Thomson adds covenant; Asurion ups price talk, tweaks terms; secondary softness returns

By Sara Rosenberg

New York, June 22 - Thomson Learning came out with a new change to its credit facility, this time adding a financial covenant to the deal, and Asurion Corp. also made a second round of revisions to its deal as it increased guidance, decided to offer the first-lien term loan at more of a discount and added soft call protection.

Meanwhile, in the secondary, general market weakness was once again the name of the game, with both cash and LCDX lower on the day, although Lear Corp.'s term loan B didn't get hit as hard, as investors are waiting to see what happens with the company's buyout.

Thomson Learning announced on Friday morning that it added a senior secured leverage ratio covenant of 8.25 times to its $3.74 billion senior secured credit facility, according to a market source.

This is the second time this week that the transaction has undergone a modification in order to attract investors.

Just this past Wednesday, the company increased pricing on both its revolver and term loan B tranches, removed the super-priority from the revolver, and added an original issue discount and soft call protection to the term loan B.

Following those first changes, pricing on the $300 million six-year revolver and the $3.44 billion seven-year term loan B was reset to Libor plus 275 basis points. The revolver was originally launched at Libor plus 225 bps - when it was still super-priority - and the term loan B was originally launched at Libor plus 250 bps.

In addition, the term loan B gained an original issue discount that is being talked at 99 to 99¼ and 101 soft call protection for one year.

Prior to the changes, the revolver was rated B1/B+ and the term loan was rated B1/B.

RBS Securities, JPMorgan, Citigroup and UBS are the lead arrangers on the $3.74 billion senior credit facility, with RBS as administrative agent, JPMorgan as syndication agent, and Citi and UBS as co-documentation agents.

Proceeds will be used to help fund the acquisition of Thomas Learning, which is a division of Thomson Corp., by Apax Partners and Omers Capital Partners.

The Stamford, Conn.-based higher education, careers and library reference assets include Wadsworth, Delmar Learning, Gale, Heinle, Brooks/Cole and South-Western.

The transaction is expected to close in the third quarter, subject to regulatory approvals and other customary closing conditions.

Asurion reworks deal again

Asurion was another deal that got reworked as a result of the "choppiness" in the primary market, with its modifications including a second increase in first- and second-lien term loan price talk, a sweetening of the first-lien original issue discount and the addition of soft call protection to the first-lien term loan, according to a market source.

The $1.755 billion first-lien term loan is now being talked at Libor plus 275 bps to 300 bps, up from this past Tuesday's revised talk of Libor plus 250 bps and original talk at launch of Libor plus 225 bps, the source said.

In addition, the first-lien term loan is now being sold at 99, as opposed to 99½ as was proposed earlier this week and at par as was proposed at launch, the source continued.

Furthermore, the first-lien term loan now carries 101 soft call protection for one year as opposed to no call protection, the source remarked.

Meanwhile, the $580 million second-lien PIK toggle term loan is now being talked at Libor plus 625 bps to 650 bps cash pay, up from recently revised talk of 575 bps cash pay and from original talk at launch of Libor plus 550 bps cash pay, the source added.

If PIK is elected on the second-lien loan, pricing will increase by 75 bps.

Call protection on the second-lien term loan is 102 in year one and 101 in year two. This was changed on Tuesday from just 101 in year one.

The second-lien term loan is being sold at par.

Asurion's $2.435 billion credit facility also includes a $100 million revolver that is priced at Libor plus 200 bps, in line with original talk.

Commitments are due on Monday at noon ET. Originally, the commitment deadline was set for this past Thursday.

Merrill Lynch, Bank of America and Lehman Brothers are the lead banks on the deal.

Proceeds will be used to help fund the acquisition of a majority stake in the company by Madison Dearborn Partners, Providence Equity Partners and Welsh, Carson, Anderson & Stowe.

Asurion is a Nashville, Tenn., provider of enhanced services to the wireless telecommunication industry.

Hargray retranches

Hargray Communications Group, Inc. increased the size of its first-lien term loan and downsized its second-lien term loan, according to a market source.

The first-lien term loan (B1/B) is now sized at $210 million, up from $195 million, while pricing was left unchanged at Libor plus 225 bps, the source said.

As for the second-lien term loan (Caa1/CCC+), that's now sized at $90 million, down from $95 million, with pricing left unchanged at Libor plus 500 bps, the source added.

Hargray's now $325 million (up from $315 million) credit facility also includes a $25 million revolver (B1/B) that is priced at Libor plus 225 bps.

Bank of America and RBC Capital are the joint bookrunners on the deal, which will be used to help fund Quadrangle Capital Partners' acquisition of the company.

Hargray is based in Hilton Head Island, S.C., and provides telecommunication services in southeastern South Carolina and northeastern Georgia.

LCDX, cash market drop

After just a one-day hiatus, LCDX and the cash loan trading market returned to their downward spirals on Friday just because of general weakness everywhere, according to a trader.

LCDX went out at 98.50 bid, 98.60 offered, down from Thursday's levels of 98.95 bid, 99.05 offered, the trader said.

"Credit spreads are widening over every asset class so this thins is following suit," the trader said.

As for the cash market, that was down about a quarter of a point, with some names even off as mush as three-eighths of a point, the trader said.

Just as an example, Michaels Stores Inc., an Irving, Texas, specialty retailer for the hobbyist and do-it-yourself home decorator, saw its term loan B drop to 99¾ bid, par offered from par bid, par ¼ offered, the trader remarked.

And, Georgia-Pacific Corp., an Atlanta-based manufacturer and marketer of tissue, packaging, paper, building products and related chemicals, saw its term loan B end the day at par 1/8 bid, par 3/8 offered, down from par ¼ bid, par ½ offered, the trader continued.

"The first part of the week it was covenant-light deals that were getting hit. Now it's just everything," the trader added.

Lear dip softened by meeting postponement

Although Lear's term loan B did fall a little in trading, the drop was somewhat cushioned by the uncertainty over the company's buyout getting OK'd by shareholders, according to a trader.

The term loan ended the day at 99 3/8 bid, 99¾ offered, down from 99½ bid, 99 7/8 offered, the trader said.

"Everyone is waiting for the shareholder vote, which got postponed today. Not as drastic a move [as the rest of the market] because if the deal doesn't get approved, this gets ripped up," the trader added.

On Friday morning, Lear announced that it is delaying its shareholder meeting to July 12 from June 27 to allow stockholders sufficient time to evaluate the company's response to recent criticisms of the proposed acquisition by American Real Estate Partners, LP for $36 per share in cash.

In the letter to stockholders, the board of director's special committee emphasized that the offer price is fair to shareholders, no competing offers were received despite over 41 potential strategic and financial buyers being contacted and there is significant execution risk to the company's long-term business plan.

Lear is a Southfield, Mich.-based supplier of automotive seating, electronics and electrical distribution systems.

GenCorp closes

GenCorp Inc. closed on its new $280 million credit facility (Ba2/BB-), according to a company news release.

The facility consists of an $80 million revolver due June 21, 2012, a $75 million term loan due April 30, 2013 and a $125 million synthetic letter-of-credit facility due April 30, 2013, with all tranches priced at Libor plus 225 bps.

The revolver has a 50 bps commitment fee.

Wachovia and JPMorgan acted as the joint lead arrangers and joint bookrunners on the deal, which was used to refinance existing debt.

Covenants include a maximum total leverage and a minimum interest coverage ratio.

GenCorp is a Rancho Cordova, Calif., manufacturer of aerospace and defense products and systems.

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