Gate Gourmet holds bank meeting for new credit facility on Tuesday

By Sara Rosenberg

New York, Nov. 26 - Gate Gourmet launched its new credit facility on Tuesday via Citibank and Credit Suisse First Boston, according to market sources. The facility consists of a $150 million six-year term loan B with an interest rate of Libor plus 450 basis points and a small revolver.

Other terms of the financing include a Libor floor of 3% and a dollar selling price of 981/2, one sell-side source told Prospect News.

Proceeds are being used to help fund the leveraged buyout of the company by Texas Pacific Group from Swissair Group.

Financing for the acquisition also includes $175 million of mezzanine debt and $235 million of equity, the sell-side source said.

"It's a small bank deal with a company that's got a lot of mezzanine and equity debt," the source said. "Leverage is under two times senior and under three times total. There's a 3% Libor floor when usually it's only 2 to 2.5%. And it's selling at 981/2. That should tell you something about the deal."

Gate Gourmet is an airline catering company.

In follow-up news, Wackenhut Corrections Corp.'s $125 million six-year term loan B (Ba3/BB) was flexed up to Libor plus 400 basis points from Libor plus 350 basis points, according to a market professional. Furthermore, a Libor floor of 2% was added to the terms of the deal.

The addition of a Libor floor is not out of the ordinary in the current primary bank loan market.

"Something like 7 out of the last 25 or 28 deals have had Libor floors. Some of them have been upwards of 3%; they're typically between 2%-3%. Libor's a buck-fifty right now, so you're basically giving up a point-and-a-half of yield," a market professional said.

"People were putting in Libor floors around 2% earlier in the year. But that was when Libor was around 1.95%, so it wasn't such a big deal. Now people are giving up some pretty substantial yield, at the bottom."

BNP Paribas and Wachovia are leading the loan, which also contains a $50 million revolver. Proceeds will be used to refinance existing debt.

Wackenhut is a Palm Beach Gardens, Fla. operator of private correctional facilities.

Patriot Media and Communications LLC's $100 million term loan B was flexed up to Libor plus 450 basis points from Libor plus 400 basis points.

Bank of New York is the lead bank on the deal that will be used to help fund the spin off from RCN Corp. with Spectrum Equity Investors as equity sponsor.

The New Jersey cable company's new facility also contains a $65 million pro rata portion.

Last on the list of recent price changes is Scientific Games Corp.'s $275 million six-year term loan, which was flexed up to Libor plus 350 basis points from Libor plus 325 basis points. Furthermore, upfront fees were increased and the greenshoe option was removed, a market professional said.

Bear Stearns is the lead bank on the deal that will be used to refinance existing debt. Besides the institutional tranche, the facility also contains an $85 million five-year revolver.

Scientific Games is a New York provider of services, systems and products for instant-ticket lotteries and pari-mutuel wagering.

DRS Technologies Inc. closed on its new credit facility on Tuesday, according to a syndicate source. Wachovia is the lead bank on the deal.

The loan consists of a $75 million add-on to the term loan B with an interest rate of Libor plus 325 basis points and an increase in the revolver to $125 million from $100 million with an interest rate of Libor plus 275 basis points.

Proceeds are being used to help fund the acquisition of Paravant Inc.

DRS Technologies is a Parsippany, N.J. manufacturer of navigational equipment.

Meanwhile in secondary activity, cellular names continue to be the big movers in the distressed bank loan market, according to a trader.

Some names given as examples by the trader included Western Wireless Corp. and Rural Cellular Corp. Western Wireless was quoted in the low 70's on Tuesday and Rural Cellular was quoted in the low 80's, up from previous levels in the high 70's, the trader said.

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