Travelport, Gentiva slide with ratings cuts; Sealed Air, Dial set talk; Avis tweaks deal

By Sara Rosenberg

New York, Sept. 13 - Travelport LLC's extended U.S. institutional bank debt and Gentiva Health Services Inc.'s term loan B were weaker in trading on Tuesday on the back of ratings downgrades at both companies.

Over in the primary, Sealed Air Corp. and Dial Global released price talk on their new deals as the transactions were presented to lenders during the session, and Avis Budget Group Inc. came out with changes to its B loan, including increasing the size and widening pricing.

Travelport retreats

Travelport's extended U.S. institutional bank debt fell on Monday, following news that Standard & Poor's lowered the company's ratings, with one trader quoting it at 90½ bid, 91½ offered, down from 91 bid, 92 offered, and a second trader quoting it at 90 bid, 91 offered, down from 91¼ bid, 92¼ offered.

Specifically, the company's corporate credit ratings were cut to CCC from B- and placed on CreditWatch with negative implications, and its senior secured debt was downgraded to CCC+ from B.

The rating agency attributed the ratings revisions to increased liquidity risk as a result of the upcoming maturity of the company's $693 million payment-in-kind loan due in March 2012.

"We do not currently believe that the company will be able to secure sufficient cash resources either from operations or disposals to repay these notes and will, therefore, need to find a refinancing solution. In our opinion, this may be difficult given Travelport's highly leveraged capital structure, partially pledged asset base, and currently weak debt capital markets," S&P said.

Travelport is an Atlanta-based provider of transaction processing services to the travel industry.

Gentiva plummets

Also affected by rating news was Gentiva, an Atlanta-based home health care provider, with levels on its term loan B quoted at 81 bid, 86 offered, down from 85 bid, 88 offered, following a delayed response to a downgrade, according to a trader.

On Monday, Moody's Investors Service lowered Gentiva's corporate family rating to B1 from Ba3 and senior secured bank ratings to Ba3 from Ba2.

The trader explained that people didn't react immediately to the news, probably because it's not one of the more liquid names in the secondary market. But, on Tuesday, the reaction was evident.

Moody's said that the downgrade reflects its "expectation for meaningfully weaker financial performance" due to additional costs associated with new regulatory policies and ongoing reimbursement rate cuts from Medicare.

Furthermore, Moody's remarked that future step-downs in financial covenants may require amendments and that leverage will remain considerably higher than originally anticipated.

Neiman down to flat

Neiman Marcus Inc.'s new term loan was quoted in the low 90's with the company's release of fiscal fourth-quarter results that showed a growing net loss from the previous year, according to traders.

One trader had the loan at 92¾ bid, 93¾ offered, down from 93 bid, 95 offered, a second trader had it at 93 bid, 94 offered versus 93 bid, 95 offered on Monday, and another guy had it at 93 bid, 93¾ offered, unchanged on the day.

For the fourth quarter of fiscal 2011, the company reported a net loss of $61.4 million, including a $42.7 million after-tax loss on debt extinguishment from the refinancing of senior notes and credit facility debt that was completed in May, versus a net loss of $32.8 million in the previous year.

Meanwhile, total revenues for the quarter were $919.7 million, compared to $826.3 million in the fourth quarter of fiscal 2010.

And, the Dallas-based high-end specialty retailer reported EBITDA for the quarter of $67.5 million, up 13% from $59.8 million last year.

Sealed Air launches

Moving to the primary, Sealed Air held a bank meeting on Tuesday afternoon to kick off syndication on its proposed $1.2 billion seven-year term loan B, and with the launch, price talk on the U.S. dollar and euro denominated tranches was announced, according to a market source.

The $925 million U.S. term loan B is talked at Libor plus 400 basis points and the $275 million U.S. dollar equivalent euro term loan B is talked at Euribor plus 450 bps, with both having a 1% floor, an original issue discount of 97 and 101 soft call protection for one year, the source remarked.

By comparison, earlier filings with the Securities and Exchange Commission said the debt would be priced at Libor plus 275 bps on the U.S. piece and Euribor plus 300 bps on the euro piece, with the entire tranche having a 1% floor.

Citigroup Global Markets Inc., Bank of America Merrill Lynch, BNP Paribas Securities Corp. and RBS Securities Inc. are the lead banks on the deal and are asking for commitments by Sept. 23.

Sealed Air pro rata debt

Sealed Air's $3 billion senior secured credit facility (Ba1/BB+) also includes a $700 million five-year revolver - split between a $500 million U.S. tranche and a $200 million multi-currency tranche - and a $1.1 billion five-year term loan A - split into a $900 million U.S. piece (a portion of which may be converted into euros), a $140 million U.S. dollar equivalent JPY piece and a $60 million U.S. dollar equivalent Canadian piece.

Syndication of the revolver and term loan A was launched in late July and was such a success that the total amount of term loan A debt ended up being upsized from $1 billion, resulting in the downsizing of the B loan from $1.3 billion.

And, originally, based on regulatory filings, it was expected that the term loan A would total $750 million and the term loan B would total $1.55 billion, but a revised structure emerged at the pro rata launch.

Pricing on the A loan and revolver is Libor plus 250 bps. The revolver has a 50 bps unused fee that can step down to 37.5 bps based on net total leverage.

Sealed Air buying Diversey

Proceeds from Sealed Air's credit facility, along with $1.5 billion of senior unsecured notes, will be used to fund the purchase of Diversey Holdings Inc. from the Johnson family and Clayton, Dubilier & Rice LLC for $2.1 billion in cash and an aggregate of 31.7 million shares of Sealed Air common stock.

The notes are backed by a commitment for a $1.5 billion one-year U.S. dollar and euro bridge loan. Pricing on the bridge loan is Libor plus 575 bps on the U.S. piece and Euribor plus 600 bps on the euro piece, with the spread on both pieces stepping up by 50 bps after three months and every three months thereafter. There is a 1% Libor floor on the U.S. tranche and a 1.25% Euribor floor on the euro tranche.

Pro forma leverage will be 4.3 times, with closing expected in the fourth quarter, subject to customary regulatory approvals.

Sealed Air is an Elmwood Park, N.J.-based manufacturer of packaging and performance-based materials and equipment systems for food, industrial, medical and consumer applications. Diversey is a Sturtevant, Wis.-based provider of cleaning, sanitization and hygiene products.

Dial Global talk emerges

Also holding a bank meeting on Tuesday was Dial Global, and price talk on this $265 million transaction surfaced as well in connection with its launch, according to market sources.

The $25 million revolver and $175 million first-lien term loan are being talked at Libor plus 600 bps to 625 bps with a 1.5% Libor floor and an original issue discount of 98 to 981/2, and the $65 million second-lien term loan is being talked at Libor plus 950 bps to 1,000 bps with a 1.5% Libor floor and an original issue discount of 97 to 98, sources said.

The second-lien term loan includes call protection of 102 in year one and 101 in year two.

GE Capital Markets and ING are leading the revolver and first-lien term loan, and Macquarie Capital (USA) Inc. is leading the second-lien term loan.

Commitments are due on Sept 27.

Dial Global funding merger

Dial Global, a portfolio company of Oaktree Capital Management LP, will use the credit facility to help fund its merger with Westwood One Inc., a portfolio company of Gores Group LLC, in a stock-for-stock transaction and to refinance existing debt.

Following the merger, Oaktree will be the majority shareholder of the combined company.

Closing is expected in the fourth quarter, subject to customary conditions and expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.

Dial Global is Los Angeles-based provider of advertising sales representation and syndication services to radio production companies. Westwood One is a New York-based provider of network radio programming.

Avis reworks deal

In more primary happenings, Avis told lenders on Tuesday that it is upsizing its seven-year term loan B to $420 million from $400 million, and price talk was revised to Libor plus 525 bps with a 1.5% Libor floor and an original issue discount of 97 to 98, according to a market source.

When the deal first launched in early August, before the large market sell off, the loan was talked at Libor plus 350 bps with a 1.25% Libor floor and an original issue discount of 99.

Since then, there have been rumors that pricing would be increased to better reflect current market conditions.

The term loan B still has 101 soft call protection for one year.

Commitments are due on Sept. 22.

Avis lead banks

Morgan Stanley & Co., Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., Scotia Capital (USA) Inc. and RBS Securities Inc. are the lead banks on Avis' term loan B, for which an update call was held on Tuesday afternoon to announce the changes.

Proceeds will be used to help fund the acquisition of Avis Europe plc for £3.15 in cash per share. The transaction is valued at £635 million, or about $1 billion.

Closing is expected to take place in October, subject to Avis Europe shareholder approval, court approval and regulatory clearances.

Parsippany, N.J.-based Avis Budget and Bracknell, England-based Avis Europe are vehicle rental companies.

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