all the buyers take the strip and then sell the delayed draw? In a slow week, everyone's going to take a look at it," the buyside source added.

The funded and delayed-draw term loan B tranches will be sold to investors as a strip with the typical institutional players expected to be approached on the transaction, another source said, adding that it is possible for CLOs to participate in a delayed-draw deal.

In addition to the $700 million of term loan B debt, MEG Energy's credit facility will also contain a $50 million three-year revolver that is expected to launch with price talk of Libor plus 225 basis points and carry a 50 basis point undrawn fee.

Lehman and Credit Suisse are the lead banks on the deal, with Lehman the left lead.

Proceeds will be used to develop a SAGD (Steam Assisted Gravity Drainage) project. SAGD involves drilling pairs of horizontal wells. The upper wells are the steam injection wells and the lower wells are equipped as the bitumen production wells. Steam is continuously injected through the upper well bores to create steam chambers, which heat the formation. The heated bitumen, under the influence of gravity, then drains to the lower horizontal wells and is produced to the surface.

MEG Energy is an oil and gas company involved in oil sands development in northeast Alberta, Canada.

Fresenius sets talk

Fresenius Medical Care AG decided to present its $2 billion seven-year term loan B to lenders with opening price talk of Libor plus 150 basis points to 175 basis points, according to a market source.

Bank of America and Deutsche Bank are the lead banks on the deal that launched with a bank meeting this past Friday, with Bank of America the left lead.

Proceeds from the $2 billion term loan B, along with proceeds from $3 billion in pro rata bank debt that was already syndicated last year, will be used to finance the acquisition of Renal Care Group Inc. for about $3.5 billion, plus the assumption of about $500 million of Renal debt.

In addition to funding the acquisition, Fresenius will also use the new loan to replace its existing $1.2 billion credit agreement.

In June 2005, Fresenius came to market with its $3 billion in pro rata debt consisting of a $1 billion revolver and a $2 billion five-year term loan A, with both tranches priced initially at Libor plus 137.5 basis points.

Originally, the term loan A was sized at $1.5 billion, but during the 2005 syndication process, the company shifted $500 million out of its not-yet-launched term loan B and into its term loan A.

In addition, during the pro rata syndication, pricing on both the revolver and the term loan A was reverse flexed from original price talk at launch of Libor plus 150 basis points.

Fresenius' acquisition of Renal Care has been under regulatory scrutiny since 2005 as the Federal Trade Commission has been making requests for additional information on the transaction.

Just the other week, however, Fresenius and Renal Care announced that they have signed a definitive agreement to sell about 100 dialysis clinics to National Renal Institutes Inc. in connection with the Federal Trade Commission's review of the merger.

The divestiture of the clinics was labeled by the companies as an important step toward concluding the FTC's review of the transaction.

The merger is now targeted for completion by March 31, subject to meeting all closing conditions including final approval by the FTC.

Fresenius is a Bad Homburg, Germany-based dialysis products and services provider. Renal Care is a Nashville, Tenn.-based dialysis service provider.

Dunkin' breaks for trading

Switching to the secondary, Dunkin' Brands allocated its credit facility on Monday with the $850 million term loan B opening for trading late in the session quoted at par 3/8 bid, par 5/8 offered, according to market sources.

Trading activity in the term loan B was relatively light and levels stayed so close to par as investors are still apprehensive over rumors that the paper may be repaid relatively quickly, one trader explained. In fact, some market players had heard that the term loan might be gone in three months if Lehman arranges a securitized franchise receivables deal.

The term loan B is priced with an interest rate of Libor plus 250 basis points. During syndication, the tranche was upsized from $700 million and pricing was reverse flexed from Libor plus 275 basis points since the deal was massively oversubscribed.

To compensate for the increased amount of term loan B funds, the company decreased the size of its funded bridge loan.

Dunkin' Brands' $1 billion credit facility (B2/B+) also contains a $150 million revolver with an interest rate of Libor plus 250 basis points. Pricing on this tranche was also reverse flexed during syndication from Libor plus 275 basis points.

Proceeds from the deal will be used help fund the leveraged buyout of Dunkin' by Bain Capital Partners, The Carlyle Group and Thomas H. Lee Partners.

Under the transaction agreement, the sponsors will acquire Dunkin' Brands for $2.425 billion in cash from Pernod Ricard SA.

JPMorgan and Lehman are the lead banks on the credit facility, with JPMorgan the left lead.

Dunkin' Brands is a Canton, Mass., quick service restaurant franchisor.

Gentiva around 101

Another deal that allocated on Monday was Gentiva's credit facility, with its $370 million seven-year term loan quoted by one trader at 101 bid, 101 3/8 offered, by another trader at par 7/8 bid, 101 1/8 offered and by a third trader at slightly wider levels of par ¾ bid, 101¼ offered.

The term loan is priced with an interest rate of Libor plus 225 basis points. Pricing on the term loan can drop to Libor plus 200 basis points if total leverage is less than 3.5x, with a further reduction to Libor plus 175 basis points if total leverage falls below 3x. These potential step downs in the spread were added to the deal during syndication.

Gentiva's $445 million senior credit facility (Ba3/B+) also contains a $75 million revolver with an initial interest rate of Libor plus 225 basis points.

Lehman is the lead bank on the deal.

Proceeds from the term loan, along with about $55 million in common stock and about $58 million in cash on hand, will be used to finance the acquisition of The Healthfield Group Inc. for $454 million, refinance more than $183 million in existing Healthfield debt and fund transaction costs.

Gentiva is a Melville, N.Y.-based provider of comprehensive home health services. Healthfield is an Atlanta-based provider of home health care and hospice.

Movie Gallery softens

Movie Gallery Inc.'s term loan was heard to be lower on the day by about a half to three quarters of a point, but with no trading activity in the name it was hard to tell if those levels were real, according to a trader.

"I heard 93 bid, 94 offered but no one is trading them. It's all speculation. I don't know why it would be lower today. The bonds were up," the trader said.

On Friday, Movie Gallery's term loan closed the day quoted at 93¾ bid, 94½ offered, up on the bid side and tighter when compared to previous levels of 93 bid, 94½ offered on rumors that the company hired an investment bank boutique firm to explore options, including the sale of the company.

Movie Gallery is a Dothan, Ala.-based operator of video retail stores.

EK Success closes

GTCR Golder Rauner, LLC completed the acquisition of EK Success Ltd., a Clifton, N.J., scrapbooking and craft products company, according to a news release.

To help fund the acquisition, EK Success got a new $155.25 million credit facility consisting of a $20 million revolver with an interest rate of Libor plus 325 basis points, a $75 million first-lien term loan with an interest rate of Libor plus 325 basis points, a $19.25 million synthetic letter-of-credit facility with an interest rate of Libor plus 325 basis points and a $41 million second-lien term loan with an interest rate of Libor plus 750 basis points.

Dresdner acted as the lead bank on the deal.

Ply Gem closes

Ply Gem Industries Inc. closed on $118 million of new senior secured term loan (B1/BB-) debt in connection with completing the acquisition of AWC Holding Co. (Alenco) from Linsalata Capital Partners and management in a cash transaction valued at about $120 million, according to a company news release.

The incremental term loan debt is priced with an interest rate of Libor plus 250 basis points - in-line with existing term loan pricing.

UBS and Deutsche Bank acted as joint lead arrangers on the deal, with JPMorgan involved as well.

Ply Gem is a Kearney, Mo., manufacturer of exterior building products. Alenco is a Bryan, Texas, manufacturer of aluminum and vinyl windows and doors.

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