Heinz $9.5 billion loans allocate; Philadelphia Energy, Reddy Ice lead parade of spread cuts

By Paul A. Harris

Portland, Ore., March 27 - The LCDX 19 index of bank loan credit default swaps ended the Wednesday session slightly lower at 102¾ bid, 103¼ offered, down 1/8 point, according to market source.

Nonetheless, cash continues to stream into the bank loan and high-yield asset classes, according to a fund manager whose portfolio includes both.

In the loan primary market, H.J. Heinz Co.'s $9.5 billion package of term loans allocated.

And Philadelphia Energy Solutions Refining and Marking LLC and Reddy Ice Corp. led a parade of deals in the market that are reducing spread and discount talk.

Heinz allocates

Heinz's total $9.5 billion of term loans allocated on Wednesday, according to market sources.

The B1 tranche broke to par ¼ bid, par ¾ offered, and the B2 tranche broke to par ¾ bid, 101¼ offered, according to a mutual fund manager whose portfolio includes leveraged loans.

Later, however, a market source saw them lower, and quoted the B1 loan at 99¾ bid.

The blowout deal was said to have played to $17 billion of orders.

As reported, Heinz reduced pricing on its six-year term loan B-1 to Libor plus 225 basis points from talk of Libor plus 275 bps to 300 bps and on its seven-year term loan B-2 to Libor plus 250 bps from talk of Libor plus 275 bps to 300 bps, according to a market source.

Also, both term loans saw the addition of a 25 bps step-down when net first-lien leverage is less than 2.1 times, the source said. At close, net first-lien leverage will be 3.1 times.

The total amount of term loan B-1 and B-2 was reduced to $9.5 billion from $10.5 billion as the company upsized its senior secured second-lien notes offering to $3.1 billion from $2.1 billion.

In addition to the term loans, the company's now $11.5 billion senior secured credit facility (Ba2/BB/BB+), down from $12 billion, includes a $2 billion revolver that was upsized from $1.5 billion.

At launch, the company was planning on getting $8.5 billion of U.S. term loan B-1 and B-2 debt, $1.4 billion euro equivalent in six-year term loan B-1 and seven-year term loan B-2 debt, and up to $600 million in sterling-denominated six-year term loan B-1 and seven-year term loan B-2.

However, the company dropped the euro and sterling loans and instead moved those funds into the U.S. loans to get a 100% U.S. dollar capital structure.

J.P. Morgan Securities LLC, Well Fargo Securities LLC, Barclays and Citigroup Global Markets Inc. are the arrangers on the deal.

Proceeds will be used to help fund the company's buyout by Berkshire Hathaway and 3G Capital for $72.50 in cash per share. The deal, which includes the assumption of Heinz's outstanding debt, is valued at about $28 billion.

Other funds for the transaction will come from $16.24 billion of equity.

Closing is expected in the third quarter, subject to shareholder approval and regulatory approvals.

Heinz is a Pittsburgh-based food product company.

Philadelphia Energy cuts discount

Philadelphia Energy Solutions cut the original issue discount it is offering on its $500 million five-year term loan B (B1/BB-) by 50 cents, a market source said on Wednesday.

The reduction revises the discount to 98.5 from 98.

Spread talk remains Libor plus 500 basis points with a 1.25% Libor floor, and the loan remains non-callable for one year, then at 102 in year two and 101 in year three.

Allocations are expected early in the week ahead.

J.P. Morgan Securities LLC is the lead bank on the deal.

Proceeds will be used for general corporate purposes and to fund a dividend.

Philadelphia Energy Solutions is a Philadelphia-based owner and operator of the Philadelphia refinery complex, which includes the Girard Point and Point Breeze refineries.

Reddy Ice trims spread

Reddy Ice tightened talk on its $225 million six-year covenant-light first-lien term loan (B1/B) and its $120 million 61/2-year covenant-light second-lien term, a market source said on Wednesday.

The first-lien term loan is now talked at Libor plus 550 basis points, reduced from 550 to 575 bps. The discount was also cut to by 50 cents, taking it to 99 from 98.5.

Pricing on the second-lien loan was cut to Libor plus 950 bps, reduced from earlier spread talk of 950 to 975 bps. The discount remains unchanged at 98.

Both tranches feature 1.25% Libor floors.

The call structure of the second lien loan was also changed. It now has a 101 one-year hard call, revised from the previous 103, 102, 101 call structure.

The company's $395 million credit facility also provides for a $50 million five-year revolver.

Commitments were due by the Wednesday close.

J.P. Morgan Securities LLC and Jefferies Finance LLC are the lead banks on the deal.

Proceeds will be used to refinance existing debt and for general corporate purposes.

Reddy Ice is a Dallas-based manufacturer and distributor of packaged ice products.

Crown Media cuts spread

Crown Media Holdings Inc. reduced spread talk on its $172 million term loan B due July 2018 (Ba2/BB) to Libor plus 300 basis points from earlier talk of 325 to 350 bps, according to a market source.

J.P. Morgan Securities LLC is the lead bank on the deal.

The 1% Libor floor remains unchanged, as does the original issue discount of 99.75.

The B loan has 101 soft call protection for one year.

Proceeds will be used to refinance an existing roughly $188 million term loan B due July 2018.

Expected loan ratings are Ba2/BB, the source added.

Crown Media is a Studio City, Calif.-based owner and operator of pay television channels, including the Hallmark Channel and Hallmark Movie Channel.

Applied Systems upsizes

Applied Systems Inc. upsized its package of first- and second-lien term loans to $771 million from $621 million, an informed source said on Wednesday.

The deal includes repricings of its existing $546 million of first-and second-lien debt, as well as tack-ons to those tranches.

Included are a $371 million repricing of the company's first-lien term loan due December 2016 at Libor plus 325 basis points, with a 1% Libor floor at par, and a $150 million tack-on to the first-lien term loan due December 2016, at Libor plus 325 bps, with a 1% Libor floor at 99.75.

In addition there is a $175 million repricing of the second-lien term loan due June 2017, at Libor plus 725 bps with a 1% Libor floor at par, and a $75 million tack-on to the second-lien term loan due June 2017, at Libor plus 725 bps with a 1% Libor floor at 99.75.

The first lien tack-on was upsized from $75 million. The second-lien tack-on was added to the package with the upsizing.

Credit Suisse Securities (USA) LLC is the lead bank on the deal.

Funds from the add-on loan will be used for acquisition financing. With respect to the upsize amount, $75 million of the first-lien add-on and $75 million of the second-lien add-on will be used to fund a dividend.

The first-lien add-on has a ticking fee of half the spread starting after 30 days and the full spread after 60 days, the source added. The added second-lien add-on has a ticking fee of half the spread from 31 days to 60 days, and the full spread thereafter.

Applied Systems is a University Park, Ill.-based software provider for the insurance industry.

Atkins downsizes

Atkins Nutritionals Holdings II Inc. reduced the size of its credit facility to $355 million from $425 million, and restructured the deal, a market source said on Wednesday.

The first lien tranche (B1/B-) was cut to $255 million from $280 million. The maturity was decreased to 5.75 years from six years.

The second lien tranche (Caa1/CCC) was cut to $100 million from $125 million. The maturity was reduced to six years from 6.5 years.

Credit Suisse Securities (USA) LLC is the lead bank on the deal.

Pricing remains unchanged.

Talk on the first-lien term loan is Libor plus 500 basis points with a 1.25% Libor floor and an original issue discount of 99, and the second-lien term loan is talked at Libor plus 850 bps with a 1.25% Libor floor and a discount of 98, the source continued.

Commitments are due at 3 p.m. ET on Thursday.

Proceeds will be used to refinance existing debt and fund a dividend.

Atkins is a Denver-based weight management brand.

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