School Specialty, Knoll set price talk; Mega Bloks breaks; Portfolio auction grabs attention

By Sara Rosenberg

New York, Sept. 8 - School Specialty Inc. and Knoll Inc. revealed price talk on their credit facilities as both deals launched via bank meetings on Thursday.

In secondary doings, Mega Bloks Inc.'s credit facility freed up for trading, with the term loan B trading up into the lower-101 context by day's end. And, a portfolio of par names was auctioned off, stealing a good amount of attention from market players.

School Specialty launched its proposed credit facility Thursday with opening price talk of Libor plus 225 basis points on the $175 million revolver, and opening price talk of Libor plus 250 basis points on both the $300 million term loan B and the $250 million delayed-draw term loan, according to a market source.

JPMorgan and Bank of America are co-lead arrangers on the deal, JPMorgan, Bank of America and Deutsche Bank are joint bookrunners, with JPMorgan also administrative agent, Bank of America syndication agent and Deutsche documentation agent.

Proceeds from the $725 million credit facility will be used to help finance Bain Capital Partners LLC's leveraged buyout of School Specialty.

Bain has agreed to purchase the Greenville, Wis., education company in a transaction valued at $1.5 billion including assumption of non-convertible debt totaling $101 million.

The delayed-draw term loan will be used to fund certain permitted acquisitions and to repurchase any of School Specialty's 3.75% convertible subordinated notes due 2023 tendered and exchanged.

School Specialty has also received commitments for up to $525 million in senior unsecured and senior unsecured subordinated bridge facilities, up to $150 million pay-in-kind loans under a senior unsecured subordinated bridge facility, a $175 million trade receivables commercial paper co-purchase conduit facility and $460 million in equity financing from Bain.

Knoll price talk

Knoll launched its $450 million credit facility (BB-) Thursday with opening price talk of Libor plus 200 basis points on both the $150 million five-year revolver and the $300 million seven-year term loan, according to a market source.

Primarily, the deal is going out to existing lenders, and by the end of the day, early commitments were already in hand, the source said.

The term loan is being offered to investors at par.

Commitments are due on Sept. 22.

Through this refinancing deal, the company is reducing its term loan debt by about $100 million, while increasing its revolver capacity and reducing interest rates.

UBS and Bank of America are the lead banks on the deal.

Subject to the closing of the refinancing, Knoll plans on declaring and paying quarterly dividends of $0.10 per share on its common stock, double its current quarterly dividend.

Knoll is an East Greenville, Pa., designer and manufacturer of branded office furniture products and textiles.

RailAmerica nets orders

RailAmerica Inc.'s $75 million add-on to its term loan had already gotten some early orders in from investors shortly after its Thursday launch, according to a market source. UBS is the lead bank on the deal.

The add-on is priced in line with the existing term loan debt.

Proceeds from the add-on will be used for a small acquisition.

RailAmerica is a Boca Raton, Fla., owner and operator of short line freight railroad and regional rail service.

Mega Bloks tops 101

Mega Bloks's $260 million seven-year term loan B broke for trading Thursday, with the paper opening at par ¾ bid, 101¼ offered but quickly trading up to 101¼ bid, 101½ offered where it closed out the session, according to market sources.

The term loan B is priced with an interest rate of Libor plus 175 basis points. Originally, the tranche was launched with pricing of Libor plus 225 basis points but was reverse flexed on strong demand. In fact, demand was so high, that allocations on the deal were "very small," a fund manager said.

The $400 million credit facility (Ba3/BB-) also contains a $60 million five-year Canadian revolver, a $40 million five-year U.S. revolver and a $40 million five-year term loan A - with all three pro rata tranches priced with an interest rate of Libor plus 200 basis points.

Proceeds from the term loans are being used to fund the already completed $350 million acquisition of Rose Art Industries Inc., to refinance $12.3 million of debt, to add $2.6 million of cash to the balance sheet and to pay about $9 million of fees and expenses.

Both revolvers are expected to be undrawn at closing and will be used for working capital purposes.

Bank of Nova Scotia and Bank of Montreal are the lead banks on the deal.

Mega Bloks is a Montreal-based producer of fun and educational construction toys.

Portfolio auction spotlighted

An auction went off during Thursday's session for a $199 million portfolio filled with par names, catching the interest of many loan market participants, according to a trader.

The seller was a New England-based asset manager.

The winner of the auction was Credit Suisse First Boston, beating a cover bid of 101.15, the trader added.

Delphi trades up

Delphi Corp.'s bank debt moved up by about half a point during Thursday's market hours, with some pointing to the high-yield market as the impetus and others pointing to the company's decision to eliminate its dividend and a more optimistic attitude toward a potential financial bailout.

The revolver was quoted at 94½ bid, 95¼ offered by day's end, up from 94 bid, 94½ offered on Wednesday, and the term loan was quoted at 102 bid, 102½ offered by day's end, up from 101½ bid, 102 offered early in the Thursday session, according to various traders.

"Short covering in the high-yield market pushed it up," one trader said.

However, a second trader pointed to the dividend news and said that he heard rumblings that the United Auto Workers union remarked that it would prefer to keep Delphi out of bankruptcy - which, of course, is good news for investors.

On Thursday, Delphi announced the elimination of its quarterly dividend of $0.015 per share on $0.01 par value common stock for the remainder of the year so as to conserve liquidity during the current restructuring discussions surrounding its U.S. legacy liabilities and the challenging U.S. production volumes from its largest customer.

Delphi is looking to former corporate parent General Motors Corp. for some sort of financial bailout and has warned that it could be forced into Chapter 11 if it does not get concessions from the UAW and help from GM.

Many had thought that Chapter 11 was a very unlikely course of action for the company but over the past two weeks or so, bankruptcy concerns have flared up as media reports have been saying that UAW wouldn't support all the concessions being sought by the companies.

Delphi is a Troy, Mich., supplier of vehicle electronics, transportation components, integrated systems and modules, and other electronic technology to vehicle manufacturers.

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