Federal IT, Deltek upsize, reduce pricing; New World, Insurance Auto set price talk; Protection One breaks

By Sara Rosenberg

New York, April 15 - Federal Information Technology Systems LLC upsized its term loan, reduced pricing and added a step down as the deal was more than three times oversubscribed. And, Deltek Systems Inc. added a delayed-draw tranche to its in-market deal and cut pricing by 25 basis points across the board.

Meanwhile, price talk came out Friday on both the New World Restaurant Group Inc. and the Insurance Auto Auctions Inc. recently launched credit facilities.

And, in the secondary, Protection One Inc.'s credit facility allocated and freed up for trading, with the term loan B wrapping around the mid-par area.

Federal IT increased the size of its term loan B to $90 million from $80 million on Friday and reverse flexed pricing to Libor plus 275 basis points from Libor plus 300 basis points, according to a buyside source.

Furthermore, a step down in pricing was added to the institutional tranche, under which the spread can go to Libor plus 250 basis points if net leverage is less than 2.75x.

"They had quite a few people interested in the deal. [They] figured they'd take advantage of it and get a little bit of extra money," the source said.

"They have about $270 million in orders in the book. They had to shut down the book early. They shut it down on Tuesday or Wednesday of this week. It wasn't supposed to shut down until Tuesday of next week but they didn't want allocations to be totally terrible, even though they still will be," the source continued.

"They're going out to everybody today [with the changes] to see if they're OK with it," the source concluded.

The term loan is being issued to investors at par.

Federal IT's facility also contains a $10 million revolver, but that tranche is not being sold as the two lead banks on the deal - Bear Stearns and Wachovia, with Bear Stearns the left lead - have decided to account for that portion of the transaction.

Proceeds from the now $100 million credit facility (B2/B+) will be used to help fund the acquisition of Sensor Systems Inc. Federal IT is a Kelso portfolio company, but with this transaction, Pegasus Advisors is being added as an equity sponsor.

Following closing of the transaction, total leverage will be around 3.7x.

Federal IT is a Morristown, N.J.-based provider of information technology services to the intelligence defense sector. Sensor Systems is a Sterling, Va.-based developer of image exploitation and analysis software primarily for the intelligence community.

Deltek upsizes, cuts pricing

Deltek added a $15 million six-year delayed-draw term loan B to its credit structure and reverse flexed pricing on its revolver and term loan B tranches that have been in the syndication process since March 30, according to a syndicate document.

The $30 million five-year revolver and the $115 million six-year term loan B are now priced at Libor plus 250 basis points compared to original price talk of Libor plus 275 basis points.

The new $15 million delayed-draw term loan B is also priced at Libor plus 250 basis points, the document said.

Credit Suisse First Boston is the sole lead arranger and sole bookrunner on the recapitalization deal.

Deltek is a Herndon, Va., provider of application software and solutions to project businesses and professional services firms.

New World price talk

New World Restaurant Group set an opening pricing level of Libor plus 425 basis points on its $15 million five-year revolver (B3/CCC+) and $125 million six-year first-lien term loan B (B3/CCC+), and an opening pricing level of Libor plus 675 basis points on its $45 million seven-year second-lien term loan (Caa1/CCC-), according to a market source.

The term loans are being offered to investors at par.

The second-lien term loan contains call protection of 102 in year one and 101 in year two, the source added.

Bear Stearns is the lead bank on the $185 million refinancing deal that launched via a bank meeting this past Thursday.

New World Restaurant is a Golden, Colo., company that operates in the quick casual restaurant industry.

Insurance Auto price talk

Insurance Auto Auctions set opening pricing on its $115 million term loan B at Libor plus 300 basis points and set opening pricing on its $50 million revolver at Libor plus 275 basis points, according to a market source.

The term loan is being offered to investors at par.

Bear Stearns and Deutsche Bank are the lead banks on the $165 million deal (B2/B) that launched via a bank meeting this past Thursday.

Proceeds from the credit facility will be used to help fund Kelso & Co.'s leveraged buyout of Insurance Auto Auctions.

The company already sold $150 million of 11% eight-year senior unsecured notes in late-March to help fund the LBO as well. Price talk on the notes was 10½% to 10¾%.

In addition, Kelso has committed to provide $148.7 million in equity financing.

Under the terms of the agreement, Insurance Auto stockholders will receive $28.25 per share in cash upon the closing of the merger. The total value of the merger transaction is about $385 million.

Closing on the acquisition, which is expected to occur in the second quarter, is subject to terms and conditions customary for transactions of this type, including stockholder approval and the completion of financing.

Insurance Auto is a Westchester, Ill., provider of automotive total loss and specialty salvage services.

Movie Gallery upsizing official

Movie Gallery Inc. made the upsizing of its term loan B by $150 million official Friday as the company announced that it would indeed be selling a downsized $325 million senior unsecured floating-rate note offering.

The term loan B is now sized at $700 million, compared to an original size of $550 million, but price talk remained at Libor plus 300 basis points.

This shift in funds from the bonds to the loan has been rumored for a few weeks now because of the recent back-up in the high-yield market and the strong interest in the loan market.

Movie Gallery Inc.'s senior secured credit facility also contains a $95 million five-year term loan A with an interest rate of Libor plus 275 basis points and a $75 million five-year revolver with an interest rate of Libor plus 275 basis points.

Wachovia Capital Markets LLC is the sole lead arranger, sole bookrunner and administrative agent on the credit facility, and Merrill Lynch will be involved in the loan as well.

Wachovia committed 90% of the debt financing package, and Merrill Lynch committed 10%.

Proceeds from the term loans and the proposed bond offering will be used to pay the approximately $850 million purchase price for Hollywood Entertainment Corp., plus the assumption of about $350 million of debt. Movie Gallery will be acquiring all of the outstanding shares of Hollywood for $13.25 per share in cash.

Revolver borrowings will be available for working capital and general corporate purposes.

The revolver contains an accordion feature allowing for the expansion of the tranche by $25 million under certain circumstances.

Movie Gallery is a Dothan, Ala.-based owner and operator of video specialty stores. Hollywood is a Wilsonville, Ore.-based (and will remain based there following completion of the acquisition) video chain.

Protection One breaks

Protection One's $250 million term loan B opened for trading on Friday, with levels quoted pretty consistently and closing out the session at par 3/8 bid, par ¾ offered, although the tranche did trade as low as par ¼ and as high as par ¾ at various points during the day, according to a trader.

The term loan B is priced with an interest rate of Libor plus 300 basis points. Original price talk had been Libor plus 350 basis points but the deal was reverse flexed during syndication as it was somewhere around three times oversubscribed.

Protection One's $275 million credit facility (B2/B+) also contains a $25 million revolver with an interest rate of Libor plus 325 basis points.

The term loan B was offered to investors at par, and revolver commitments of $10 million got an upfront fee of 75 basis points.

Bear Stearns and Lehman Brothers are the lead banks on the deal, with Bear Stearns the left lead.

Proceeds will be used to refinance existing bank debt and some bond debt.

Protection One is a Lawrence, Kan., provider of commercial and residential security services.

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