Scientific Games' loan prices light, some say; Wyndham dives on slashed EBITDA forecast

By Sara Rosenberg

New York, Oct. 17 - Scientific Games' new credit facility may be a tough sell, according to market sources. The $360 million loan, which launched on Thursday, was viewed as lightly priced with the $85 million five-year revolver carrying an interest rate of Libor plus 275 basis points and the $275 million six-year term loan carrying a price of Libor plus 325 basis points.

In secondary news, the big loss of the day belonged to Wyndham International Inc., as its bank debt traded down by about seven points to 73 on lowered EBITDA forecasts for the third quarter, according to a trader.

Scientific Games, formerly known as Autotote, is a "tough credit," according to a sell-side source. "Autotote is not an easy business. But the company has done well. I'm a bit surprised [by the pricing]. I thought it would come in the 400s."

"The company services state lottery machines," a fund manager previously told Prospect News. "One risk would be state contracts. Whenever government agencies are involved there are always complications. The [mitigating factor] is that a lot of state budgets are running deficits right now and lottery is one way to plug the deficit so their contracts wouldn't get terminated this year."

The loan is a "best-efforts deal", meaning that it is not underwritten so the amount funded will only be as much as the agent banks can syndicate, according to the fund manager.

Bear Stearns is the lead bank on the refinancing deal

The loan is anticipated to receive a Ba3 rating from Moody's Investors Service and a BB- rating from Standard & Poor's, the fund manager said.

Scientific Games is a New York, N.Y. provider of services, systems and products to both the instant ticket lottery industry and the pari-mutuel wagering industry.

Wyndham's bank debt traded down to 73 after the company lowered third quarter EBITDA guidance to approximately $60 million from $82 million to $87 million. One trader said he had previously seen the loan at 80 while a second said the last trade he saw was at 83.

The Dallas hotel and resort company's reduced forecast is primarily "a result of the slow return of business travel due to the sluggish economy impacting the entire industry," a news release said.

Towards the end of September, Wyndham's bank paper bounced up by about two points to 83/85 on the IRL and 821/2/84½ on the B loan following news of a definitive agreement with Westbrook Hotel Partners IV, LLC to sell 13 hotel properties for approximately $447 million.

Meanwhile, AES Corp.'s $1.6125 billion credit facility (B2) "is slow to go," according to market sources, with the syndicate "out trying to see what they can do."

"The energy sector isn't the easiest to get your arms around," a market professional said. "[There are] general concerns over the industry. The existing paper has traded up but it's still weak. It's a stock secured deal with limited assets, which definitely limits your investor base. This doesn't mean it won't get syndicated [though]."

Interestingly, the loan contains a stipulation for a 50 basis point termination fee, which gives potential lenders an added incentive to invest in the facility. "It's kind of unusual," a source told Prospect News. "If the facilities are cancelled the borrowers will pay a 50 basis point fee to the lenders."

The loan consists of a $500 million revolver, a $75 million letter of credit facility, a $350 million term loan A, a $425 million term loan B and a $262.5 million term loan C, sources said. All tranches are due in July 2005 and have an interest rate of Libor plus 375 basis points.

Citibank is the lead bank on the Arlington, Va. power company's refinancing deal.

Talk has been circulating recently that Dex Media East LLC's (QwestDex, Ba3/BB-) margins have been "fluid" with the $700 million term loan B flexed up to Libor plus 400 basis points from Libor plus 350 basis points. But, these rumors were emphatically denied by a syndicate source who claimed that the deal has not been flexed up from 350 and is progressing nicely.

The pro rata portion consists of a $100 million revolver and a $690 million term loan A, both priced at Libor plus 300 basis points.

JPMorgan, Bank of America, Deutsche Bank, Lehman Brothers and Wachovia Securities are the lead banks on the facility, which will be used to help fund the leveraged buyout of the directory services business by The Carlyle Group and Welsh, Carson, Anderson & Stowe; directory services company.

Del Monte Foods Co., like Burger King Corp., was pushed off till November, according to a sell-side source. "I think they're potentially renegotiating the sale of some of the assets," he explained.

The $1.4 billion credit facility (Ba3) is expected to consist of a $350 million six-year revolver, a $250 million six-year term loan A and an $800 million eight-year term loan B. Bank of America, JPMorgan Chase, UBS Warburg and Morgan Stanley are the lead banks on the deal.

Proceeds will be used to help the San Francisco, Calif. processed food company fund a merger with certain H.J. Heinz Co. businesses.

The proposed merger is expected to close at the end of calendar year 2002 or early 2003, and is subject, among other things, to approval by the company's stockholders, receipt of a private letter ruling from the Internal Revenue Service, receipt of applicable governmental approvals and the satisfaction of other customary closing conditions.

Unlike Del Monte, speculation on Burger King's loan being pushed back had nothing to do with renegotiation; rather market sources basically attributed it to the high yield environment. "They're probably waiting on the bond market," one source previously explained. "It was kind of hot but now it's cooling off." Another source hypothesized that either that the banks are waiting for the high yield market to stabilize a little bit since timing on the bond deal and the bank deal have to be a little bit synchronized or that there is something wrong with the credit.

As far as structure on the Miami, Fla. hamburger fast-food chain's loan is concerned, there have been some numbers floating around the market with the bank debt being discussed in the zip code of $800 to $900 million, while the bond offering could potentially be for $500 million.

JPMorgan and Salomon Smith Barney are the lead banks on both the bank debt and the bonds.

Proceeds are being use help fund the leveraged buyout of Burger King by equity sponsors Texas Pacific Group, Bain Capital and Goldman Sachs Capital Partners from Diageo plc.

Another deal that has been relatively fluid on timing is United States Filter Corp.'s $325 million credit facility. Originally, the loan was anticipated to launch during the second week of October. However, it is now being said that the deal will possibly come next week or the week after.

"There was no rush to bring something to market when there was a bit of a backlog in terms of supply," a syndicate source said. "We have until year end or thereabouts to close so there was no reason to push it. With time available nobody wanted to bring something in a [poor] market."

The loan consists of a $75 million six-year revolver with an interest rate of Libor plus 275 basis points and a $250 million seven-year term loan B with an interest rate of Libor plus 325 basis points, sources said. However, all details on the loan are subject to change.

JPMorgan, Goldman Sachs and UBS Warburg are the lead banks on the deal.

Proceeds will be used to help fund the acquisition of United States Filter's waterworks distribution business. The business is being bough by a company jointly owned by JPMorgan Partners and Thomas H. Lee Partners for a cash purchase price of $620 million.

United States Filter is a Palm Desert, Calif. provider of water and wastewater systems.

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