Spectrum falls on asset sale worries, Applica launch still on; Graham Packaging up; FoxCo ups B loan

By Sara Rosenberg

New York, June 30 - Spectrum Brands Inc.'s term loan B dropped in trading on Monday after news emerged that the company's lenders did not approve the sale of its global pet business, but the credit facility from Applica Pet Products LLC that will fund the transaction is still set to launch on Tuesday.

Also in the secondary, Graham Packaging Holdings Co.'s term loan traded higher as the company announced plans to go public through a transaction with a special purpose acquisition company.

In other news, FoxCo Acquisition Sub LLC upsized its well received term loan B on Monday after the decision was made to downsize its senior notes offering, and Broadlane came out with timing on its proposed credit facility.

Spectrum Brands' term loan B fell off by a couple of points during the trading session following the company's announcement that it was unable to obtain the consent of its senior lenders for the sale of its United Pet Group business to Salton Inc., according to a buyside source.

However, despite this snag, Applica Pet Products, the acquisition subsidiary for United Pet Group and a wholly owned subsidiary of Salton, is still planning on holding a bank meeting on Tuesday to launch the $325 million credit facility (B1/BB) that is meant to fund the acquisition, a second market source remarked.

The consent of Spectrum Brands' lenders is a condition to the completion of the sale, but, even with the lack of lender support, Spectrum Brands said that the definitive purchase agreement continues in full force and effect, and that it intends to comply with its obligations thereunder in order to satisfy the conditions necessary to close the sale.

When asked what other options Spectrum may consider in order to get around the lender consent problem, a company spokesperson told Prospect News that there's no further comment beyond the Monday press release.

Proceeds from the sale of the business are expected to be used by Spectrum Brands to repay a portion of the borrowings outstanding under its ABL credit facility along with other senior bank debt.

On the news, Spectrum Brands' term loan B dropped in trading, closing the day around 92 bid, 94 offered, compared to Friday's levels of 94½ bid, 95½ offered, the buyside source said.

Under the transaction agreement, Salton is buying the pet business for $692.5 million in cash, plus additional consideration in the form of $98 million of Spectrum's variable-rate toggle senior subordinated notes due 2013 and $124.5 million of Spectrum's senior subordinated notes due Feb. 1, 2015, in each case taking into account the principal amount and any accrued interest.

The upcoming Applica Pet credit facility that will fund the acquisition is being led by Credit Suisse and GE Capital and consists of a $25 million revolver and a $300 million term loan.

Other acquisition financing will come from equity provided by Harbinger Capital Partners, Salton's controlling stockholder.

United Pet Group, which markets and manufactures pet supplies for fish, dogs, cats, birds and other small domestic animals, will operate as a standalone business following the acquisition.

Spectrum Brands is an Atlanta-based manufacturer and marketer of consumer batteries, pet supplies, electric shaving and grooming, electric personal care and portable lighting products. Salton is a Miramar, Fla.-based marketer and distributor of small household appliances.

Graham heads higher

Graham Packaging's term loan gained some ground on Monday as news came out that the company would be going public through an agreement with Hicks Acquisition Co. Inc. in partnership with Blackstone Group and the Graham Group, the current equity holders, according to a trader.

The term loan was quoted at 95½ bid, 96½ offered, up from 95 bid, 95½ offered, the trader said.

Under the transaction agreement, which is valued at about $3.2 billion, current stockholders of Graham Packaging will receive $350 million of cash held in trust, 35 million common shares and 2.8 million warrants.

The purchase consideration includes a transfer of value to the current Graham Packaging equity holders of about 2.8 million founder's shares and warrants.

In exchange, the Hicks-led sponsor will retain, through a series of transactions, earnout units, of which the shares have a trigger price of $13.75, and the warrants, which will become exercisable at a strike price of $10 and a trigger price of $15.

Hicks Acquisition's existing public stockholders will own about 66% of Graham Packaging's common shares outstanding after the completion of the transaction. The current equity holders, led by Blackstone, will remain in the aggregate the company's largest shareholder, with about 34% of the common shares.

The transaction has been structured to preserve Graham Packaging's existing capital structure and does not breach, or result in a default under, the company's existing credit facility or constitute a change of control under the indentures of its existing senior and senior subordinated notes.

According to an 8-K filed with the Securities and Exchange Commission, the company is estimating that it will pay down $156 million of its term loan B in connection with this transaction.

Senior secured debt to 2008 estimated EBITDA for the revised company is expected to be 3.8 times, compared to 4.1 times at the current Graham Packaging.

Net debt to 2008 estimated EBITDA for the revised company is expected to be 5.3 times, compared to 5.0 times at the current Graham Packaging.

Completion of the transaction is expected to take place in the third quarter, subject to expiration or early termination of the applicable Hart-Scott-Rodino waiting period, Hicks Acquisition stockholder approval and other customary closing conditions.

An agreement in principle has been reached on this transaction, but it is still subject to execution of a definitive agreement, which is expected to be finalized in the next few days.

Graham Packaging is a York, Pa.-based provider of blow-molded rigid plastic containers for the branded food and beverage, household, personal care/specialty and automotive lubricant industries.

FoxCo upsizes

FoxCo Acquisition came out with a change to its credit facility structure early on in the session, announcing that the term loan B was increased to $515 million from $485 million, according to a market source.

On the flip side, the company's bond offering was decreased to $200 million from $230 million, the source said. The bonds are being talked in the 13% to 13¼% range.

The decision was made to upsize the term loan B as a result of the tranche already being oversubscribed even though it just formally launched to investors with a bank meeting on June 24, the source explained.

"The deal is going very well," the source added.

Price talk on the term loan B was left unchanged at Libor plus 425 bps and the paper is still being offered to investors at an original issue discount of 97.

Like before, the term loan B has 101 soft call protection for one year and a 3% Libor floor through Sept. 30, 2009, after which the floor increases to 3.25% from Oct. 1, 2009 through Sept. 30, 2011.

FoxCo's now $565 million - up from $535 million - credit facility (Ba3/BB-) still includes a $50 million revolver that is talked at Libor plus 425 bps.

Deutsche Bank, UBS Securities, Bank of America and BNP Paribas are the lead banks on the bank deal, with Deutsche the left lead.

Proceeds from the credit facility and the bonds will be used to help fund Oak Hill Capital Partners acquisition of eight FOX network affiliated television stations from News Corp. for about $1.1 billion in cash.

The stations include WJW in Cleveland, KDVR in Denver, KTVI in St. Louis, WDAF in Kansas City, Mo., WITI in Milwaukee, KSTU in Salt Lake City, WBRC in Birmingham, Ala., and WGHP in Greensboro, N.C.

The transaction is expected to be completed in the third quarter.

Broadlane timing emerges

Broadlane firmed up timing on the launch of its proposed credit facility with the scheduling of a bank meeting for July 10, according to a market source.

All that was known on timing previously was that the deal would launch sometime in July.

Jefferies is the lead bank on the credit facility that will be used to help fund TowerBrook Capital Partners LP's acquisition of the company from Tenet Healthcare Corp. for about $155 million in cash.

Details on credit facility structure and price talk are not yet available, the source added.

Broadlane is a Dallas-based technology-oriented healthcare services company.

EnerSys closes

EnerSys closed on its new $350 million senior secured credit facility (Ba1/BBB-), according to a news release.

The facility consists of a $225 million term loan A and a $125 million revolver, with both tranches initially priced at Libor plus 175 bps.

Shortly after the deal's launch, a company spokesman had told Prospect News that they were looking to get pricing of Libor plus 200 bps on the credit facility.

Security is a first-priority interest in substantially all of the company's assets and the assets of the subsidiary guarantors, but limited to 65% of the voting stock of any foreign subsidiary.

Proceeds from the term loan A were used to pay the combined balance of $191.4 million, which was the final amount owing on the company's term loan B and revolver under the previous U.S. credit facility. The amount of term loan B debt had been recently reduced through the use of proceeds from a convertibles offering.

Prior to the June 4 bank meeting that was held to launch the credit facility into syndication, the term loan A was downsized from $250 million since the $22.5 million over-allotment option on the company's 3.375% 30-year convertible senior notes was exercised in full.

The new revolver was undrawn at close.

Bank of America and Wachovia acted as the joint lead arrangers and bookrunners on the deal, with Bank of America the left lead, and co-managers on the deal were Goldman Sachs PNC and RZB.

"Both the May 2008 $172.5 million convertible senior unsecured note issuance and the June 2008 $350 million senior secured credit facility syndication were well received by our lenders and investors, as evidenced by their strong demand and favorable terms and conditions," said Michael T. Philion, executive vice president of finance and chief financial officer, in the release.

"All our financial objectives were accomplished; namely, providing future capital structure flexibility, adding borrowing capacity to support our company's future growth and minimizing our long term cost of capital. We expect this refinancing will result in interest savings in fiscal year 2009 of about $4 million when compared to the prior fiscal year, which is equivalent to about $.06 of earnings per share," Philion added in the release.

EnerSys is a Reading, Pa.-based manufacturer, marketer and distributor of industrial batteries.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.