Stratus Technologies, Sagittarius Restaurants break; Movie Gallery bid heads higher

By Sara Rosenberg

New York, March 28 - Stratus Technologies Inc.'s credit facility freed for trading on Tuesday, with the first-lien term loan quoted atop 101 and the second-lien term loan quoted in the high-90's.

Also, hitting the secondary market Tuesday was Sagittarius Restaurants (Captain D's Inc.), with its term loan quoted in the 101-type context.

In other trading news, Movie Gallery Inc. saw its term loan levels tighten a bit as the bid side headed higher after spending the last few sessions in a downward spiral.

Stratus Technologies allocated its credit facility on Tuesday now that tranche sizes and pricing have been adjusted, and the deal freed for trading with the first-lien term loan seen quoted at 101¼ bid, 101¾ offered and the second-lien term loan seen quoted at 97 bid, 98 offered, according to a trader.

The first-lien term loan (B1/B-) is sized at $200 million and carries pricing of Libor plus 300 basis points. The tranche was recently upsized from $175 million and pricing came in at the high end of the original spread guidance - which was expected for a while now - of Libor plus 275 to 300 basis points.

Meanwhile, the second-lien term loan (Caa1/CCC) is sized at $100 million, carries pricing of Libor plus 900 basis points and was sold to investors with an original issue discount at 97. This tranche was recently downsized from $125 million. In addition, pricing on this loan was first talked at Libor plus 700 to 750 basis points and was later revised to the Libor plus 800 basis points area before finally firming up at the current spread.

Stratus Technologies' $330 million credit facility also contains a $30 million revolver (B1/B-).

Goldman Sachs and Deutsche Bank are the lead banks on the deal, with Goldman the left lead.

Proceeds from the credit facility will be used to a tender offer for all of the company's outstanding 10.375% senior notes due 2008.

Stratus Technologies is a Maynard, Mass., solutions provider to customers in telecommunications, financial services, banking, manufacturing, life sciences, public safety, transportation & logistics and other industries.

Sagittarius frees to trade

Sagittarius Restaurants' (Captain D's Inc.) credit facility also broke for trading during market hours, with its $270 million term loan quoted at 101 bid, 101¼ offered, according to traders.

The term loan is priced with an interest rate of Libor plus 225 basis points. During syndication, pricing on the tranche was reverse flexed from original price talk at launch of Libor plus 250 to 275 basis points.

The company's $330 million credit facility (B) also includes a $60 million revolver that is priced with an interest rate of Libor plus 250 basis points - the tight end of original price talk of Libor plus 250 to 275 basis points.

JPMorgan is the lead bank on the deal that will be used to help fund the acquisition of Del Taco Inc.

Private equity investors in the acquisition are Grotech Capital Group, Charlesbank Capital Partners, Leonard Green & Partners LP and Stockwell Capital LLC.

Captain D's is a Nashville, Tenn., seafood quick-service restaurant chain. Del Taco is a Lake Forest, Calif., Mexican quick-serve chain.

Movie Gallery tightens

Also in trading, Movie Gallery's term loan saw its bid side move to higher levels, creating a tighter market for the paper, according to a trader.

The term loan closed the session quoted at 89½ bid, 90½ offered, up half a point on the bid side on a day-over-day basis, but unchanged on the offer side, the trader said.

The bank debt had spent the early part of this month weakening on covenant compliance worries, but after the company completed an amendment to its credit facility around mid-March that relaxed certain financial covenants, levels had stabilized in the 93 bid, 94 offered type of context.

Just a few days later though, levels started to fall again as the company released full-year earnings estimates that investors found somewhat disconcerting, and then, shortly after that, when audited fourth-quarter and full-year numbers were released, levels dropped off even more to the 90 bid, 91 offered context.

And, as if the saga wasn't complicated enough, this past Friday, the company filed a 10-K in which it disclosed that four material weaknesses in internal controls over financial reporting were identified and that there is a possibility for non-compliance with some financial covenants for the first quarter of 2007 without further amendments to its credit facility.

Following the filing of the 10-K on Friday, the Dothan, Ala.-based video rental company's term loan had dropped to 89¾ bid, 90¾ offered, and the softening continued into Monday's market as levels widened to 89 bid, 90½ offered.

Pegasus ups term loan talk

Pegasus Solutions Inc. has increased the price talk on its $110 million term loan to the Libor plus 300 to 325 basis points context from original price talk at launch of Libor plus 275 basis points, according to a market source.

Pricing on the company's $10 million revolver is expected to remain where it was launched at Libor plus 275 basis points, the source said.

JPMorgan is the lead bank on the $120 million credit facility (B1/B).

Proceeds will be used to fund Prides Capital Partners LLC's acquisition of Pegasus for approximately $275 million and provide for working capital.

Under the acquisition agreement, Pegasus stockholders not affiliated with the investment group will receive $9.50 in cash for each share of Pegasus common stock they hold.

Pegasus is a Dallas-based provider of technology and services to hotels and travel distributors.

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