EP Energy, Sprouts, Preferred Sands break; PQ revises discount; Aptalis ups amendment fee

By Sara Rosenberg

New York April 10 - EP Energy Corp. finalized the original issue discount on its term loan and then freed up for trading on Tuesday, with levels quoted above the discount price, and Sprouts Farmers Market and Preferred Sands LLC both saw their incremental term loans hit the secondary market.

In more loan happenings, PQ Corp. widened the original issue discount on its loan, and Aptalis Pharma Inc. (formerly known as Axcan Holdings Inc.) increased the consent fee that it is offering lenders for an amendment to its credit facility.

Furthermore, Schrader came out with price talk on its first- and second-lien term loans, and Blackboard Inc. set guidance on its add-on, as both companies presented their new debt to lenders during the session, and Constellation Brands Inc. surfaced with new deal plans.

EP Energy tops OID

EP Energy's $750 million senior secured covenant-light term loan (Ba3/BB-) made its way into the secondary market on Tuesday, with the debt seen at par bid, par ½ offered, according to a trader.

Pricing on the loan due May 1, 2018 is Libor plus 525 basis points with a 1.25% Libor floor, and it was sold at an original issue discount of 99, after firming at the low end of the 98 to 99 guidance in the afternoon, a source said. Included in the loan is 101 soft call protection for one year.

Earlier this week, the term loan was upsized from $500 million, as the company downsized its senior unsecured notes due 2020 to $2 billion from $2.5 billion and upsized its senior secured notes due 2019 to $750 million from $500 million.

Also, it wasn't until Monday that official price talk on the term loan was announced. Prior to that, there were only whispers in the 7% area.

EP Energy notes price

While firming pricing on the term loan, EP Energy also priced its notes, with the senior secured notes coming at par to yield 6 7/8% and the senior unsecured notes coming at par to yield 9 3/8%, the source said.

Talk on the secured notes had been in the 7% area and talk on the unsecured notes had been in the 9½% context.

Along with the term loan and bonds, the company is getting a $2 billion reserve-based revolver that is expected to have a pricing grid ranging from Libor plus 150 bps to 250 bps based on utilization and an unused fee ranging from 37.5 bps to 50 bps based on borrowing base usage.

At close, $800 million is expected to be drawn under the revolver.

EP Energy being acquired

Proceeds from EP Energy's credit facility, bonds and $3.2 billion of equity will be used to fund its $7.15 billion buyout by Apollo Global Management LLC, Riverstone Holdings LLC, Access Industries Inc. and other investors from El Paso Corp.

Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., BMO Capital Markets Corp., RBC Capital Markets, UBS Securities LLC and Nomura are the lead banks on the financing, with Citi the left lead on the term loan and notes, and JPMorgan the left lead on the revolver.

Closing is expected in the second quarter, subject to the completion of the acquisition of El Paso by Kinder Morgan Inc.

EP Energy is a Houston-based oil and natural gas exploration and production company.

Sprouts starts trading

Sprouts Farmers Market's $100 million add-on term loan (B2/B+) freed up for trading on Tuesday, with levels quoted at 98¾ bid, 99¼ offered, according to a trader.

The add-on and the existing loan trade together, and the existing loan was quoted in basically the same 98¾ bid, 99¼ offered context on Monday, the trader added.

Pricing on the add-on and the existing loan is Libor plus 475 bps with a 1.25% Libor floor, and the add-on was sold at an original issue discount of 981/2.

Jefferies & Co., Apollo Global Securities and Natixis are leading the deal that will be used to help fund the acquisition of Sunflower Farmers Market.

Closing is expected in mid-Spring, subject to regulatory approval.

Sprouts Farmers Market is a Phoenix-based grocer that operates in the farmers market specialty segment of the retail food industry. Sunflower Farmers Market is a chain of full-service grocery stores.

Preferred Sands frees up

Preferred Sands' $125 million add-on term loan B (B2/B+) also broke for trading, with levels quoted at 98½ bid, 99 offered on the open and then it widened out to 98½ bid, 99½ offered, according to a market source.

The add-on, which is fungible and therefore trades with the existing B loan, is priced at Libor plus 600 bps with a 1.5% Libor floor, in line with existing pricing, and was sold at an original issue discount of 98. By comparison, when done in December, the existing term loan B was sold at a discount of 971/2.

Like the existing loan, the add-on matures on Dec. 15, 2016 and has 101 soft call protection through Dec. 15, 2012.

Barclays Capital Inc. is the lead bank on the deal that will be used to acquire some class A minority investor interests, fund a distribution to remaining investors and for general corporate purposes.

Preferred Sands, a Radnor, Pa.-based provider of silica sand products, will have leverage of 4.4 times on a secured and gross basis with this transaction, versus 4 times currently.

Hawker softens more

In other trading news, Hawker Beechcraft Inc.'s strip of institutional bank debt has now dropped to 64½ bid, 66½ offered from 65 bid, 67 offered, according to a trader. Over the course of the last week and a half, the debt has seen a roughly 10 point decline.

Pressure on the debt has been attributed to ratings downgrades, a missed 10-K filing deadline, skipped April 2 interest payments on notes, news of expected 2011 losses from operations of roughly $481.8 million and deferred loan interest payments.

As previously reported, the company has reached a forbearance agreement through June 29 with about 70% of credit facility lenders to defer the interest payments and get covenant relief, and has obtained a new $124.5 million senior term loan due June 29 to fund ongoing operations.

Hawker Beechcraft is a Wichita, Kan.-based manufacturer of business, special mission, light attack and trainer aircraft.

PQ reworks OID

Switching to the primary, PQ changed the original issue discount on its $200 million add-on first-lien term loan (B3/B+) to 97½ from 98, according to a market source.

Pricing on the add-on due July 30, 2014 is Libor plus 375 bps with no Libor floor, in line with existing term loan pricing, and the tranches are fungible.

Credit Suisse Securities (USA) LLC is the lead bank on the deal that will be used to pay down revolver borrowings.

With the add-on, the company is amending its existing credit facility to allow for the new debt and the existing term loan is being repriced to Libor plus 375 bps from Libor plus 325 bps.

PQ is a Malvern, Pa.-based producer of specialty chemicals and catalysts.

Aptalis ups fee

Aptalis Pharma raised the fee being offered for its credit facility amendment to 50 bps from 25 bps ahead of the Tuesday consent/commitment deadline, according to a market source.

The amendment is being done in connection with the company's proposed $200 million five-year senior secured incremental term loan B (B2/B+) that is talked at Libor plus 400 bps with a 1.5% Libor floor and an original issue discount of 98.

The spread and the floor are the same as the existing term loan B that was done in early 2011, but that debt was sold at an original issue discount of 991/2.

Bank of America Merrill Lynch, Barclays Capital Inc. and RBC Capital Markets LLC are the lead banks on the deal that will be used to prepay $195 million of 12¾% senior unsecured notes due 2016.

Aptalis is a Bridgewater, N.J.-based specialty pharmaceutical company.

Schrader talk emerges

Also on the new deal front, Schrader held a bank meeting on Tuesday morning to launch its proposed credit facility, and with the event, price talk on the first-and second-lien term loans was announced, according to a market source.

The $230 million first-lien term loan (B1/B) is talked at Libor plus 450 bps to 475 bps with a 1.25% Libor floor, an original issue discount of 98½ and 101 soft call protection for one year, the source said.

And, the $100 million second-lien term loan (Caa1/B-) is talked at Libor plus 850 bps to 900 bps with a 1.25% Libor floor, a discount of 98 and hard call protection of 103 in year one, 102 in year two and 101 in year three, the source remarked.

The company's $365 million credit facility also provides for a $35 million revolver (B1/B).

Schrader lead banks

Barclays Capital Inc., Goldman Sachs & Co. and Citigroup Global Markets Inc. are the lead banks on Schrader's credit facility, for which commitments are due on April 24.

Proceeds, along with equity, will be used to fund the buyout of the company by Madison Dearborn Partners LLC from Tomkins for $505 million in cash plus a small minority equity interest in the parent of the purchasing company.

First-lien leverage is roughly 3.1 times and total leverage is around 4.4 times.

Closing is expected in the second quarter, subject to customary conditions.

Schrader is a manufacturer of tire pressure monitoring systems, valve products and tire hardware and related accessories for both original equipment manufacturers and aftermarket customers.

Blackboard guidance

Blackboard also released pricing with its launch, telling investors that its $60 million add-on covenant-light term loan is talked at Libor plus 600 bps with a 1.5% Libor floor, in line with existing pricing, and is being offered at an original issue discount of 97, according to a market source.

Commitments are due on April 17, the source remarked.

Bank of America Merrill Lynch is the lead bank on the deal that will be used for acquisition funding.

Blackboard is a Washington, D.C.-based provider of enterprise software applications and related services to the education industry.

Constellation readies deal

Meanwhile, Constellation Brands has set a bank meeting for 10:30 a.m. ET on Wednesday in New York to launch a $1.7 billion senior credit facility that is being led by Bank of America Merrill Lynch, J.P. Morgan Securities LLC, Rabo Securities USA Inc. and Barclays Capital Inc., according to a market source.

The facility consists of a $900 million five-year undrawn revolver, a $550 million five-year term loan and a $250 million seven-year term loan, the source said, adding that price talk is not yet available.

Proceeds will be used to refinance the company's existing senior credit facility.

Also, the company is selling $600 million of senior notes, with proceeds earmarked for general corporate purposes, which could include the repayment of some existing term loan debt, and funding acquisitions or common stock share repurchases.

Constellation Brands is a Victor, N.Y.-based wine company.

Toys 'R' Us closes

Toys 'R' Us Inc. completed its $225 million covenant-light incremental term loan B-3 (B1/B+/B-) on Tuesday, according to an 8-K filed with the Securities and Exchange Commission.

Pricing on the loan due May 25, 2018 is Libor plus 375 bps with a 1.5% Libor floor, and it was sold at an original issue discount of 98. There is 101 soft call protection for one year.

During syndication, the loan was downsized from $300 million and the discount firmed at the high end of the 98 to 98½ guidance.

Bank of America Merrill Lynch, J.P. Morgan Securities LLC, Goldman Sachs & Co., Wells Fargo Securities LLC, Credit Suisse Securities (USA) LLC, Citigroup Global Markets Inc. and Deutsche Bank Securities Inc. led the deal that is being used for general corporate purposes, including the repayment, repurchase or redemption of debt.

Toys 'R' Us is a Wayne, N.J.-based toy retailer.

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