Scotts $1.2 billion loan twice oversubscribed on launch day; Levi's finds audience with 700 bps spread

By Sara Rosenberg

New York, Sept. 17 - The Scotts Co.'s $1.2 billion credit facility, which launched on Wednesday, was reported as being a major blowout with the term loan B two-times oversubscribed before the day came to an end. While, Levi Strauss & Co.'s deal is also said to be going really well as investors are finding it hard to resist the newest price talk of Libor plus 700 basis points on the term loan B.

Scotts' credit facility consists of a $550 million five-year revolver and a $650 million term loan B. Price talk on both tranches is currently in the Libor plus 225 basis points area. Pricing on the institutional tranche is 25 basis points lower than pricing on the company's existing deal, according to a market source.

"It's been such a solid credit in terms of performance so there will probably be a lot of rollover," the market source said. "In all the stuff they do they are number one in the sector. Number two is far behind them and the rest of the sector is fragmented."

"Just looking at their stock it's up 14.8% year-to-date, so I guess they're doing well," a second source added.

JPMorgan is the lead arranger on the deal, which is part of a refinancing plan that will also include a $200 million senior subordinated notes offering.

Proceeds from the credit facility and the high-yield offering will be used to finance a tender offer for the company's $400 million outstanding 8.625% senior subordinated notes due 2009.

Scotts is a Marysville, Ohio supplier of lawn and garden care products.

Levi's $500 million senior secured term loan maturing in 2009 is "going really well", according to a number of market sources, as the syndicate managed to gather $400 million in commitments for the term loan by late Tuesday.

Not only is the tranche expected to price with a juicy coupon of 700 basis points over Libor, but there is also a 2% Libor floor, making this one very juicy piece of paper to institutions.

"I think it was disclosed behind the scene and everyone jumped on it," one buy-side source said regarding Levi's price talk. "Minimum you're going to get 9% with that floor. It's hard to pass up that kind of coupon especially in this market."

The possibility that the term loan may not be just one large term loan B but rather divided into a fixed-rate and a floating-rate tranche is still out there, however some are speculating that the deal will end up being all Libor based. "You can choose whatever you want. If you want all floating rate you can get it. Sounds to me like everyone will come in and ask for floating rate. I think they'll end up doing all floating rate. But we'll see. I also thought it wouldn't go so well and I was wrong there."

The $1.15 billion credit facility also contains a $650 million asset-based revolver maturing in 2007 with an interest rate of Libor plus 275 basis points.

Bank of America is the lead bank on the deal, which will replace the San Francisco brand name clothing company's existing senior secured credit facility consisting of a $375 million revolver and $365 million term loan, as well as $110 million of debt arranged under an accounts receivables securitization.

In the secondary, Huntsman LLC's term loan A and term loan B felt stronger on Wednesday and are expected by some to trade around 95 in the near future based on relative value now that the company has priced its $380 million bond offering, according to a trader.

On Tuesday, the company sold its 11 5/8% senior secured notes due Oct. 15, 2010 at 98.815 to yield 11 7/8%. "The bonds have traded today at around the 99½ level so that's popped up," the trader said.

Credit Suisse First Boston and Deutsche Bank Securities were joint bookrunners on the bond deal, with CIBC World Markets, Citigroup, JP Morgan and UBS Investment Bank acting as co-managers.

Proceeds from the bond offering will be used to completely repay all outstanding revolver debt, which is about $65 million, and prepay two years of amortization requirements under the company's term loan A, which is approximately $290 million.

"It's a credit with more liquidity. They're taking care of amortization for two years. Relative value pricing suggests that the bank debt should trade around 95, but it isn't really being quoted today and I haven't seen any trades at those levels. People may be waiting for the bond deal to settle, which should be in the next week or so," the trader explained.

When the Salt Lake City-based petrochemical company successfully amended its credit facility late last week to allow for the bond sale and modify the application of proceeds definition, the bank debt moved up to 94 bid, 95 offered.

Otherwise it was a pretty quiet day in the secondary market with bids continuing to be strong and very few offers being seen. There has not been a large amount of new paper hitting the secondary lately so investors are holding on to what they own since there is no paper to replace it with if they opt to sell. And being that investors are flush with cash, bids remain strong as people struggle to get their hands on some bank debt, the trader explained.

"My guess is that activity will pick up in the next week or two as the new deals that are coming now break for trading," the trader added.

In follow-up news, Alderwoods Group Inc. closed on its new $325 million senior secured credit facility (B1/BB-). Banc of America Securities LLC was the lead bank on the deal.

The Cincinnati-based funeral home operator's facility consists of a $275 million term loan B with an interest rate of Libor plus 325 basis points and a $50 million revolver. The transaction is expected to be funded on or before Sept. 29.

Proceeds from the term loan will be used to fully retire $195 million of 11% senior secured notes due in 2007, and $80 million of Rose Hill's 9.5% senior subordinated notes due in 2004.

Alderwoods also announced on Wednesday that in August it repaid $20 million of borrowings under its previous revolver from cash on hand, bringing the total debt repaid to approximately $99 million for fiscal 2003 and $180 million since emergence from bankruptcy on Jan. 2, 2002. Following this repayment, the total outstanding debt of the company is $659 million.

"We are very pleased with the success of our first debt issuance since emergence, and the response we received from the financial markets," stated Paul Houston, president and chief executive officer, in a news release. "The refinancing will substantially enhance our corporate cash flow as we move forward, which will further assist with company goals. As we have previously stated, one of our strategic objectives is to de-lever the company, and we have again proven our commitment to this initiative by further reducing our debt by another $20 million."

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